China The Main 'Winner' Of Russia-Ukraine Crisis

Now that six months have elapsed since the start of the Russia-Ukraine crisis, it is clear that China is the main geopolitical beneficiary. This was already evident some months ago, but is even clearer now that the rift between Russia and the West has worsened.

There are three ways in which China can benefit from the crisis.

Firstly, the US will need to focus more political capital and military resources on dealing with the 'Russia threat' in Central and Eastern Europe. In particular, Washington needs to demonstrate its commitment to the security of Poland and the Baltic states. Given that the Middle East is also still meriting considerable US attention, due to the conflicts in Syria, Iraq, and Gaza, and the uncertain rapprochement with Iran, the Russia-Ukraine crisis serves as a further impediment to Washington's long-stated desire to 'pivot' towards the Pacific. China opposes the 'pivot', seeing it as a means to contain its own rise. A renewed US focus on Eastern Europe would give Beijing somewhat more breathing space to pursue its own bid for influence in Asia.

Secondly, the tighter Western sanctions on Russia following the downing of MH17 mean that Russia will be forced to rely more on China, economically. This process was already in motion before the Ukraine crisis, but has been accelerated by it. This also explains the signing of the USD400bn Sino-Russian gas deal in May 2014. True, China will become more dependent on Russia for its energy needs, but Russia's relative isolation (admittedly still somewhat exaggerated) could drive it into a deeper partnership with China, with Beijing being the more powerful partner.

Thirdly, China will have noted the West's hesitancy in imposing sanctions on Russia, owing to Russia's economic importance, especially to Europe. The Russia-Ukraine crisis had, prior to the downing of MH17, demonstrated disunity and arguably weakness in the West over how to challenge Russia's actions in Ukraine. Beijing most probably believes (correctly in our view) that the West would be far more reluctant to impose sanctions on China in the event of a future geopolitical crisis in the Asia-Pacific region. China is the world's second-largest economy, and cannot be easily sanctioned without causing a catastrophic trade war.

Risks For China

That is not to say that China does not face geopolitical risks from the Russia-Ukraine crisis. The main risk is that Beijing could underestimate the US's resolve in defending allies such as Japan and the Philippines in the event of a military confrontation between either of them and China over their maritime territorial disputes. The second issue – which is more a fear than a risk – is that the separatist rebellion in Eastern Ukraine is a reminder that China itself could face such a renewed rebellion in the western provinces of Xinjing or Tibet.

This blog is tagged to:
Sector: Country Risk, Oil & Gas
Geography: China, Russia, Ukraine
Tags: China, Russia, Ukraine, crisis, winner, beneficiary

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