After ‘Bridge to Europe’ bid, Ukraine’s ties with China put to the test | Business and Economics News

Last July, Ukrainian President Volodymyr Zelenskyy made a bold offer to his Chinese counterpart Xi Jinping. In a phone call to mark the 10th anniversary of a strategic partnership between the two countries, Zelenskyy said he wanted Ukraine to become a “bridge to Europe” for Chinese companies.

Seven months later, that hope is being tested in the crucible of Europe’s worst security crisis since the end of the Cold War, with Russia launching a full-scale military offensive against Ukraine on Thursday.

Since 2019, China has been Ukraine’s top trading partner, taking pole position from Russia amid tensions between Kyiv and Moscow. Despite the pandemic, trade between China and Ukraine has increased over the past two years, reaching $15.4 billion in 2020 and nearly $19 billion in 2021, according to Ukrainian government customs data.

China also sees Ukraine as a hub and transit node for Xi’s Belt and Road Initiative, a global network of highways, railways and ports built with loans from Beijing. A direct train linking the two nations started last June.

But China’s reluctance to condemn Russian President Vladimir Putin’s announcement of an invasion of eastern Ukraine could complicate this nascent partnership, while injecting new uncertainty into economic relations with Europe and the United States, according to experts.

“Uncertain and problematic,” is how Vasyl Yurchyshyn, director of economic programs at the Razumkov Center, a Kiev-based think tank, described the current state of Sino-Ukrainian relations with Al Jazeera. “Ukraine will continue its economic cooperation with China, but its effectiveness and efficiency will entirely depend on China and its willingness to support our country,” he said.

Fine balance

So far, China has tried to strike a balance in the Ukrainian crisis. He backed Russia’s security demands, including Moscow’s insistence that NATO refrain from further eastward expansion. On Wednesday, he criticized Western sanctions against Russia, accusing Washington of “sowing fear and panic”. He blamed NATO for the tensions in Europe. But he also stressed that he does not support an invasion of Ukraine.

“The sovereignty, independence and territorial integrity of any country should be respected and safeguarded,” Chinese Foreign Minister Wang Yi said last week during a speech at the Munich Security Conference. “Ukraine is no exception.” On Thursday, Chinese Foreign Ministry spokeswoman Hua Chunying called on all parties to exercise restraint, but dismissed a reporter’s description of Russia’s actions as an invasion.

Analysts believe that this diplomatic juggling is largely aimed at trying to insulate China from any economic backlash from the United States and the European Union. “This is something that worries Xi Jinping,” Trey McArver, co-founder of Trivium China, a Beijing-based strategy consulting firm, told Al Jazeera.

After Xi and Putin issued a joint statement earlier this month declaring that friendship between Beijing and Moscow has “no limits”, US national security adviser Jake Sullivan warned that China could also face “costs” if considered favorable to Russian aggression against Ukraine.

“I think that concern is part of what is motivating Beijing to thread the needle in its messaging about the conflict,” Brookings Institution fellow Jessica Brandt told Al Jazeera.

Chinese President Xi Jinping and Russian President Vladimir Putin say their countries’ friendship has ‘no bounds'[File: Evgenia Novozhenina/Reuters]

Economic relations between Beijing and the West have already taken a severe blow in recent years. Concerns over trade barriers, currency manipulation and data privacy in Chinese tech have tangled with broader tensions over human rights abuses in Xinjiang, Beijing’s crackdown on dissent in Hong Kong and its threats against Taiwan.

The European Union suspended a free trade deal with China last year, while Beijing and Washington have yet to significantly reverse measures they took against each other during the trade war. launched by former US President Donald Trump.

Still, things could get even worse for China because of the Ukraine crisis, analysts say. “Especially with the European Union, I think the economic relationship could suffer,” Li Mingjiang, associate professor at the S Rajaratnam School of International Studies at Nanyang Technological University in Singapore, told Al Jazeera.

At the same time, Western sanctions risk increasing Russia’s economic dependence on China. Their bilateral trade, which stood at $104 billion in 2020, is set to increase as Russia depends even more on the vast market of its southern neighbour. After meeting Xi in Beijing in early February, Putin announced a new pipeline that will supply China with 10 billion cubic meters of gas each year, in addition to the 16.5 billion cubic meters that Russia already sends.

All of this gives China leverage it could use to seek or renegotiate deals with Russia on even more favorable terms for Beijing. Some analysts believe Xi will likely refrain from exercising this option. “He definitely has the circumstances that would allow him to push his edge with Russia,” McArver of Trivium China said. “However, I don’t see him doing it.”

China would not want to disrupt its relations with Moscow, Brandt said. This is also true for Beijing’s economic ties with Kyiv, according to Li of the S Rajaratnam School of International Studies.

The relationship is easy to overlook because the volume of trade between China and Ukraine – while huge for the Eastern European nation – is small compared to the flow of goods and services between major nations. But Ukraine provides spare parts and maintenance services for a range of Russian-made Chinese planes, a legacy of the Soviet Union’s random collapse that left its vast aerospace and aircraft sector split between two countries. Ukraine is also one of China’s main sources of corn.

Deeper dilemma for China

“China appreciates this relationship,” Li said. “That’s why, if you read between the lines, he actually criticized Russian aggression.”

But many Ukrainians may not be willing to parse diplomatic nuances as their country is under attack.

“In international forums, which deal with issues important to Ukraine, the United States and European partners show consistent support for Ukraine,” said Yurchyshyn of the Kyiv-based Razumkov Center. “China, on the other hand, often takes a far from pro-Ukrainian stance, mainly on issues of countering Russian aggression… can we really ignore that?”

Certainly, reducing economic ties with China would likely hurt Ukraine more in the short term – trade between nations accounts for 11% of Ukraine’s gross domestic product.

Yet recent history offers examples where Ukraine adapts when it needs to. In 2014, when Russia annexed Crimea, Ukraine’s economy depended even more on its big neighbor than it does on China today. The subsequent sharp decline in trade with Russia has helped Ukraine’s economy become more competitive, Yurchyshyn said.

Ultimately, the current crisis exposes a deeper dilemma for China, Brandt said. Moscow and Beijing share an animosity against liberal institutions and governments that challenge them, she said. But they have different long-term strategic goals.

“Russia is a power in decline that seeks disorder. China is a rising power that wants to reshape the existing order to suit its interests,” Brandt said.

Beijing’s choices over the next few weeks could help dictate what that world order will look like.

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