• On March 20th‑21st the Russian and Chinese heads of state met in Moscow, the Russian capital. The meetings between Russia’s president, Vladimir Putin, and his Chinese counterpart, Xi Jinping, were designed to affirm their closeness.

• Economic co-operation between the two countries will deepen over the 2020s, but the relationship will be unequal, given Russia’s weakened economy and dependence on Chinese economic assistance.

• Trade ties will strengthen, but we remain sceptical about a massive expansion in economic linkages, owing to the risk of US sanctions and Russia’s unattractive economic environment.

• China will proceed cautiously in deepening its energy ties with Russia, with the proposed Power of Siberia 2 pipeline unlikely to come on stream until the early 2030s (if at all).

Mr Xi’s meetings with Mr Putin affirmed the importance of Russia in China’s foreign policy strategy. Mr Xi is the first major global leader to visit Moscow since Russia’s invasion of Ukraine, giving his trip strong diplomatic significance. Despite China’s insistence of neutrality in the conflict, we continue to see the country as Russia-leaning—a stance that has undermined China’s relationship with the US and Europe. Mr Xi’s visit further undermined China’s assertions of neutrality regarding Ukraine, particularly given concerns that China could provide lethal aid to the Russian military.

China-Russia ties will deepen, but with caveats

China’s 12-point statement, released on February 24th, is aimed at positioning the country as a mediator in the Ukraine conflict. The statement was coldly received by both Ukraine and Western countries, however, and we maintain our view that a Chinese-backed solution to the war remains a dim prospect—particularly given Ukraine’s hostility to any proposal that would involve territorial concessions.

Moreover, China’s potential role in ending the war in Ukraine is not a central part of the China-Russia relationship. The limited attention paid to the war in Ukraine by Messrs Xi and Putin paints a picture of deepening bilateral ties predicated on other economic and political co-operation. China will continue to see Russia as a useful partner to confront the US and Western countries more broadly. This relationship will be uneven, however, given Russia’s feeble economy and growing dependence on Chinese economic assistance. Although both sides spoke of the importance of the Shanghai Co-operation Organisation and the BRICS grouping (comprising Brazil, Russia, India, China and South Africa), we do not expect the formation of a China-Russia “bloc”. Existing regional security and economic institutions represent only weak alternatives to Western frameworks such as NATO, the EU or the AUKUS security pact.

Countering US influence is a priority

We expect China to re-examine its ties with Russia in 2023 as it looks to rebuild its relationship with western Europe to counter US pressure. A Chinese rapprochement with Europe has become more urgent given agreement by the Netherlands (and other European countries) to join US export controls on advanced semiconductor technology. Fu Cong, China’s ambassador to the EU, has recently urged the bloc to lift its sanctions on China to pave the way for the ratification of the frozen China-Europe Comprehensive Agreement on Investment as a way to stabilise bilateral relations (we see this outcome as unlikely).

However, Chinese efforts to court European countries do not imply fragility in the China-Russia relationship. Strong alignment predicated on shared efforts to counter US influence globally will remain an important stabilising force in bilateral ties, even if it does not assuage private feelings of insecurity or mistrust held by Chinese or Russian officials. Messrs Xi and Putin’s shared hostility to Western sanctions and courtship of developing countries will remain a driving force in expanding economic and defence ties in the 2020s.

Actions speak louder than words: Chinese exports to Russia are not booming

The two sides have called for the strengthening of bilateral trade, but we remain sceptical about a massive expansion in economic ties. The uptick in Chinese imports from Russia (up by 44% in 2022) is overwhelmingly concentrated in the resource and energy sectors, reflecting Russia’s lost access to European markets (and record-high energy prices in 2022). Chinese exports to Russia grew by only 12.7% in 2022, a feeble outcome given Russia’s need to replace Western suppliers. Chinese firms will remain cautious regarding their dealings with Russia in the coming years for fear of falling under US secondary sanctions (so far these have only targeted the Russian military sector, but they could be expanded to target other areas). In addition, the collapse in Russia’s economy has made the country’s business environment unattractive, particularly when this risks jeopardising more profitable operations elsewhere.

Even in the energy sector, we forecast limits to future expansion. Mr Xi has resisted further development of the Power of Siberia 2 pipeline, which we now expect to stall, despite official plans for construction to start in 2024. Even under an ambitious timeline, we do not expect this pipeline to come on stream until the early 2030s (if at all), suggesting only limited avenues for Russia-China natural gas trade to expand in the short term (for lack of export infrastructure). China’s caution on moving forward with these plans—negotiations for which have lasted for two decades—epitomises its security and economic priorities vis-à-vis Russia. These include maintaining a diversified portfolio of energy sources without becoming overly reliant on a few single markets (including Russia) for its energy needs.

The analysis and forecasts featured in this piece can be found in EIU’s Country Analysis service. This integrated solution provides unmatched global insights covering the political and economic outlook for nearly 200 countries, enabling organisations to identify prospective opportunities and potential risks.