Russia rejoices at the status of a raw material surplus: how the country fell into Chinese dependence

Yekaterina Maximova, Natalia Seibil

The day before, President Putin expressed confidence that Russia will reach $200 billion in trade with China.

The Head of State stressed that Russia has the largest trade turnover with China. And it's growing. This is confirmed on the eve of the announced statistics of the Main Customs Administration of China. 

According to the Customs of the People's Republic of China, by the end of 2022, the trade turnover between the Russian Federation and the People's Republic of China reached a record level of 190 billion dollars (+29.3%). Goods worth 114 billion dollars (+43.4%) were sent from Russia to China. But Chinese exports of goods to Russia are much more modest: 76 billion dollars (+12.8%). Simply put, the PRC received much more from Russia than it "gave away". 

Alexander Daniltsev, director of the HSE Institute of Trade Policy, clarified to Novye Izvestia that about 70% of Russian exports to China are raw materials, energy resources, and wood. Russia received mainly consumer goods from China - appliances, electronics, clothing. Plus industrial equipment. In short, finished products. 

Political geographer Dmitry Oreshkin also notes that trade with China is highly closed to the export of energy resources.

"That is, in fact, Russia rejoices that it has become a raw material appendage of China. If the trade turnover with China were an addition to Europe, it would be wonderful. Yes, in strategic terms, we need to develop relations with China, because it is a huge market. The trouble is that this is happening instead of relations with the European Union. If it were a plus, then one could be heartily happy.  And since this is a replacement… That is, we lost, conditionally, 10 units, and thanks to China, we acquired three. And this is accompanied by the loss of former markets, former influence and former connections. And, of course, they are not replaced by China and will never be replaced," Dmitry Oreshkin commented. 

Economist, writer Dmitry Potapenko adds: there are no self-sufficient economies relying only on internal resources.

 "Neither the Chinese nor the American economies are self-sufficient. It is ok. The 21st century is not the century of self–confident half-wit. All economic layers are synchronized, so there is no country that would completely lock itself in. The same Turkey, which is a highly self-sufficient country. There are problems with the lira, an authoritarian regime, a military coup, but all these are links in the same chain. The same story about us. We are an authoritarian regime that is slowly but surely falling into totalitarianism. Unfortunately, it needs to be said, because it causes an exodus to restrictions, talks about import substitution, switching from one supplier to another," says Potapenko. 

He also notes that the problem also lies in the fact that Russia is a small market for China. 

"If we start wandering (sorry, I can't find another term), if we were a significant market for a European supplier and he could compromise, give any preferences and discounts, then the Chinese manufacturer will easily send us, and in plain text, refusing the deal. And despite the fact that any decisions – technological, economic, software - are tied up, this is a chain that cannot be changed by clicking, saying "fuck you", then this leads to the fact that you really become dependent. If this dependence was parity when trading with Europe and the United States, now we are consciously putting ourselves under a very large economy, very large manufacturers and suppliers, for whom it is easy to say "fuck you" and immediately say that they disconnect us from all support – financial and others. And do what you want," Potapenko comments. 

And as the author of historical books reminded: "I have been working through a lot of historical materials. Even tsars, dukes, the most authoritarian and autocratic rulers had enough brains not to put themselves on an aspen stake stuck in the throat, a stake of other people's technologies. You can't get off this stake. It will exceed 57% - and we are finished. In any area. Fifty–seven to fifty–eight percent is such a critical figure for any industry. Then the question "how to take us" will simply not stand. We will act as we are ordered and it will depend not on the CPC and Comrade Xi, but on some small official or small supplier who will say: "guys, where will you go from the submarine?". There has never been such a thing in history. We are the first. We have to be pioneers in something!".  Dmitry Oreshkin also noted that the trade turnover with China is accompanied by a very serious transport load.

We are connected by a single Transsib highway. "For example, Segezha Group has reduced exports to Europe by five times, but an attempt to switch exports to new markets in China is accompanied by time costs, because it is necessary to drag the forest from the Arkhangelsk region across Russia by train.

It is accompanied by a decrease in prices, because it is urgently necessary to look for sales markets, and the buyer immediately asks to sell him cheaper. Plus logistics costs - transshipment, transshipment, waiting, etc.," the expert continues. Among the advantages, Dmitry Oreshkin notes, the border regions of the country - Khabarovsk, Vladivostok - received an economic incentive. Because it is always profitable to have open access to a large market. 

"China is a neighboring state with a large and diversified economy. Therefore, it is clear that the development of trade will continue. Especially in the conditions of sanctions, when many countries have dropped out of our circulation. Dependence on the European Union was not very useful. And too much dependence now on China is also not good, but there is no other option yet. And I think that the trade turnover with China will increase, and then we'll see," Alexander Daniltsev said.

Let's see and compare. Here are just a few indicative figures from the past reality of Russia. 

By the end of 2021, Russia's foreign trade turnover amounted to 789 billion dollars (with a share of Russian exports of 493 billion dollars). China was already the largest partner even then, but more than a third (36%) of the turnover was accounted for by European countries.

Thus, the turnover between Russia and the EU countries in 2021 exceeded 247 billion euros (of which Russian exports exceeded 158 billion euros).  But Russia's turnover with BRICS partners, including China, amounted to $164 billion by the end of 2021. In other words, the share of the BRICS countries did not overlap the indicators of cooperation between Russia and Europe. The turnover with China then amounted to $ 146.8 billion.

There are no complete statistics for 2022 yet, but in the first 9 months of the sanctions year, according to the FCS, Russia's trade turnover exceeded $ 611 billion (exports of $ 431 billion, imports of $ 180 billion). And as previously reported by Deputy Prime Minister Dmitry Chernyshenko, for the first 9 months of 2022, it is  Russia and China traded for 129 billion dollars (+30%). 

At the same time, according to the results of last year, the Europeans still remained key partners for Russia (210 billion euros). According to Eurostat, almost all accounts for exports from Russia (168 billion euros). Supplies from the EU collapsed by 35% (42.2 billion euros). 

Economic geographer Natalia Zubarevich believes that in 2023 the balance of foreign trade will change. "Fellow macroeconomists say that in 2023 this balance will be halved, because the cost of exports is likely not to grow, and the cost of imports is growing. The big three of our foreign trade are China, Belarus and Turkey. China's share in foreign trade turnover is close to 30%, and the share in imports will be closer to 40%: we are becoming China-dependent, this is very evident from the figures," Zubarevich said.