1September 2018, Vol. 38, No. 8 RUSI Newsbrief

Vostok 2018

From 11–17 September, Russia and China held joint, large-scale military exercises known as Vostok in the Russian Far

East. While the exercises have some relevance as a symbol of Russia and China’s defence collaboration, the scale of their military cooperation was small. Instead, Vostok took place against the backdrop of Russia and China’s deepening economic engagement, marred by disagreements over China’s influence in Central Asia and Russia’s concerns about China’s Belt and Road Initiative.

Military Symbolism Russia conducts military exercises for several reasons. The first is a practical test of the tactical skills that the military has learned from its interventions in places like Syria and eastern Ukraine. Second, for the past ten years, Russia’s military has been undergoing a general upgrade of all naval, land and air forces, with varying degrees of success. Military exercises are an opportunity for Russia to showcase its new equipment to potential non-Western buyers, like China. This is an important marketing opportunity for Russian arms manufacturers that have been embargoed by Western sanctions, which have left many companies in the lurch as they lack components usually purchased from Western partners.

There is also a domestic element to the exercises. A display of Russia’s

military capabilities is a welcome distraction from irritants such as the strong public reaction to the government’s proposals in July to increase the pension age, which prompted widespread protests in usually compliant regions of the country. In this vein, the Russian authorities have been quick to reassure the public that the exercises are on budget and are unlikely to increase the burden on taxpayers.

Vostok offered Beijing a much-sought after opportunity to train with and learn from armed forces that have had combat experience

Joint military exercises can also reveal important nuances about a bilateral relationship. Russia held large-scale military exercises in September 2017 known as Zapad (West) with Belarus, its military and, ostensibly, political ally. These exercises highlighted the serious political divisions between the countries, as President Vladimir Putin and his Belarusian counterpart Alexander Lukashenko failed to tour the troops together. This came after several public political spats between Russia and Belarus over gas prices, Belarus’s refusal to host a Russian

military base, and brokering the peace process in eastern Ukraine. In a similar vein, the 2018 Vostok exercises revealed important political and economic tensions in the Russia–China relationship.

Political Spats Revealed The military aspect of Vostok was in some ways less important; China’s military representation was small – just 3,200 soldiers compared to the alleged 300,000 troops participating from the Russian side. While their presence was a symbolic display of unity, the numbers do not represent the true scale of the Chinese military, with 915,000 ground force personnel active in combat units. Moreover, while the exercises were larger than usual, they are not new. Russia and China have been cooperating militarily for the past ten years, mostly as part of the Shanghai Cooperation Organisation – a security, economic and political alliance whose member states often conduct joint exercises. But the two countries have also held bilateral naval exercises since 2012 in various places, including the Yellow Sea, the Sea of Japan and, in 2017, in the Baltic Sea and the Sea of Okhotsk/Sea of Japan. This prompted some consternation from the three Baltic States, as well as China’s neighbours in Asia.

Instead, Vostok seems to hint that Russia no longer considers China to be a serious military threat. This is a departure from the thinking within

Vostok’s Weak Optics Reveal Russia and China’s Fractured Relationship Emily Ferris and Veerle Nouwens

The joint Russia–China Vostok exercises demonstrated some military cooperation between the two. However, the more significant event was the concomitant Eastern Economic Forum, an investment forum hosted in Russia’s Far East. Amid a depressed economy, Russia is attempting to encourage Chinese investment in the Far East, but many deals with China have fallen through and large-scale investment is unlikely to be forthcoming.

2September 2018, Vol. 38, No. 8 RUSI Newsbrief

the Russian administration during the early 2000s – that China had designs on Russia’s Far East. The region is economically and strategically important for Russia – it represents 36% of Russia’s territory and is its main link to the Asia-Pacific. For Russia, the threat that China posed in its Far East was largely based on historical disagreements over territorial claims, followed by a contemporary imbalance in Chinese and Russian economic activity and migration in the region that falls squarely in China’s favour, which Moscow feared could increase China’s political influence and ability to exert territorial control. Inviting the Chinese People’s Liberation Army to conduct joint exercises in the region is likely a signal that Russia recognises that the region ranks low on Beijing’s long list of foreign policy priorities.

Vostok offered Beijing a much-sought after opportunity to train with and learn from armed forces that have had combat experience – something

that China is severely lacking. In speaking to the armed forces, Chinese President Xi Jinping has highlighted China’s need to enhance real and joint combat training. While Beijing’s emphasis in recent years has been on elevating the importance of China’s maritime strategy and capabilities, Xi has underscored that ‘[q]uantity should be reduced, [and] quality improved to build a capable and efficient modernized standing army’. Exercises with Russia can be seen as helping China move toward that goal. However, joint military exercises are also seen as something that great powers do, as the Chinese Military Online notes: ‘major powers in the world or groups of countries always show their strength and military power, expand their influence and enhance their own safety through joint exercises’. Indeed, the optics of the exercises were key for Beijing – illustrating that China has friends, despite being ‘disinvited’ to this year’s

US-led Rim of the Pacific exercises, and is actively pursuing Xi’s goal of attaining a world-class military force built to fight and win wars by 2050.

The exercises were held at the same time as a more significant event, Russia’s annual Eastern Economic Forum (EEF), which ran from 11–13 September. The EEF has been held in Vladivostok since 2015, designed to promote foreign and domestic investment in Russia’s underfunded Far East. The EEF is much more important to Russia than the war games, as its economy is only slowly recovering from the recession of 2014–16, when oil price fluctuations and the introduction of Western sanctions hampered GDP growth. Many foreign investors have been deterred by international sanctions, as well as the prospect of further similar measures from the US as the Mueller inquiry continues – examining Russia’s involvement in the 2016 US presidential elections and introducing sanctions accordingly

The Chinese People’s Liberation Army take part in the Vostok 2018 joint military exercises with Russia at the Tsugol training range in the Trans-Baikal territory of eastern Russia. With only 3,200 troops participating out of the Chinese Army’s 915,000 ground force personnel, China’s representation at the exercises was relatively small, suggesting this to be primarily a symbolic display of unity. Courtesy of the Office of the President of Russia

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on individuals thought to have been involved. Given this, it is increasingly important for Russia to approach non-Western partners. Representatives from countries such as Japan, China and South Korea routinely attend the EEF to discuss economic cooperation in infrastructure, and in lucrative sectors like oil, gas and mining.

At first glance, the EEF appears to have gone well. Yury Trutnev, deputy prime minister and Putin’s special envoy to the Far East, noted that this year’s EEF yielded $42 billion worth of deals for Russia. While Putin found time to tour the Vostok troops, he also attended the EEF, chairing a joint session on investment prospects in the Far East with the leaders of China, Japan, Mongolia and South Korea. The storage and transportation of liquified natural gas located in fields in Siberia and the Far East is a priority for Russia. In one of the most significant deals, Rosneft – Russia’s largest state-controlled oil company – signed a joint venture agreement with Beijing Gas Group, to construct several gas filling compressor stations in Russia.

Trouble in Paradise? In theory, Russia and China have similar ideas of what a nation state should look like – with strong, centralised and authoritarian models of governance – how public dissent should be dealt with, and the importance of the government’s interventionist role in the economy. They are both concerned with North Korea’s nuclear programme and the US’s Terminal High Altitude Area Defense (THAAD) missile-defence system that was deployed to South Korea in 2016. China has been a customer for Russia’s defence industry for years – in 2015, one year after the Western sanctions were introduced, China bought 24 Sukhoi-35 combat jets and six S-400 surface-to-air missile defence systems. Increasingly, China is also becoming a defence supplier: Chinese companies frequently exhibit their products at Russia’s annual arms expo in Moscow, hosted by the ministry of defence.

There are also some practical obstacles to Russia and China’s business relationship. On 20

September, the US Treasury announced that it had introduced sanctions on 33 Russian individuals thought to be close associates of Putin, as well as companies linked to them, owing to their involvement in the 2016 US presidential elections. Most importantly, the Treasury maintained that it would also introduce sanctions on the Chinese defence company involved in purchasing the Sukhoi-35 combat aircraft and S-400s surface-to-air missile systems in 2015. This is designed to deter other Chinese companies from deepening their involvement in Russia’s internationally embargoed defence industry.

The EEF is much more important to Russia than the war games, as its economy is only slowly recovering from the recession of 2014–16, when oil price fluctuations and the introduction of Western sanctions hampered GDP growth

However, Russia’s diplomatic relationship with China is marred by their mutual struggle for influence and power. Russia is China’s main oil supplier, but while Russia is keen to attract Chinese investment, Russia will not allow China to dictate the terms of deals, and numerous business agreements have failed to bear fruit. One of the most widely publicised debacles was the May 2018 breakdown of the China Energy Company’s attempt to purchase a 14.16% stake worth $9.1 billion in Rosneft, from a consortium of Swiss trader Glencore and the Qatar Investment Authority. Neither Moscow nor Beijing offered a reason for the collapse of the deal, and the shares were eventually bought by Qatar. The deal had been touted as China’s largest investment in Russia’s oil market, and its failure to materialise is likely to make Chinese investors more cautious of the Russian market.

Russia is particularly concerned with China’s influence in Central Asia through their Belt and Road Initiative (BRI), a global infrastructure project designed to link China to European markets. Countries that fall within what the Russian authorities consider their ‘sphere of influence’, like Belarus, Ukraine and Kazakhstan, have emerged as important BRI transit hubs where China is considering significant infrastructure investments. China is also making economic inroads into Tajikistan, and in 2016 offered to construct checkpoints along Tajikistan’s border with Afghanistan. China has also displaced Russia from Turkmenistan’s gas market and is now the sole recipient of its gas – Russian state-controlled Gazprom left that market in 2016 owing to high asking prices.

While the Vostok 2018 exercises are a show of force aimed at both countries’ main competitors, namely the US and its regional allies in the East and West, the war games thinly veil Russia and China’s troubled relationship. The lines between traditional spheres of influence are blurring, and Moscow and Beijing do not consider one another political or economic equals. China and Russia characterise their special relationship through their bilateral ‘Comprehensive Strategic Partnership of Coordination’, as well as Xi’s decision to award Putin with China’s first-ever Friendship Medal. This will continue for appearances’ sake, as long as they need to appear stronger together rather than weaker apart. While further joint exercises are likely in future, looking at the underlying economic and political dynamics will reveal how deep this relationship really goes.

Emily Ferris Emily is a Research Fellow at RUSI focussing on Russian and Eurasian foreign policy.

Veerle Nouwens Veerle is a Research Fellow at RUSI focussing on Chinese foreign policy and geopolitics in the Asia-Pacific.

The views expressed in this article are the authors’, and do not necessarily reflect those of RUSI or any other institution.

Vostok 2018