Sunday, 25 May 2014

China/Russia Gas deal: Good news for everybody

The announcement this week of a multi-billion dollar deal between China and Russia over gas supplies is a major good news story. Predictably, the press was full of analysis and reporting on what the deal means for America and the West, and whether it indicates the emergence of a new world order based around a Chinese-Russian alliance. Questions were asked about Russia's intentions in Eastern Europe now that it has an alternative market for its energy exports, and about China's in East Asia now that it has a secure source of energy supplies in its own backyard.  The most important aspect of this deal however, is positive. It will help to stabilise both countries, by providing them with an opportunity for economic growth and by securing vital sources of trade and investment. The deal will hopefully form the first part of a process of further economic cooperation between the two nations, and maybe even stimulate greater economic growth and development for both.

Russia and China both face a similar but distinct set of problems in their medium and long term futures. Both face a demographic crisis. China's population is ageing rapidly, and due to the one child policy and other factors, while its growing middle class is demanding economic and political reforms, which president Xi Jinping has attempted to enact without much success. Russia's demographic crisis is even more severe, as its population is actively shrinking year on year, while life expectancy is under significant downward pressure from drug and alcohol abuse and other social ills. China suffers from completely self-inflicted environmental problems, with Beijing routinely recording air pollution levels so severe that the population are forced to remain indoors. The tendency for factories and other industrial projects to contaminate their surrounding areas with heavy metals and other toxins has led to multiple riots and protests against new factory openings and the lack of government action on pollution generally.

Russia too has its share of environmental issues, and both countries suffer from widespread corruption at every level of government and on the scale of tens of billions of dollars every year. Finally, both China and Russia have restive ethnic minorities within their borders. China's Uighur people and the mainly Muslim population of Russia's north Caucasus region are at the margins both politically and geographically. Decades of discrimination and heavy handed tactics by the central governments of both nations have driven elements within these marginalised groups to engage in armed resistance and insurgent tactics. Suicide bombings in Russia and mass knife attacks in China are symptoms of deeper discontent and anger among their minorities.

All of these factors combine to leave Russia and China with dangerous instabilities within their social and political systems. Dictatorships, oligarchies and repressive regimes generally tend to be pressure cookers, locking in tensions either until they are suppressed or until they erupt in violence and upheaval. In the case of both China and Russia, the second outcome is too terrifying to even contemplate happening. Both nations have very large, well equipped military forces, and they are both nuclear powers. Russia's arsenal of over 4,000 warhead dwarfs China's roughly 250 devices (source:, but even one nuclear weapons falling into the wrong hands would be an irreversable disaster for the whole world.

The regimes in Moscow and Beijing are in many ways anathema to the West and to democratic nations everywhere, but they are, to use an appropriate economic term "too big to fail". The prospect increasing social instability in either one, leading to military intervention, civil strife between rival factions or worst of all a complete collapse of political order is one that should concern the whole world. Even if their nuclear weapons remain in the hands of the military, as those militaries become embroiled in conflict with their own people, the potential for fragmentation of the chain of command and accidents with or outright loses of individual nuclear devices rises. The risks are simply too great. Even one active weapon, in the hands of a radical insurgent group or a rogue military commander has the capacity to cause devastation on an unimaginable scale.

For these reasons, this gas deal is good news. It will provide Russia with a new and very lucrative market for its abundant natural resources. This will hopefully in turn lead to more money flowing into the Russian economy and stimulate economic growth and job creation. Increased prosperity will go a long way towards alleviating the concerns of marginalised and disadvantaged groups in Russia. The Putin regime, in the interests of its own self-preservation want to use its new economic strength to try and buy off rather than forcibly crush its domestic opponents, thus reducing some of the internal tensions within Russia.

For China, access to the one trillion cubic metres of gas (source: Russian intends to supply will help the country move away from heavily polluting sources of energy like coal. This should help to alleviate Beijing's smog and other environmental concerns. It will also help China avoid energy shortages and also to reduce energy poverty among the poor and rural sections of its population. A dependable source of energy will also help China to maintain economic growth while it tries to readjust its economy and financial sector. Continued economic growth improved access to cleaner energy will, as in Russia, address the concerns of some but not all of China's marginalised groups. Gazprom, the Russian state gas company, proposes to run part of the pipeline supplying China through Xinjiang province (source:, home of the restive Uighur Muslim ethnic minority. While China's conduct in the region has been heinous in many cases, the fact remains that the Uighur are a small minority within a very large superpower. Hopefully the pipeline's construction will bring both jobs and investment to the region, addressing the complaints by the Uighur that they have been cut out of China's economic miracle.

While the Uighur are not just economically marginalised, the presence of the pipeline will give them a greater stake in China's economy, and may help to re-balance their relationship with Beijing. The solutions provided by the gas deal are not perfect, but they are a start. Given the the size of both countries and their deadly collection of nuclear weapons, this deal buys both more time and more resources to address their internal issues and move towards a more stable future. This is exactly what the world needs for both China and Russia, and what China and Russia need for themselves. So here's hoping that this deal sticks, and that it delivers on all of its potential.

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