Global Economic Order: What Does the Xi-Putin Summit Mean?

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The possibility of Europe plunging into a historic economic disaster has dissipated as the winter is over in Europe. However, the anticipated economic recovery has not materialized as the global financial meltdown has persisted and become a chronic issue for humanity at large. Therefore, it can be inferred that although winter has ended, spring is yet to arrive. The Ukrainian conflict is currently being considered the primary catalyst behind the global hysteria of geopolitical shifts.

Presently, the world is undergoing a period of resuscitating “western unity” against Russia, its old rival, which is evident in various forms of activities such as economic sanctions and unfriendly policies from different economic groups. Conversely, China, the only economic competitor of the West, is experiencing a tough time in the economic domain, including post-pandemic disarray, supply chain disruptions, and rising competition from new economic players.

In this complex geo-strategic scenario, the world has witnessed some ground-breaking changes in the last year, ranging from numerous economic struggles in the developing world to establishing a new west-led economic order. In these sensitive periods of the global economy, the Ukrainian war has recently completed its first anniversary, and the pain of the world economy persists. However, the relationship between Russia and China has remained unaffected by these uncertainties and struggles.

To highlight the strong bond between these two giants, China’s top leader, Xi Jinping, has concluded a state visit to Moscow, where he engaged in almost three full days of discussions with Russia’s President, Vladimir Putin, marking the 41st such interaction in the last decade.

The Xi-Putin Summit: What Does It Mean?

Even though Putin was wanted for arrest by the International Criminal Court for war crimes, China sent a strong signal of support for Russia with this visit. The visit is a diplomatic advantage for Russia at a crucial moment, but the west has avoided Putin at all costs.

However, China has taken a strategic decision to strengthen and expand ties with Russia in order to advance its own inherent interests. Besides, China suggested a 12-point agenda for “a political settlement of the Ukrainian problem” during the summit, demonstrating Xi’s image as a mediator while being mostly disregarded by the west.

On the other hand, the most consequential result of the summit, then, reveals an unwelcome and unpredictable facet of international politics: the introduction of a “new global order. In Putin’s words “Together, we should push forward these changes that have not happened for 100 years”. We may assume that the participants have made enough plans for establishing a new global order. Consequently, the Xi-Putin summit is a public recommitment of the two’s relationship, regarded as crucial for them to oppose what they perceive as the West’s unjust involvement in their affairs.

Additionally, two parties have at long last found common ground in a number of cooperating fields, a crucial step toward building a new global order. Thus, maintain their productive energy exchange is one of the focal aspects as Europe’s reduced dependence on Russia’s primary resource has led to a spike in energy commerce between the two allies, and this trend seems certain to continue. Due to the embargo on energy imports in the West, China has become a key customer for Russian oil and gas at deeply reduced prices.

In addition, Russia supplied China with 1.94 million barrels of oil per day in January and February, up from 1.57 million in 2022. Crude oil shipments from Russia to China are increasing as well, by 8% in 2022 to a total of 1.72 million barrels per day. In addition, China spent $3.98 billion on Russian pipeline gas imports and $6.75 billion on Russian liquefied natural gas imports in 2018, increases of 2.6 and 2.4 times, respectively. Meanwhile, China bought 20% more Russian coal, reaching 68.06 Mt.

To further advance oil, gas, coal, power, and nuclear energy cooperation projects, the two presidents have also pledged to “create a tighter energy collaboration.” Besides, Russian gas supplies to China were another topic of conversation between the two sides, as was the “proposal to construct the Power of Siberia 2 gas pipeline across the territory of Mongolia.” The sides also agreed to collaborate on a “new China-Mongolia-Russia natural gas pipeline project” by conducting “research and consultation.” As a result, the summit demonstrated China’s commitment to Russia in the form of increased energy and products trade and substantial investments in the future years. Already, Chinese businesses, such as the car industry, have benefited from the departure of Western brands from Russia.

In addition, Xi wrote a long-signed letter in the Russian Gazette before to his travel to Moscow, pleading for more economic cooperation, investment, and bilateral commerce. The approach isn’t a spontaneous phenomenon; rather, it is a component of the Sino-Russian “no limits partnership” agenda.

Furthermore, Russia has increased its purchases of Chinese equipment, electronics, basic metals, automobiles, ships, and airplanes in the last year, all while providing energy to China. Up from $67.57 billion in 2021, China’s exports to Russia were $76.12 billion in 2022. Overall, commerce between the two sides increased by over a third, to around $190 billion, last year, and is expected to continue rising.

However, their economic ties are unbalanced, so there’s room for future investment. As a result, the two groups agreed to keep working together practically in areas of mutual interest such as civil aviation, automotive production, shipbuilding, and metalworking.

Moreover, China’s promise to expand telecommunications-related high-tech cooperation with Russia was also impacted by the summit. Although more Chinese companies were made vulnerable to US sanctions as a result of the strategy, it did usher in a new round of geopolitical conflict among major powers.

Noticeably, at the outset of the Ukrainian conflict, western traditional measures to freeze the assets of Russian banks and cut off Russian financial institutions from SWIFT constituted a huge danger to the Russian economy. Russia was cut off from the global dollar system, but the Chinese yuan and digital currencies have stepped in to fill the hole. In only nine months, yuan-based transactions went from making up 0.4% of the total to 14% of the whole.

In addition, Russia’s central bank sold $47 million in yuan in January to make up for shortfalls in its budget caused by weaker oil and gas earnings, as its dollar reserves dwindled as a result of sanctions. Nonetheless, two additional groups have brought up the introduction of other financial settlement systems as potential SWIFT substitutes.

As a result of the agreements reached at these summits, Russia may now more easily switch from the dollar and the euro to the yuan when making purchases of energy and other items. The method solved Russia’s currency crisis in the near run. Yet, Russia’s future economic prosperity is now contingent on China’s actions. Although both sides express excitement about the potential for a “no-limit partnership,” “There can be no reliance on it at all. So, the idea’s correct implication remains unclear.

Last but not least, at the meeting, Russia expressed its sincere gratitude to China for successfully holding the 14th BRICS Summit. The two sides are eager to collaborate with the other BRICS members in order to carry out “BRICS+” collaboration and cooperation, which involves bringing together the BRICS nations plus the New Development Bank to execute the agreements made at previous BRICS presidents’ meetings. Emerging markets and developing nations might feel secure in their shared interests thanks to BRICS’s periphery discussions. Yet, the summit established the new BRICS map, which will almost certainly bring about a great deal of confusion to the existing world economic system.

In summary, the global economy is currently poised to undergo an unprecedented transition in its operational system, with the prospect of building a new world order emerging in the past year. Nevertheless, the joint statements and numerous commitments to pursue a responsible economic path between Russia and China have transformed the possibility into a tangible reality. Consequently, the world is now embarking on an uncertain journey towards prosperity, characterized by the looming polarization of the global economy. The recent summit between Putin and Xi serves as a testament to this.

– S. M. Saifee Islam is a Research Associate at the KRF Center for Bangladesh and Global Affairs (CBGA).

Published in Modern Ghana [Link]