Courcy’s Intelligence Brief

Our main briefing last week looked at Russian vulnerabilities, including China’s lessening dependence on Russia for modern weaponry.  This week, Russia’s Prime Minister Vladimir Putin has been in Beijing trying to boost ties and talking about the “truly strategic nature” of their partnership.  However, the 11-12 October visit has not diminished the impression that Russia is increasingly the junior partner.  An interesting piece of news management concerning Russia-India collaboration on “hypersonic cruise missiles” may have been intended as a reminder that Russia is not to be taken for granted.

There are many areas of agreement between Russia and China, not least over Nato’s actions in Libya and the need to prevent any repetition in Syria.  They cooperate with the framework of the Brics grouping (Brazil, Russia, India, China, and South Africa), the Shanghai Cooperation Organization, and the G20.  And both sides are committed to expanding bilateral trade further, from $60bn in 2011 to $100bn within three years.
China will also have been pleased with Putin’s attack on US economic policy at a time when China and the US are embroiled in an escalating dispute over the value of their respective currencies.  Putin told a pro-Kremlin youth rally on Monday: "They [the US] are living beyond their means and shifting a part of the weight of their problems to the world economy...They are living like parasites off the global economy and their monopoly of the dollar."

Nevertheless, as we pointed out last week, China has not placed a significant weapons order with Russia since 2005, and in 2007 Russian arms exports to China fell to half the level of 2006.  They declined again slightly in 2008 and further in 2009 and 2010.  China’s share of Russian arms exports was just 10% in 2010, well below the average of 40% estimated for the 20 years since the collapse of the Soviet Union.

And as a recent report from the Stockholm Peace Research Institute (Sipri) noted, while in 2009 Russia became the world’s largest producer of oil and second largest of natural gas, and while China (which shares a 4,000km border with Russia) became the world’s largest energy consumer in 2010, Russian crude oil now constitutes a smaller share (6%) of China's overall oil imports than five years ago.  China has strategically diversified its suppliers, and its largest oil supplier is Saudi Arabia, followed by Angola, Iran and Oman.  In the gas sector, Russia’s negotiating position has been weakened by China’s success in finding other partners, especially in Central Asia.

China’s gas deficit by 2020 is expected to be 200bn cubic metres a year, so it would be astonishing if Russia weren’t able to close a deal.  But when, on the last day of Putin’s visit to China, Russia’s Deputy Prime Minister Igor Sechin referred to current negotiations on gas supplies to China, it was hardly in effusive terms.  He said: “We are currently working on gas, we are sure contracts will be signed when the work is finished.”  He mentioned a likely level of supply to China of 30bn cubic metres of gas a year.

As we argued last week, there is no sign at all of a rift between Russia and China.  But, equally, nothing in Putin’s visit to China this week alters the conclusion we reached last week, namely that the combination of China’s inexorable rise with its lessening dependency on Russia for weapons and energy can only feed Russia’s feelings of insecurity.  And no doubt it was exactly this feeling of insecurity that prompted the Kremlin, on the eve of Putin’s visit to Beijing, to send China a reminder about Russia’s close military and technology ties with India.

On 10 October, the Russian military news agency Interfax-AVN carried a report highlighting the joint development with India of a hypersonic Mach-7 version of the BrahMos stealth cruise missile.  An agreement was signed in August between BrahMos Aerospace, the Moscow Aviation Institute, and the Indian Institute of Science to set up a centre for advanced technologies in high-speed aerodymanics.  The Moscow Aviation Institute and the Indian Institute of Science will design key elements of the missile, which was described in the report as “the world’s best supersonic missile”.

Separately, on 7 October, Putin announced that the Russian army and navy was to be almost completely rearmed in the next 10 years.  He told a meeting dedicated to the development of Russia’s military-industrial complex: “It is necessary to prepare industry for large-scale serial production of advanced hardware and weapons”.  He said that over the next decade, Russia would need to invest nearly $100m in the defence industry.  This would entail the modernization of as many as 1,700 enterprises.  And, he added:?“We expect that the investment of these significant resources in the defence industry will facilitate the modernization of the entire Russian economy.”