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So far Xi Jinping has done his best to make the most out of the Ukraine war as he possibly can. Firstly, he made sure he did not admonish Putin or sanction him. Then he met with him several times as “allies with no limits”. Most recently, Putin attended the Shanghai Cooperation Organization summit in Samarkand, Uzbekistan, on Sept. 16 and met with Xi.

Ukraine analysts believe China has become crucial for the survival of Putin's Russia as crippling Western sanctions leave Moscow with no alternative than to fall deeper into Beijing's embrace.

"Russia, quite literally, will become China's gas station," said Mark Savchuk, head of the oversight committee of the National Anti-Corruption Bureau of Ukraine.

Given that China is experiencing financial difficulties with its COVID-19 lockdowns and property crisis, the Chinese could "really use a trading partner that can sell its oil at a 50% discount," said Savchuk, who specializes in transparency and the macroeconomic outlook of the energy sector.

The European Union's latest oil sanctions on Russia will kick in on Dec. 5. They will include a ban on insurance for tankers transporting Russian oil. In February, additional sanctions on oil products and a possible price cap on Russian gas will come into force.

"So China becomes absolutely vital for Russia's survival," Savchuk said. "China will become the largest market for Russia. Russia has no alternatives, in terms of imports of critical tech like cars, cellphones, various equipment and machinery that is now banned from the West."

China's imports from Russia -- mostly oil and natural resources -- jumped a record 80% in May over the same month last year, according to Oksana Lesnyak, Head of the Asia-Pacific Bureau of the Kyiv-based Center for Global Studies Strategy XXI.

Is Xi worried about Putin’s nuclear threats? Probably. But not to the point where he will jeopardise what he can get from Russia. China will be milking Russia dry, i.e. buying their oil and gas at a huge discount, as it already does.

Lesnyak was equally pessimistic in her outlook for Russia.

"The war is making Russia increasingly dependent on China," she said. Sanctions and isolation "will accelerate Russia's conversion into China's satellite."

Additionally, Russian companies are issuing bonds in the Chinese yuan. "[The] Renminbi could soon become the de facto reserve currency for Russia, further increasing Moscow's dependence on Beijing," Lesnyak said.

Western sanctions are likely to set back Russia's economic development by 30 years, regardless of whether Moscow decides to proclaim that its war goals have been achieved, Lesnyak said.

"Strategically, Russia has already lost" the war, she added.

Serhiy Fursa, an economist and director of Dragon Capital of Ukraine, said if Putin remains in power, there is "no chance" for Russia to return to business as usual. "The new business model [for Russia] will be to sell commodities and other goods to China at a price that China dictates."

In the meantime, China will be sitting, watching and waiting. It will be learning everything it can from how Russia and Ukraine handle a major modern war. Knowing Xi’s naked territorial ambitions, he will be drafting his war plan against Taiwan – and maybe the West as well.

Xi Jinping and the PRC should do the sensible thing and ensure their voices are added to those of the West in denouncing Putin’s mad terrorism. His own people are finally in full voice and paying the price. Will they? Unlikely. The next few months will no doubt tell.

In the short term though, Xi at least has the option to hobble Russia by banning Chinese exports to them. Especially the higher tech ones!

GB / AB Source: Amy Chew, Nikkei Asia 21/9/22

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