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How China Benefits From the Ukraine Crisis

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As the West and Russia face off over Crimea, China is well positioned to exploit a strategic opportunity given the escalating tension between Washington and Moscow. As has become China's modus operandi in the chess game of foreign affairs, Beijing's calculated silence on the Ukrainian crisis is based on several geopolitical issues: the ideological pillar of non-interference in the affairs of sovereign states, the China-Russia alliance, Chinese investments in Ukraine, and concerns about ethnic separatism in western China.

In due course, China's response to the Crimea crisis could shed light on three geopolitical questions. First, is China's support for non-interference in the affairs of sovereign states driven by principle, strategic interest, or both? Second, will China's respect for the sovereignty of weaker states decline as its own power strengthens? Third, will China's approach to evolving conflicts -- to wait silently in the background while other parties slug it out -- continue to reap it rewards when the conflicts are over? The answer to these questions will become increasingly important for the future of international relations.

Having stood shoulder-to-shoulder with Russia on the Syrian civil war, China vetoed three United Nations Security Council (UNSC) resolutions on the basis that Syria's sovereignty was threatened by Western powers. Beijing and Moscow have also defended their aligned positions on a plethora of pariah states and international crises -- all under the banner of non-interference in the affairs of sovereign nations. China was therefore placed in a difficult position when Russia was accused of violating Ukraine's sovereignty by interfering in Crimea. Fearful of being accused of moral hypocrisy, China did not want to be seen as overtly supporting Moscow, but at the same time, China was not eager to align with the West against the Kremlin, given Russia's growing importance to China's overall foreign policy.

The emerging China-Russia alliance therefore serves as a counterbalance to the U.S. while advancing China's commercial, energy and military interests. Across their shared 2,700 mile border, China and Russia have increased bilateral trade seven-fold since 2002. China has grown increasingly dependent on Russia, as the world's top energy exporter, to quench its seemingly insatiable thirst for oil and natural gas. China has become the main beneficiary of the Russian Eastern Siberia/Pacific Ocean oil pipeline, and it buys more military equipment from Russia than from any other country.

Following Russia's actions in Crimea, China joined other Asian powers -- including India and Japan -- by neither condemning nor condoning the Kremlin. Beijing responded with carefully construed ambiguity. Gin Gang, an official spokesperson for China's government, asserted that "It is China's longstanding position not to interfere in others' internal affairs...We respect the independence, sovereignty and territorial integrity of Ukraine." However, Beijing later 'clarified' its position by announcing that China has "taken the historical and contemporary factors of the Ukraine issue into consideration." It seems that China would like to keep the door open should it find itself with a similar dilemma in the future, whether along its borders - from Aksai Chin (India) to Bhutanese enclaves in Tibet to Baekdu Mountain (North Korea) - or in the South China Sea.

When the UNSC voted to condemn the Moscow-sponsored referendum in Crimea, China abstained. Neither Russia nor the West received what they wanted from China, despite the fact that Putin and Obama both called President Xi and pleaded with him to view the Ukraine situation from their respective government's perspective, and vote accordingly. While avoiding commentary on the referendum, China's Vice Foreign Minister, Li Baodong, urged all parties to "calmly maintain restraint [and] to prevent the situation from further escalating and worsening", adding "...political resolution and dialogue is the only way out." In short, China was siding in Putin's favor, since the annexation was a fait accompli.

China's investments in Ukraine also factor into Beijing's cautious response. In December 2013, Ukraine's former President, Viktor Yanukovich, and President Xi signed an accord that amounted to $10 billion in Chinese investments related to agriculture, aviation, energy, finance industries and infrastructure across Ukraine, making China the country's second largest trading partner. The accord contained a nuclear clause, stipulating that in the event of a nuclear attack (or even the threat of one) Beijing would provide Kiev with military support. Given Kiev's political orientation at that time, it was a sweetener China that did not expect to have to deliver upon, as it knew the likelihood of a nuclear attack by the West on Ukraine was virtually impossible. Given the change in political orientation in Kiev, China's obligation to Kiev remains more or less the same, as the likelihood that Moscow would ever attack Ukraine with nuclear weapons must be considered close to nil.

While Beijing lost an ally when Yanukovich lost power, it is likelier than not that the new Kiev government will maintain an interest in deepening economic and military ties with China. Within this context, China will be careful not to burn a bridge with the new government in Kiev by being perceived to be too closely aligned with Moscow on the question of Crimea. Kiev is likely to recognize that it is in its own interest to allow Beijing some latitude on this issue, so as not to jeopardize its own economic and military well-being in the process.

Another factor that likely prevented Beijing from throwing its weight entirely behind Moscow relates to China's own problems with ethnic minorities groups and separatist movements. China is fundamentally opposed to the idea of ethnic minority groups voting for succession from a country without the central government's consent. This is largely driven by Beijing's fear of the potential ramifications in Tibet and Xinjiang, where greater autonomy/independence from Beijing is advocated by currents within the Tibetan and Uighur communities that view China's central government as exploitative and oppressive. The Taiwan/"One China" issue also pressures Chinese officials to recognize the territorial integrity of all nation states.

From China's perspective, the future of Crimea presents numerous opportunities and risks. Clearly, the prospects for a Moscow-Washington rapprochement have greatly diminished since Russia first took action in Crimea, given the exchange of sanctions between the West and Russia, and Russia's suspension from the G8. In what is without a doubt the most serious East-West standoff of the post-Cold War era, China understands that its strategic value to both the Kremlin and the White House will increase as Obama and Putin seek Xi's support against the other. As the West attempts to isolate and punish Russia, Moscow will have even more reason to turn to its Chinese partner, with respect to energy exports to China, the solicitation of foreign direct investment into Russia, and a military alliance against the West.

At the same time, the Ukraine crisis ought to be compelling China to ask some fundamental questions about the weight it places on the "non-interference" pillar of its foreign policy. While maintaining cooperative ties and a strategic partnership with Russia will presumably remain a Chinese interest over the long-term, Beijing's support for Moscow vis-à-vis Crimea will likely remain nuanced -- and Moscow will understand why. By pursuing a relatively neutral stance on Ukraine, analysts will have less reason to accuse Beijing of reacting to U.S. and Russian interference in weaker nations' affairs with a double-standard.

On the question of whether China can continue to wait in the background while protagonists attack one another in a variety of conflicts, it has worked rather well for China thus far. The best example relates to Iraqi oil contracts, which Chinese companies won the majority of, without China having participated in the Iraq War. There is little reason to believe that China will change its approach, as the Chinese government believes, based on recent experience, that it has little lose and everything to gain by maintaining neutrality and being patient.

For that reason alone, China will likely continue to maintain a studied neutrality and silence in terms of Ukraine's future and let Russia's relationship with the West grow increasingly cold. Chinese leaders will exploit the rising tension between Washington and Moscow when the time is right. In that regard, President Xi is every bit as talented a chess player as Vladimir Putin.

This post was reprinted with permission from Eurasia Review.

Daniel Wagner is CEO of Country Risk Solutions, a cross-border risk advisory firm, Senior Advisor with Gnarus Advisors, and author of the book Managing Country Risk. Giorgio Cafiero is a research analyst with CRS based in Washington.