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22 June 201618:20

Russian Ambassador to China Andrey Denisov’s interview with the Rossiya Segodnya and TASS news agencies, June 21, 2016

1186-22-06-2016

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Question: There are many close positions and also visible differences in the foreign policies of Russia and China. What is the current foundation of Russian-Chinese partnership, and on which issues do we differ? How is Russia-China partnership developing?

Andrey Denisov: Russia and China are large, independent states that are playing major roles in regional and global politics. Our countries also have over 4,000 kilometres of a common border, which is one of the longest land borders in the world. As large and independent states, Russia and China have their national interests, their own view on the world’s development, their own political history and, if you prefer, their own political mentality. In short, we are different even though we are neighbours. It is logical, therefore, that we have different views on global developments.

It is another matter that we have many points of contact in this turbulent world; we hold similar views on international events and, most importantly, on the impact of these events on the national interests of China and Russia. Our leaders have defined relations between our countries as “comprehensive partnership and strategic interaction” and agree that they are better than ever before in our history. This is not an exaggeration, as there are more international issues on which we really agree than issues on which we differ, and the reason behind this is our national interests. China and Russia stand for strict compliance with international law and respect for universal values in relations between nations, as well as for the broad equality of states and respect for their independent choice of development paths. We stand for taking into account national specifics when assessing political developments in other countries and historical realities when assessing international events. And lastly, we stand for a peaceful solution of regional and international crises, however acute they may be, through negotiations. This is what objectively keeps us together. As a result, we have close, and in some areas congruent attitudes, including at regional and international organisations, where our partnership assumes a concrete form.

At the same time, we are two different countries and hence we differ on some issues in international politics. But these differences are individual and do not bear down on our relations in general, or on our attitudes to international developments in particular. But even when we differ on some issues, our relations firmly rest on the main principle, which is mutual respect. We respect each other’s positions. The Chinese President once said that when assessing international developments, one must not lose sight of historical roots and political realities.

Question: Russian-Chinese trade has plunged in money terms because of falling oil prices and rouble fluctuations. Can we still achieve the targets set by our leaders? What can be done to improve our bilateral trade?

Andrey Denisov: Trade is a volatile business, with many ups and downs. Furthermore, trade is based on the market economy principles, which were still here the last time I checked. So, it is not surprising, and I would even say logical that the volumes of trade or the import/export of products and services tend to fluctuate. There are mixed trends in the global market, and there are high and low tides. Energy prices have fallen, or we can even say plunged, and this primarily concerns oil prices, which are used as the basis for calculating the prices of other energy resources. As a result, the volume of Russia’s trade with the countries the bulk of whose imports are energy resources has decreased. On the other hand, this could be a blessing in disguise. Before oil prices fell, fuel and energy amounted to 60 percent or more of Russian exports to China, but it is now barely 50 percent, while the share of value-added products in our exports, including machinery and equipment, has increased, even if slightly. In other words, there are mixed trends, and there’s no great loss without some small gain.

Overall, Russian-Chinese trade decreased by about 30 percent last year, from about  $100 billion, or more precisely $94-$95 billion, to less than $70 billion. The decline looks dramatic in figures. Had the energy and other non-oil and gas prices remained at the 2014 level, our trade would have increased to over $100 billion in 2015. But foreign trade is not at all like planned economy, and so the targets that are set are nothing more than indicative figures, as they say. Indeed, when prices of our main exports were high and the rouble was more stable against the basic foreign currencies, we thought the $100 billion target to be near at hand, and in fact, it was, as I have said. But we don’t intend to review our targets, because they are there as reference points.

The most important element amid the worsening global situation is the quality of our trade and economic cooperation. I can tell you that simple trade in goods has given way to investment projects, which implies a longer cycle of economic relations under each project, lasting at least several years, and closer relations, because investment projects include financial relations, inter-bank and technical cooperation, as well as interaction in the marketing of products, including in other countries. In other words, our economic relations have definitely become more positive and are more advanced that a simple trade turnover. This is a goal we should strive for. I often say that Russia-China economic relations and our companies need more success stories with these projects.

We already have a few success stories, but we would like to have more of them. This year we continued to strengthen the framework for our trade and investment cooperation, including with reliance on the possibilities and resources of international financial institutions and development banks, which Russia and China have recently helped create. Nobody promised that our companies would have it easy despite fluctuations on the global commodity markets, but there are no reasons to become dispirited. What we need to do is work harder, learn more about each other’s potential and use it to the best of our abilities. Judging by the contracts signed in 2016, our businesses understand this very well.

Question: President Putin will soon be in Beijing. As usual, the press is interested in what documents are likely to be signed and whether we can expect any breakthroughs, specifically in areas that have been discussed with enthusiasm recently.

Andrey Denisov: Each meeting between the leaders of our countries is a world event. The President of Russia and the President of the People’s Republic of China maintain rather frequent contact, meeting no less than five times a year. Nevertheless, what we call bilateral visits are always events of high importance that largely determine how relations between our countries will develop in the foreseeable future. As for the documents prepared for signing… It has become a tradition to sign large packages of documents that include several dozen different agreements, memorandums, protocols and contracts at various levels – interstate, intergovernmental, interagency, corporate, and at the public organisation level. We have tended to not try to sign as many documents as possible but have focused on the quality of the agreements instead. Nevertheless, there are still many of them, due to the high level and nature of bilateral relations.

The working part of the upcoming visit will be on June 25 and we have prepared an impressive list, including more than 30 projects that are at different stages of completion. Occasionally projects are finalised during the last days of the meetings and sometimes even on the last day or only a few hours before signing. It would therefore be premature to present the list of agreements we are preparing – not because it is a big secret but because the work is ongoing. Nevertheless, certain general items can be announced at this point. For example, a rather serious package of political documents is in preparation. I think this will be of interest to many in the world. These are documents on issues related to international politics, approaches, and principles.

I’d like to mention several trends. Over the last one and a half or two decades, including the last few years, we have formed certain standards in our relations, signing various intergovernmental documents that set the rules for relationship building in practical cooperation areas. By now, this framework of standards is in place and we have agreed to play by the rules. So, we are beginning to score goals and fill this framework with specific content. But the framework of standards continues to improve as well, because it’s a permanent process. For example, we are preparing to sign a number of documents aimed at facilitating commodity trade, specifically to simplify customs control procedures. It’s very important to simplify the permit procedures related to trade in agricultural products, both vegetable and animal.

There is a remarkable trend that has emerged basically this year. I’m referring to an increase in Russian agricultural exports to China. We are quite happy with this and intend to maintain this trend any way we can. A case in point is both agricultural raw materials, specifically exporting Russian wheat to China, and processes foods that enjoy a high reputation in China in terms of both quality and taste preferences. The most important thing in this regard is to avoid hurting the reputation of our commodities among Chinese consumers.

The documents we are preparing also include quite remarkable projects in new areas of economic partnership. For example, Chinese companies will participate in developing tourist resources in the north Caucasus. Our interests and those of our Chinese partners objectively converge in this area and this could lead to very important results.

Corporate documents being prepared include a cooperation project envisioning the production of surgical robots. This is yet another area of mutual interest. We are preparing an agreement on ice hockey, which is a new area for cooperation, where we have certain achievements. In China, hockey is increasingly popular, particularly in the run-up to 2020, when the PRC will host the Winter Olympic Games. So this area is important.

Structural projects that will expand cooperation include aircraft engineering projects, specifically large civil aircraft and heavy helicopters. We have documents in the area of nuclear energy and space exploration. Certainly, the public is focused on Russian-Chinese energy cooperation, which we could justly call an energy alliance. Two years ago, Russia and China signed a major agreement and several contracts for the long-term supply of natural gas from Russia to China via the eastern route through eastern Siberia and northeast China. The project is progressing towards successful completion. The gas pipelines on both sides are under construction. The first gas is expected to arrive in China in 2018.

Many experts and observers are watching very closely how the Russian-Chinese talks on the western route are progressing. Everyone is trying to guess what will be signed in this area during the upcoming visit. I can’t tell you anything specific at the moment because the talks are still in progress. But I would like to point out several aspects that should be taken into consideration. First, any agreement at this level is not just a stack of signed and sealed documents. There will be entire portfolios consisting of dozens of documents outlining the technical, managerial and financial aspects of these complicated and multidimensional deals that will take years to fulfill. It is very possible that these kinds of documents may be signed during the upcoming visit. As far as the supply contract, the core document of the deal, is concerned, the talks are ongoing, largely affected by the global energy market situation. This is perhaps not the best time for an energy supplier in the global market. However, while we are keeping to the negotiating schedule with regard to the 2014 eastern route agreements, we are also not falling behind on the western route. There is no delay, only consistent progress towards the approval of mutually beneficial terms. This is commercial activity, not a charity, after all. Most importantly, nobody sets a goal to have the documents signed by a specific deadline. The parties are willing to negotiate for as long as necessary. At the same time, neither the potential seller nor the potential buyer is losing confidence in reaching an agreement eventually. So we will be patient.

Question: Russia will sell RD-180 rocket engines to China. What is the status of rocket engine manufacturing?

Andrey Denisov: Russia and our manufacturers can boast of some major technical achievements in the engine manufacturing industry. This is a well-known fact. Despite our problems with the United States, we continue to provide the US space industry with rocket engines. The same is true of China. In this respect, I’d like to focus on our cooperation in space in general, rather than sales agreements

The idea is that, instead of delivering specific systems, we should launch long-term and mutually beneficial cooperation between countries which are similar in terms of their technical compatibility. Although Chinese space industry has been developing independently for a long time, it was originally based on Russian technology, and it used it extensively.

This is evident in achievements in manned and unmanned space missions over the past few years. But many cooperation opportunities remain intact.

This is probably the main point. Russia and our Chinese partners see the possible delivery of rocket engines as part of more wide cooperation, including projects to design advanced heavy rockets and eventual cooperation in space stations and long-range space missions. Russia and China are interested in developing this promising area. At the same time, we must consider the protection of intellectual property rights and generally accepted precepts of international law. I cannot help saying that, just like any space activity aiming to explore and develop outer space, this purely peaceful and civilian cooperation eventually benefits the whole of humankind, rather than just the partner countries.

Question: In May 2015, President Putin and President Xi Jinping agreed to align the Eurasian Economic Community and the New Silk Road programme. How well is this going? What are the main challenges? What projects have already been launched in this connection, and what projects could help implement the agreement?

Andrey Denisov: Any project can be implemented successfully if it meets the interests of both parties. The project to align the Chinese concept of the New Silk Road economic belt and the Eurasian Economic Union, an integration project of Eurasian countries, highlight our mutual interest, our tangible and obvious involvement. Just look at the map.

In my opinion, the creation of a common infrastructure that can facilitate economic exchanges in this vast Eurasian territory is a task and programme that simply has no opposition, and the parties see it as highly profitable. But an institutional and regulatory framework has to be created for any cooperation. Cooperation between China and the Eurasian Economic Commission, a body of the Eurasian Economic Union, creates precisely this framework.

In May 2015, Russian and Chinese leaders issued a statement on aligning these two integration processes. Much has been accomplished over the past year. Expert meetings have been held, with participants assessing two of the main aspects of cooperation in this area. The first would be to forge an essential regulatory framework because we need to agree on trade regulations before anything. And the second issue is investment cooperation.

We prioritise cooperation in infrastructure projects, including communications, logistics centres and everything related to the movement of people and goods in either direction.

We need two-level cooperation in this area. The first “collective” level includes cooperation between the Eurasian Economic Union and the Eurasian Economic Commission, its executive body, with China. The parties are expected to launch talks on a partnership agreement.

This traditional regulatory framework exists everywhere in the world. In this framework, certain mechanisms to facilitate trade terms, including customs unions, free trade zones and certain economic associations, are being created. These talks should be launched in the near future, with the consent of all countries, including the members of the Eurasian Economic Union.

The second level includes investment cooperation. Russia and China can engage in direct investment cooperation which also helps forge the infrastructure of the entire Eurasian Economic Union. First, the parties need to coordinate a list of cooperation projects that will meet their respective interests. This work was launched last year and continues this year. We are just starting, and a lot remains to be done.

This kind of cooperation could develop in the SCO region. The SCO, which includes Russia, China and the Central Asian states, is ready for this. As I understand it, the SCO heads of state decided at their December 2015 meeting to promote a free trade zone in the future. This will help establish a new Eurasian economic infrastructure. We have a lot to do, and everyone involved in this ambitious megaproject will have to work hard at every level. But we have started, and we are moving in the right direction.

Question: The SCO summit in Tashkent will take yet another step towards accepting India and Pakistan as full members. But this process is not yet completed and there are other countries that have applied as dialogue partners. Why is it now that the “Shanghai family” is expanding so much? Are there limits to SCO expansion? After all, this organisation should, on the one hand, build up its prestige, while, on the other, remain a club of like-minded members that help it operate effectively. 

Andrey Denisov: SCO expansion is an objective process that testifies to just one thing: countries are interested in being members of this international institution. No one is forced to join; there is no question of that. If an international organisation expands, it means that increasingly more countries are willing to cooperate with it on legal basis in one way or another.

Today, considering all the forms of cooperation, the SCO has 18 members. It includes the nucleus that founded it 15 years ago and a group of observer countries that are approaching full membership. India and Pakistan, which are currently observer countries, are likely to become full members soon. This is not a spontaneous process: they are expected to give their consent and subscribe to the entire package of SCO standards. India and Pakistan are at the initial stage of this process.

The third form of cooperation is dialogue partners. The number of these partners has grown significantly in 2016. Agreements have been signed with Nepal, Armenia and Azerbaijan, among others. A number of countries are close. Even more countries are interested in establishing some kind of relations with the SCO. This points to the world’s growing interest in this young organisation.  

The SCO itself is going through a very important period in its development as it transitions from forming a political basis of cooperation to practical cooperation. As a reminder, an SCO economic strategy towards 2025 was approved last year. A number of agreements are being drafted; a cooperation agreement on ensuring stability and security in the SCO region is nearing completion. All of these are practical issues that a broad range of countries are willing to join.

This doesn’t mean, however, that there are no bumps in the road. Each member country has its own national interests, of course. Decision-making within the SCO is based on consensus, which makes reaching it the main priority. As you know, this is not always feasible in world affairs.

But the most important thing is that issues are addressed through talks in a beneficial and cooperative atmosphere. The goal is to find a common denominator, to use a math term, rather than to complicate matters. The SCO is not a discussion club; it is an institution for practical cooperation. At least this is what the member countries want the SCO to be. Achieving this objective requires a lot of effort.

We expect the Shanghai Summit on June 23-24 to adopt major breakthrough decisions, including ones related to SCO membership.

Question: Tensions have recently increased in the South China Sea. How important are relations with Russia to Beijing in this context?

Andrey Denisov: The current situation in the South China Sea is a matter of concern for all parties. Heated disputes are underway regarding territorial claims in the South China Sea and other activities in the region like freedom of navigation, rules for marking territorial and maritime borders, and so on. Tensions here are often, and possibly even in most cases fuelled artificially, largely due to the non-regional countries’ interference in a conflict settlement.

Russian experts believe that some countries’ suspicions, if not outright accusations against Chinese restrictions, which some interpret as threating the freedom of navigation in the region, are ungrounded and are removed from reality, if only because China, which has long become the world’s largest country in terms of trade, larger even than the United States, ships the overwhelming majority of its exports and imports by sea, mostly across the South China Sea.

It is obvious that China is interested more than any other country in maintaining freedom of navigation in the region without any aggravating circumstances.

Russia’s position on the South China Sea disputes is well known, logical and clear. We believe that any dispute should be settled through negotiations between the countries involved in these disputes. We believe that any form of external interference, sometimes disguised as assistance to settling the dispute, is counterproductive. We express our position, but we do not take China’s side, because Russia does not take sides in such disputes, especially when the parties involved are countries that are friendly with and highly valuable to Russia.

As for the importance of our position for China or any other party to the conflict, we not only rely on international law but also try to offer reasonable arguments. Ours is the voice of reason and balanced approach, the voice of a country that knows only too well that territorial disputes can only be settled when relations between countries rule out disputes that can hinder the development of neighbourliness. This is our position, and it is definitely favourable to China and all other parties to territorial disputes.