CHINA-RUSSIA RELATIONS: VIEWS FROM SHANGHAI ACADEMICS

C O N F I D E N T I A L SECTION 01 OF 03 SHANGHAI 000790

SIPDIS

SIPDIS

STATE FOR EAP/CM
NSC FOR DENNIS WILDER

E.O. 12958: DECL: 12/13/2032
TAGS: PREL ETRD ENRG PARM MCAP CH RS
SUBJECT: CHINA-RUSSIA RELATIONS: VIEWS FROM SHANGHAI ACADEMICS

CLASSIFIED BY: Christopher Beede, Political/Economic Section
Chief , U.S. Consulate , Shanghai .
REASON: 1.4 (b),(d)




1. (C) Summary: In a series of meetings in early December on
China-Russia relations, Shanghai's leading academic experts on
Russia characterized the bilateral relationship as "very good."
They noted the excellent personal relationship between the two
countries' leaders, which, they claim, ensures political
relations will remain strong for at least the next several
years. They also described the military relationship as very
solid, some even calling it the "best aspect" of the current
bilateral relationship. Although there are tensions in trade
relations and a growing economic rivalry in Central Asia, the
academics believe these problems will not prevent the strategic
partnership from continuing on its positive trajectory in the
near future. End Summary.

Hu and Putin: Mutual Trust, Better Relations
--------------


2. (C) Poloff met with Shanghai's leading academic experts on
Russia in early December to discuss the current state and future
outlook for China's relationship with Russia. The academics all
characterized the bilateral political relationship as "very
good," especially after all outstanding border issues were
resolved in 2004. They agreed that the personal relationship
between Chinese President Hu Jintao and Russian President
Vladimir Putin has played a significant role in improving
political relations. Lu Gang, Director of the Department of
Russia-Central Asian Studies at the Shanghai Institute for
International Studies (SIIS),said there is "mutual trust"
between the two leaders, who now meet in person four to five
times a year at various venues, such as APEC and Shanghai
Cooperative Organization (SCO) meetings. Pan Guang, Director of
the Institute of European and Asia Studies, Shanghai Academy of
Social Sciences (SASS),asserted that the current level of
"friendship" between the two countries' leaders is
unprecedented, and that both leaders feel comfortable talking
"frankly and directly" to each other.


3. (C) When asked if the political relationship would change
once the leadership changes, the academics all concurred that
the relationship is not solely personality-based, and there are
now various institutionalized mechanisms for high-level
political exchange. However, they see the leaders' relationship
continuing to play a key role in the years to come. They
believe that Putin will still exert strong influence in Russian
politics even after he steps down in 2008, and combined with the
fact that Hu will remain in power in China for the next five
years, this ensures that bilateral relations will continue on
its positive trajectory for the foreseeable future.

Military Relations "Best Ever"
--------------


4. (C) Zhao Huasheng, Director of the Center for Russia and
Central Asia Studies, Fudan University, called the military
component one of the "best aspects" of the bilateral
relationship. The other academics had a similar view, citing
increasing cooperation in anti-terrorism maneuvers, joint
military exercises, and staff exchanges as signs of a burgeoning
military relationship. Although Pan also stated that the
military relationship is the "best" it has ever been, he noted
concerns, though not widespread, among some Russians of a rising
Chinese threat, leading Russia to sell military equipment to
India as a hedge. The academics all discounted any notion of
Chinese dependence on Russian arms, asserting that Russia is not
China's only source for military equipment. (Note: Pan and Zhao
mentioned Israel as another major source. End note.) Lu went
so far as to argue that China's indigenous military technology
is now more advanced than Russia's, though he declined to
elaborate on this point.

Trade: China Not Playing Fair?
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5. (C) The academics agreed that trade is the biggest sticking
point in the bilateral relationship. They cited statistics
showing bilateral trade increased from USD30 billion in 2006 to
USD40 billion this year with similar increases expected over the
next few years. However, they also noted that 2007 will be the
first year in which Russia records a trade deficit with China.
They pointed to this as a source of Russian "dissatisfaction"
with the direction in which bilateral trade is headed.
According to the academics, China sells mostly manufactured
goods, such as garments, shoes, and consumer electronics, to
Russia while Russia sells mainly natural resources, such as oil
and wood, to China. Lu thinks Russia perceives it as "unfair"
that China only buys Russia's natural resources and not its
industrial products. Zhao concurred, saying Russia wants China
to buy its commercial airplanes, cars, hydropower generators,
consumer electronics, and nuclear equipment, but that industrial
products only account for less than one percent of China's
imports from Russia. Both Zhao and Pan think this trade
structure will be difficult to change, since Russian consumer
products are not highly regarded in China and cannot compete
with imports from Japan and other countries. The academics
believe this negative trend in trade relations may continue for
some time but will not necessarily sour the overall
relationship.

SCO and Central Asia: Rivalry Brewing?
--------------


6. (C) Zhao explained that the purpose of the Shanghai
Cooperative Organization (SCO) is "not fixed" and has broadened
its focus from border and security issues to economic
cooperation, environmental protection, drug trafficking, illegal
migration, natural disasters, sports, and education exchanges.
However, according to Zhao, each member state has its own
priority, with some emphasizing security aspects and others,
like China, focusing more on economic cooperation. Pan believes
Russia views the SCO as a military/security cooperative
organization that can serve as a bulwark against further NATO
expansion, but other SCO members, including China, are not
interested in this vision. Both Zhao and Lu think there may be
some rivalry between Russia and China in the SCO and Central
Asia, but Lu likens this rivalry to relations between the United
States and France or between France and Germany, saying it is
friendly and the "fundamental goals are the same." Zhao agreed,
stating that Russia recognizes that the world has changed and
Russia needs to cooperate with China.


7. (C) However, Pan contends that the rivalry between China and
Russia in Central Asia is real and of growing concern to Russia,
which views Central Asia as its "traditional backyard."
According to Pan, the biggest issue in Russia-China relations in
Central Asia is the lack of economic cooperation, specifically
regarding energy. Pan stated that China has been trying to push
for more energy cooperation with Central Asian states in recent
years, especially after the collapse of the Siberian-China
pipeline project in 2003/2004. Pan thinks Russia only became
seriously engaged in energy negotiations with China after China
began signing energy deals with several Central Asian states.
For example, he noted how Russian President Putin suggested
creating an "energy club" in the SCO after Chinese President Hu
signed deals with Turkmenistan and Uzbekistan in 2007 to extend
a gas pipeline via Kazakhstan to China. Pan believes Russia is
now taking a more active role in energy discussions in Central
Asia, agreeing recently to send oil through the Kazakhstan
pipeline to China, if only out of necessity to keep China from
further encroaching on its "backyard."

Similar World Views, On Most Things
--------------


8. (C) Despite growing rivalry in Central Asia, the academics
believe China and Russia share a common "world view," including
their opposition to "U.S. unilateralism." However, they were
careful to emphasize that China and Russia are not engaged in
any anti-U.S. or anti-Western alliance. Lu maintained that
China's foreign policy is based solely on its own national
interest (e.g. Lu stated that China has USD10 billion invested
in Iran, so it obviously wants to prevent war) and is not
necessarily against U.S. policy per se. To emphasize the point

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that China and Russia do not agree on all international issues,
Pan raised the issue of Kosovo. He speculated that China,
against Russia's wishes, would establish diplomatic relations
with Kosovo were it to declare independence since Taiwan would
do so otherwise. However, Pan acknowledged that this would pose
a conundrum for China, which fears separatist movements of its
own. Regarding other "hot" international areas of concern, such
as Iran and North Korea, Pan thinks China and Russia are in
agreement that the issues should be resolved under the aegis of
the United Nations.
JARRETT