CHINA TOPIX

Updated 2:12 PM EST, Wed, Jan 29, 2020

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Russia Seeks Trade Alliance with China to Boost Its Economy Weakened by Western Sanctions

Vladimir Putin and Xi Jinping

(Photo : Reuters) Vladimir Putin and Xi Jinping shake hands during the 2014 APEC summit

Russia and China are cementing their trade alliance that will exclude the United States. This May, Russian leader Vladimir Putin and his Chinese counterpart Xi Jinping signed a variety of trade agreements in Russia's capital.

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The trade agreements also include allowing Russian companies to borrow around US$25 billion from Chinese banks in the span of three years. Putin claims that the trade partnership with China will result in "common economic space" in the Eurasian continent.

Also this month, Russia has agreed to deliver to China a steady supply of natural gas for the next 30 years, starting in 2018, while China agreed to also import more oil from Russia.

Putin hopes that strengthening economic ties with China will boost his country's economy which experts predict will contract by as much as 4 percent in 2015. It can be noted that an economic sanction from the west as well as a weak currency and cheap prices for oil has weakened Russia's economy.

Eurasia political risk consultant Alexander Kliment doubts China will be able to fill up the amount that Europe's capital market usually provides to Russia. Last year, trade relations between the two countries accounted for about $90 billion; however, the amount of trade between Russia and the European Union was more than five times higher than that of 2011 alone.        

The Russian economy will greatly benefit from the sale of oil and natural gas to China but Russia will need European or even U.S. capital if it wants to have a more productive and diversified economy, said reports.

It can be noted that both countries share the common goal of reducing their dependencies on funding from the Western capital market; however, Russia and China have different views on how to achieve that goal.

Economic relations between Russia and the U.S. are complicated by anti-Americanism and sanctions while China's economy is growing and the second largest in the world; however, China wants a stable and well established relationship with the west including the U.S. as its economy continues to grow.

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