Does Russia’s economy have a China problem?

Hello! Welcome to your weekly guide to the Russian economy, written by Alexandra Prokopenko and Alexander Kolyandr and brought to you by The Bell. Our main story this week covers how Vladimir Putin’s trip to China laid bare Moscow’s reliance on Beijing. We also analyze growing calls for the central bank to cut interest rates amid slowdown fears.

A green light for the Power of Siberia 2? Not so fast.

Vladimir Putin returned from China with more than 20 business deals, highlighting the deepening ties between Moscow and Beijing. But most say little about the economic and military-political symbiosis between the allies, and even the most important agreement, on construction of the Power of Siberia 2 gas pipeline, raises many questions. Nevertheless, the increased connectedness – or, more accurately, Russia’s growing economic dependence on China – is clear from both recent trade dynamics and the details of the gas deals that were struck.

What they agreed, and what they didn’t

In its traditional style, the Kremlin published a long list, outlining the 22 agreements signed by Russia and China during Putin’s visit to the Shanghai Cooperation Organization summit in Tianjin and Xi Jinping’s military parade in Beijing. The most important deal was on gas supplies. The countries agreed to increase Russian gas deliveries to China almost three-fold, to 106 billion cubic meters a year. Russia’s Energy Minister Sergei Tsivilev called it “a huge alternative” to the European market, which Russia lost due to sanctions imposed over its invasion of Ukraine. The concrete plans include expanding capacity at the existing Power of Siberia pipeline by around 15 percent to 44 billion cubic meters a year, increasing pumping along the Far Eastern route from 10 to 12 billion cubic metres and, most importantly, starting work on Russia’s long-sought Power of Siberia 2 pipeline.