China Undermines Russia Sanctions with $18 Billion Investment

In what appears to be an effort to undermine the United States sanctions against Russia, China indicated to its state-owned Xinhua news agency that it agreed during Russian President Putin’s May 20-21st visit to Shanghai to invest $18.46 billion in Crimea

The amount of the investment is highly symbolic, since it exceeds the $17 billion International Monetary Fund (IMF) loan to the Ukraine. The Chinese action is part of a series of retaliatory responses to President Obama’s Asian trip in April that was dubbed by Asian media as the “China containment tour.” China is seeking to develop an enhanced strategic relationship with Russia in order to contain the United States.

Russian President Vladimir Putin is scheduled to visit Beijing in late May where he is expected to sign memorandums of understanding on a 30-year natural gas supply deal with Beijing and to start negotiations over the financing and feasibility of various Crimean projects. Stratfor Global Intelligence reported that China intends to build a bridge across the Kerch Strait to connect the Crimea and Russian mainland, expand Crimean ports, build solar power facilities, and create special economic zones for manufacturing. 

Russia wants to portray the investments as demonstration of solidarity with the Chinese and international acceptance of Russia’s right to annex the Crimea. China wants to demonstrate that they can use their financial muscle to challenge the United States’ foreign policy. 

Beijing perceived President Obama’s trip to four Asian countries in April as a direct effort by the United States to interfere in their regional affairs. President Obama's declaration that a group of islands, claimed by both Japan and China, were covered by America’s security treaty with Japan and the inking of a 10-year agreement to increase U.S. forces in the Philippines were both seen by the Chinese as highly provocative actions. With the Asian press labeling Obama’s trip as the “China containment tour;” China wants Russian President Putin’s visit to China to be seen as containment of the United States tour.

On May 3rd, the Chinese military and state-controlled oil monopoly, CNOCC, moved a deep-water drilling rig to a spot just 120 miles off the coast of Vietnam in an oil exploration block where Vietnam’s state-owned oil monopoly and ExxonMobil have discovered vast oil and gas reserves. The provocation sparked anti-Chinese riots across Vietnam that caused 27 deaths and left at least 100 people wounded. On Monday morning, two Chinese ships arrived at the coast of Vietnam to begin efforts to collect thousands of Chinese citizens who are fleeing the country after deadly attacks last week.

A $2.4 billion investment in the Ukraine had been a very small part of China's Eastern Europe investment strategy since 2005 to extend China's Mediterranean interests into the Black Sea. But with the combination of China’s financial strength and Russian military strength, both nations can show the West they cannot be easily intimidated.

The author welcomes feedback and will respond to comments by readers.


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