Disagreements over new sanctions vote sure to play into Beijing’s hands

26/07/2017

House of RepresentativesWith the Kremlin reacting angrily to yesterday’s vote by the US House of Representatives to impose fresh sanctions on Russia, the authorities in Moscow will be taking some consolation from the spate of recent agreements signed with China that look set to pump some $12bn into the Russian economy. Their counterparts in Beijing, on the other hand, must be looking on with satisfaction as the vote threatens to drive a wedge between Washington and Brussels, as well as between west and east European member states of the EU.
The House approved the sanctions — and separate punitive measures against Iran and North Korea — in a 419-3 vote that underscored the anger on Capitol Hill over alleged Russian interference in last year’s Presidential elections.
The move has raised concerns in Brussels where officials fear that the sanctions could effect several multi-billion dollar energy projects, particularly the Nord Stream 2 (NS2) pipeline that is due to run between Russia and Germany along the bed of the Baltic Sea. Yesterday , officials said the EU was “activating all diplomatic channels” in an effort to persuade US lawmakers to dilute the bill’s impact on European companies and the continent’s energy security.
Nord Stream2 pipesLed by Poland, however, several east European states are vehemently opposed to NS2 on the grounds that it will increase the EU’s dependence on Russia for its energy supplies. The Commission’s response to the new sanctions are due to be discussed today.
Either way, the sanctions can only prompt Russia to turn to its eastern neighbour for help to resuscitate and economy that is only just beginning to emerge from a two-year recession and to pursue further tie-ups – and to leave China bargaining from a position of strength.

Russia-China RMB Cooperation Fund
At the beginning of July, the Russian Direct Investment Fund and the China Development Bank agreed to create the China-Russia RMB Investment Cooperation Fund to invest up to $10bn Russian and Chinese projects, some of which will help boulster China’s One Belt One Road initiative and the Russian-led Eurasian Economic Union. In Russia, the initiative will be managed by the Russia-China Investment Fund (RCIF),and in China by CDB’s CDBC subsidiary.
Meanwhile, the RCIF and the Chinese province Hainan agreed to jointly inject over $500 million to support the ‘One Belt One Road’ initiative and bilateral investment cooperation between the two countries.

VEB-Harbin Bank
The announcement followed hot on the heels of the signing of an MoU at the Fourth Russia-China Expo between Russia’s state development bank VEB and Harbin Bank to launch a group of funds with a total target amount of $700mn to support innovative projects in the fields of industrial technologies, software, Internet, digital multimedia, e-commerce, communications and semiconductors.

VEB Chairman Sergey GorkovVEB-China Development Bank
VEB has also secured a 15-year $850m loan from China Development Bank to set up a new innovation-focused fund. “The potential of this market is inexhaustible. We see a lot of interest in projects with a Chinese factor in Russia,” said Sergei Gorkov, VEB’s chief executive. “The funds may be used to support projects in such sectors as energy, transportation, industrial and energy infrastructure, as well as in cross-border projects in Siberia and the Russian Far East.”
Harbin Bank-SBT Venture
In a separate move – also last month – Harbin Bank agreed to pump $50m into Sberbank’s second SBT Venture Fund II whose remit is to co-invest in Chinese tech companies.

Source: ewdn