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Putin Says Sanctions Have Spurred Russian Shift To China

Russian President Vladimir Putin
Russian President Vladimir Putin

In an interview ahead of a two-day trip to Beijing, Russian President Vladimir Putin said the sanctions imposed on Russia by the West have helped spur a shift to China for Russian businesses.

"This encourages our domestic business to develop stable business ties with China," Putin said in a joint interview with Russia's TASS and China's Xinhua news agency on September 1, when asked about an impending move by the European Union to extend its sanctions on Russia until next March.

"Since 2010, China has been Russia's leading trade partner. In 2014, despite unfavorable trends in the global economy, we managed to maintain our trade turnover, which reached around $88.4 billion," he said.

Putin did not mention the volume of trade this year, which fell by 29 percent in the first half, to $30.6 billion, according to a Bloomberg news agency report citing Russian Customs Service data.

The decline makes it unlikely Russia and China will meet their target of $100 billion in 2015.

Putin has put additional emphasis on ties with China since Russia's annexation of Crimea in March 2014 and support for separatists fighting against the Ukrainian government severely damaged its relations with the West and prompted sanctions from the United States, European Union, and other nations.

Critics question the wisdom of Putin's pivot, saying that China has the upper hand in the relationship because it has an array of sources for energy to feed its economy and does not need to rely heavily on Russia.

Putin offered a glimpse of the areas likely to be covered by nearly 30 bilateral documents and business deals Russian and China have said they will discuss during the Beijing visit on September 2-3.

High-speed rail will be one of the most "promising" areas of cooperation with China, he said.

"We have already agreed on the parameters of joint funding for the construction of a high-speed route between Moscow and Kazan, and the amount of investment to be provided by our Chinese partners and us will exceed 1 trillion rubles ($15 billion). We expect to have the new route running by 2020, for it to become a model project of Russian-Chinese transport and infrastructure cooperation," he said.

Putin added that "cooperation in aerospace and space rocket industries is of great significance for both our countries... We have already agreed on the joint creation of a wide-bodied long-range jumbo jet and a heavy helicopter, as well as on a number of other joint programs," he said.

Other areas China and Russia will work together are science, technology, and finance, he said, noting that both countries are working toward settling trade transactions in their own currencies rather than the U.S. dollar.

Sales of commodities like oil around the world are usually settled in U.S. dollars -- a practice that bolsters the dollar's status as the world's main reserve currency but which both China and Russia have said they want to change in the future.

Putin's meeting with Chinese Premier Li Keqiang on September 2 is expected to focus mainly on trade and economic matters, Kremlin policy adviser Yury Ushakov told reporters in Moscow.

He said the two men will discuss plans to link Beijing's Silk Road East-West trading route and the Moscow-led Eurasian Economic Union, which includes Belarus, Kazakhstan, and Kyrgyzstan.

Both programs are centered on developing ties with Central Asian countries like Tajikistan, Kazakhstan, and Uzbekistan, some of whose leaders are also attending events in Beijing this week.

Ushakov indicated the most important deal expected during the visit is a memorandum of understanding on a new pipeline to carry natural gas from the Russian Far East to China, but no binding agreement on the crucial issues of price or timing is expected.

Ushakov said a deal on a separate pipeline route from western Siberia to China is unlikely to be clinched during the visit.

In the interview, Putin said China is interested in investing in Russia's underdeveloped Far East.

"Our Chinese partners are ready to invest over 100 billion rubles into the construction of an oil refinery and a clinker plant in the Amur region, bridges in Nizhneleninskoye-Tongjiang and Blagoveshchensk-Heihe, and a metallurgical plant and a brick factory in Yakutia," he said.

The two sides will sign an agreement to open Russian general consulates in the Chinese cities Harbin and Wuhan, while China will inaugurate posts in Russia's Far Eastern cities of Vladivostok and Kazan, Ushakov said.

On a related note, Putin told a student in Sochi earlier in the day that the recent steep fall of the ruble hasn't been all bad for the Russian economy, as it's making Russian exports cheaper and more competitive in the global marketplace.

The ruble's decline has been ascribed mostly to the collapse in world oil prices and the Western sanctions.

He told the student that Russia hasn't sought to stop the ruble's decline through central bank intervention because "we do not regulate this situation in a nonmarket way" and "because, if we do, we will quickly burn off our gold reserves."

After attending a military parade on September 3 commemorating the 70th anniversary of the end of World War II and an official reception held by Chinese President Xi Jinping, Putin will meet with the presidents of Venezuela, Laos, and the Czech Republic, all of whom are also in Beijing for the commemoration events, Ushakov said.

Russian armed forces will be represented in the parade by a unit from the Honor Guard of the Preobrazhensky Regiment, he said.

With reporting by TASS, Bloomberg, and Xinhua news agency
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