China is outflanking Russia in the struggle to woo Europe

Xi Jinping’s visit to Russia during its Victory Day celebrations is a sign that relations between Russia and China are becoming increasingly cosy – but the two countries' competition for influence in Europe is running as high as ever.

Both Russia and China share a suspicion of the EU’s integration project, a grand supranational organism that limits its member states’ sovereignty but combines their geopolitical heft. After all, both Moscow and Beijing carry more weight in bilateral dealings with small member states than they do when dancing with the EU behemoth – and they would prefer it to stay that way.

But their motivations for dealing with Europe in the way they do are very different.

While the Chinese simply prefer to deal with national governments than the complex and hefty EU structure, Russia is hellbent on pushing back against the EU’s values and keeping it off what it views as its turf. Russia would like the West to accept that liberal values are not universal, and that sovereignty and “spheres of influence” trump pragmatic co-operation.

Moscow has long been Machiavellian in its approach to Europe, consistently following a strategy of divide and rule. Putin has openly encouraged competition for better energy and economic deals between EU member states and, whenever it can, Russia deals with EU countries bilaterally in order to get as much from each relationship as it can.

This is particularly true of Russia’s relationships with the EU’s big three: the UK, Germany and France.

Wait…what bilateral trade deal with China?EPA/Anatoly Maltsev

For the past two decades Germany has been Russia’s main European partner and capital has flowed at impressive rates between the two countries. Britain also benefited from Russian pragmatism, as the Kremlin diverted its finances to the City of London (or “Londongrad”, as it’s now known in Russian business circles). For the French, Russia has offered investment in the nuclear energy sector as well as military contracts such as the deal for the Mistral helicopter carriers that was abandoned under political pressure after the start of the Ukraine crisis.

For the larger part of the last decade, this strategy has succeeded – at least insofar as it’s prevented the EU from coming up with a common foreign policy towards Russia.

China’s pragmatism has taken an altogether different tack. Whereas political and ideological considerations used to dominate Sino-European relations, now economic co-operation and a surge of Chinese investment in Europe rule the day.

China co-operates with the big three based on their respective comparative advantages. Germany has the largest trade volumes, while the UK is strong in the field of financial services and education and research. The City of London even launched an initiative to establish London as a centre for international renminbi business, and Chinese investors are big players in the UK property market.

China’s relations with France, meanwhile, are dominated by Chinese exports and major industrial contracts such as high volume sales of Airbus planes or nuclear technology – a sector in which Beijing is fast supplanting Moscow.

There has been a significant change in tone from 1992 when French arms sales to Taiwan led to the suspension of major investment projects. Contrast this to the reaction to the British prime minister’s meeting with the Dalai Lama in 2012 which led to a mere diplomatic spat while trade relations continued unabated – and the two countries signed £14 billion of trade deals in London in June 2014.

Unlike Russia, the Chinese have no particular ideological problem with the European Union’s multinational project – just so long as it does not challenge China’s sovereignty or its political system.

Russia’s preference for bilateralism has deep ideological roots. Russia’s dislike of what it perceives as the Western-led liberal world order makes the European Commission an undesirable partner for Moscow.

Instead of offering preferential energy and trade deals to EU countries and fostering competition among them, Russia is now trying to undermine the EU by using influence and “public diplomacy” – which might less euphemistically be called propaganda.

Propaganda push

Moscow is openly supporting eurosceptics, nationalists and far-right movements across the EU – and the results are plain to see. French and British figures such as Marine Le Pen and Nigel Farage have become strong advocates for business as usual with Russia and for taking its ideological concerns seriously. They’ve been warmly received in the Russian media in return.

Moscow has also been promoting its ideological grievances very skilfully through the use of the Russia Today TV channel, and NGOs too have been recruited into the Russian efforts to promote an alternative, ideologically infused version of events in Europe. But Russia’s ideological push has not had the intimidating effect the Kremlin hoped for, instead binding the EU closer together and undermining the economic ties that Russia endeavoured to forge with the big three over the last decade.

China’s pragmatism is winning. With the Ukraine crisis putting a torch to Euro-Russian relations, Chinese investment in Europe has soared to $18 billion in 2014, while bilateral trade exceeded $615 billion – and a new EU-China investment treaty is now being negotiated.

So while China can’t match Russia’s main exports of gas, oil, and caviar to Europe, Beijing has been adept at exploiting the collapse in Russia’s political partnerships – and the EU’s major players are under pressure to rethink their priorities.

Olivia Gippner is a post-doctoral fellow of the Dahrendorf Project by the Hertie School of Governance, LSE and Stiftung Mercator and receives funding from Stiftung Mercator.

Cristian Nitoiu receives funding from Stiftung Mercator.