China-Russia alignment: a threat to Europe's security - Part II
4. The China-Russia alignment poses a threat to European security and stability
Together, China and Russia aspire to thwart Western unity and develop the capabilities to pose a formidable threat to transatlantic security. China has become a critical enabler of Moscow’s war effort, with an immediate impact on the battlefield.
By extension, it is impacting European security in four main dimensions:
- China-Russia trade and financial flows
- the provision of critical dual-use goods from China to Russia
- coordinated non-conventional security threats
- military and security cooperation
The United States and its European partners need to develop mechanisms to better coordinate their approaches. Disunity is a vulnerability that both China and Russia are keen to exploit. Here, we examine the nature and the extent of the threat from the Russo-Chinese alignment to the EU and the United States.
4.1 The growth and dynamism of China-Russia trade and financial flows gives Russia major support at a critical juncture in its war on Ukraine
In 2023, bilateral trade between China and Russia hit a record high of USD 240 billion, up 26.3 percent on the previous year.25 Moscow is moving towards a strong dependence on China’s economy. China is Russia’s fastest growing export destination, and China’s exports to Russia have surged to substitute for goods from Europe and other sanctions partners.26
The value of Chinese exports to Russia in 2023 was USD 111 billion, which was comparable to Chinese exports to the Netherlands and to Vietnam. China is the only large, industrialized country which continues to trade in unlimited ways with Russia. Sanctions and shrinking trade with the EU and the US makes trade with China vital for Russia’s economy to survive the impact of the war.27 But there are important areas which do not show any dynamic development28: Chinese investments in Russia were minor and have diminished. Beijing is happy to displace Western premium goods, but it is not interested in developing Russia as a competitor in high tech areas.29
Fossil fuel trade remains the backbone of the economic relationship, but without the necessary infrastructure to increase volumes fast. There is currently only one oil pipeline (the Siberia-Pacific Ocean Oil pipeline, 2012), which exports some 35 million tons annually to China. The only gas pipeline (Power of Siberia pipeline of 2019) is projected to export up to 38 billion cubic meters of gas per year to China by 2025 (well more than double 15.5 billion cubic meters in 2022)30. Negotiations continue on the construction of a Siberia Power 2 pipeline from the Arctic Yamal peninsula to China via Mongolia, but it is not certain that China wishes to invest in such a huge fossil fuel infrastructure project. Russian arms exports to China were strong but have been steadily shrinking since 2018.31 IT cooperation has also shrunk significantly because Chinese IT companies fear US secondary sanctions. China’s currency and part of its financial infrastructure have replaced Western financial institutions. Russia’s trade with China is conducted mostly in yuan, but Russia continues to rely on US dollars in trade with other states. Russian foreign minister Sergei Lavrov announced on 22 April 202432 that Russia and China had almost completely replaced the dollar using their national currencies. However, larger Chinese banks tend to avoid getting involved, for fear of US secondary sanctions.
4.2 China has become a key provider of critical dual-use goods to Russia
An important distinction needs to be made between lethal and non-lethal equipment. The Chinese leadership has been consistent since the start of the war in not providing lethal weapons to Russia, as the US and Europe have drawn a strong red line here. Arms exports would risk a significant escalation of tensions. China is likely to continue respecting this red line, given the high stakes in maintaining access to its largest export markets in the EU and the US.
However, China has ramped up exports of critical high technology products to Russia,33 which could potentially be used militarily. It is therefore important to assess to what degree China’s exports of listed dual-use goods to Russia constitute a circumvention of Western sanctions and a crucial support for the Russian war effort. The high proportion of exports of machine tools from or via China are of key importance as they help Russia manufacture military equipment.
Publicly available Chinese customs data suggest that China is exporting more than USD 300 million worth of dual-use products each month that are identified by the EU, US, UK and Japan as “high priority” items for weapons’ production, including in rockets and drones. These sales reached a peak of USD 600 million in December 2023.34 Overall, trade experts estimate on the basis of IMF data with Russian trade figures that out of the total Chinese exports since the invasion, over a third were products on the EU’s restricted lists (dual-use and advanced technology products as well as economically critical goods, in addition to the high priority items). Chinese exports of EU-restricted goods to Belarus, Armenia, Central Asian states and Turkey have also significantly increased. These are Russia’s other fastest growing import sources,35 used to circumvent sanctions.
Russian customs data for 2022 show that the bulk of these exports were not products made in China: they were produced in third countries for US and EU companies and transferred via Chinese trading companies. China has thus become the most important platform for Russian imports of Western dual-use goods.36
Russia is undertaking its most ambitious defense industry expansion since the Soviet era, at a much faster pace than expected. According to US estimates,37 Russia uses machine tool shipments from China to bolster ballistic missiles production and microelectronics which are used in the production of Russian missiles, tanks and aircraft. In 2023, up to 90 percent of Russia’s microelectronics imports were reported as coming from China, including military optics for tanks and armored vehicles. That year, 70 percent of Russia’s imports of machine tools from China were estimated to be destined for producing ballistic missiles. Chinese drone engines were also used to propel Russian military drones. This assessment largely coincides with the Yermak-McFaul International Group’s findings that China is the source of more than 80 percent of imported microchips (mainly of Western production) used in Russian weapons, including in missiles, and a crucial supplier of critical military drones’ components for Russia.38
China’s significant exports of dual-use goods, materials, components, and machine equipment enable Russia to expand armaments production. This constitutes an indirect threat to European security by making a difference on the battlefield. Dual-use exports give crucial support to the Russian’s military capacity and prolong the war. To end the war in Ukraine, China must be persuaded that it is in its own long-term interest to stop helping Russia to reconstitute its military industrial base.
China remains ambivalent as it neither wishes to lose its most important economic partners, nor for Russia to lose the war. However, China’s room for ambivalence is now being squeezed. EU leaders raised China’s support for Russia circumventing sanctions explicitly at the last EU-China summit in Beijing in December 2023. The matter was also raised by German Chancellor Olaf Scholz and US Secretary of State Blinken during their Beijing meetings with President Xi in April 2024. French President Macron declared on 6 May 2024 that President Xi had made a commitment to abstain from selling any arms to Moscow and to “control strictly the exports of dual-use goods”39 during his visit to Paris.
None of these appeals have led to any change in China’s behavior towards exports of critical dual-use items. Consequently, the United States and the EU decided in February 2024 to list a few Chinese companies (mainland and Hong Kong) and third country firms40 in new sanctions against Russia. More such listings are likely to be decided in the near future. By doing so, EU/US companies are forbidden to trade high risk critical dual-use goods with these companies. Blocking such dual-use product supply channels is challenging and requires targeted law enforcement in the sanctioning jurisdictions against any companies involved, combined with export controls (i.e., end-use certificates). Effective cooperation with countries where companies are circumventing sanctions will be needed, which may also require evidence-sharing.
4.3 Russia and China are pursuing below threshold, grey zone operations
The war in Ukraine has also put the spotlight on Russia-China joint intelligence cooperation, influence operations, cyber-attacks in Europe.
In the information domain, China has given Russia a considerable boost by amplifying its war narrative and adding to its credibility and outreach, particularly in the Global South. By blaming the war on the “expansion of NATO”, “Western imperialism” and “double standards”, both Russia and China have undermined global solidarity towards Ukraine’s independence, sovereignty, and territorial integrity.
China’s security operations have turned more towards Europe, including for military technology purposes and political influencing. Intelligence-gathering coordination between Russia and China is growing. It builds on already existing industrial espionage, and on Russian’s military intelligence gathering and political information influencing. Chinese spying activities intersect with Russian networks that have penetrated the EU’s extreme political parties on the far right and far left. In May 2024, German police arrested a parliamentary assistant of the lead candidate of the far right party AfD on suspicion of spying for China41. The purpose of both countries’ intelligence operations in Europe is the same: spreading doubts about democracy, creating divisions and thereby gaining influence. “China and Russia have common goals that they jointly promote when this services their interests”, warned Finland’s Security and Intelligence Service in 202342.
Such influencing goes together with increased cyber-attacks, allegedly undertaken by the group “Advanced Persistent Threat Group 31” (APT 31), linked to Chinese intelligence, against individual parliamentarians in several parliaments, most of whom are members of the Inter-Parliamentary Alliance on China (IPAC). Cyber-attacks in 2021 targeted at least five Belgian parliamentarians in the national and European parliaments, including former Prime Minister Guy Verhofstadt 43. The Belgian national parliament asked the state for a criminal investigation and named itself a civil party in the legal pursuit of the hackers.
China’s Ministry of Foreign Affairs has denied any involvement44 and the denial was reflected in the absence of official reactions to EU sanctions on Chinese cyber-attack entities imposed in summer 2021.
4.4 Growing military cooperation between China and Russia is an evolving threat
While not an imminent threat in Europe, this dynamic must be taken seriously in other regions, in particular the Indo-Pacific. At their May summit, Presidents Putin and Xi agreed to step up military ties, notably by expanding the scale of joint military exercises, more joint maritime and air patrols, and greater cooperation in bilateral and multilateral frameworks. Military cooperation between Russia and China has been steadily increasing, deepening interoperability between the two militaries. There have been joint navy maneuvers (e.g., December 2022 in the East China Sea and in the Gulf of Oman in March 2024 when Iran and Russia joined the “Marine Security Belt 2024” exercise),45 land military exercises (Exercise Vostok in September 2022 in Russia’s Far East, joined by 2000 Chinese troops)46 and cooperation on early missiles warning systems as well as joint patrols in Asia with nuclear-armed bombers47.
Former US Secretary of Defense Robert M Gates warned in 2023 that never before had the country faced four allied antagonists at the same time (Russia, China, North Korea and Iran), whose collective nuclear arsenal could soon be double the size of its own: “Developments in China and Russia matter, and the threats posed by these interconnected countries should be explained”.48
5. Policy recommendations: Responding to the changing nature of the Russia-China alignment
Responding to the multifaceted challenges that the Russia-China alignment poses to transatlantic partners requires a fundamental rethinking of threat perceptions regarding European security, taking into consideration the need for both differentiated and joint (Russian-Chinese) approaches. It also calls for the creation of diplomatic mechanisms for monitoring and addressing evolving threats. Proposed policy recommendations aim at changing China’s calculus regarding the war in Ukraine and more specifically its support for Russia. They take into consideration the complexity of the issue, including economic interdependence, and factor in the risk of inadvertently strengthening the alignment. They are premised, however, on the necessity of ‘doing all it takes’ to restore peace in Europe.
5.1 Redefining the paradigm to reflect threats to European security
The recent trajectory of China-Russia relations, in particular since the war in Ukraine, requires European and US decision-makers to change their understanding of their respective relations to China and develop the capacity to deal with the China-Russia alignment on an informed basis when making decisions. This requires a holistic approach, overcoming specialised and separate thinking on Russia as a security threat and China as an economic competitor.
Europe can no longer afford to ignore the threat that China represents for European security, even though it will remain an important and difficult economic partner, a competitor in many sectors, and a partner in dealing with global challenges. This means considering that China is simultaneously a cooperation partner, an economic competitor, a systemic rival and a threat to European security.
The recognition of China as a security threat will confront EU decision-makers with the difficult choice of how to strike the right balance between the continent’s future prosperity with China as a major economic partner and a crucial one for addressing global challenges, while ensuring increased European security. Europe has gone through several phases in rethinking and defining its engagement with China. China’s continued support for Russia is pushing Europe to enter a new one.
Recognition of China as a security threat along with Russia will create the need to forge an international space for monitoring and responding to the challenges brought by this alignment. The EU will remain an effective forum for European coordination, including with the UK. NATO would need to expand its approach to look thoroughly at these chal-lnges, including in the NATO+4 format (with Japan, Republic of Korea, Australia and New Zealand). The G7+ format will become increasingly important on the economic security and finance-related aspects.
However, any specific decision-making and the conduct of relations with China and Russia will have to be done individually at national level and collectively at EU level. It remains important to maintain the capacity and intent to treat each country differently, taking account of the specificity of each issue, to avoid inadvertently promoting even more “togetherness”.
5.2 Redefining what transatlantic partners can expect on China’s role in ending the war in Ukraine
After two years of calling on China to use its influence to end the war in Ukraine, it must be acknowledged that the transatlantic partners have not been successful and are changing their respective approaches.
Today, China sees the war as long term and has no intention of investing the necessary political capital to play an active role in helping to end it anytime soon unless both parties first make the necessary preliminary steps. The Chinese absence at the Geneva Peace Conference confirmed it. China’s position on the war has not fundamentally changed since it circulated Beijing’s 12-points plan on a resolution to the so-called “crisis”. The gesticulation with the Brazil proposal or Special Envoy Li Hui’s diplomatic tours only aim at signaling that Beijing could play a role if it thought adequate conditions existed. China’s potential role in achieving a ceasefire or participating in Ukraine’s reconstruction could well become relevant someday.
No one should underestimate China’s capacity to change its approach if the time and conditions are right and an opportunity could be seized. No one in Beijing could define what the right conditions might look like today. If such a scenario were to emerge, Europe and its transatlantic partners need to be clear that China should not acquire a stake in any redefinition of Europe’s security architecture. This is for OSCE member states to determine, if and when the moment comes.
At present, Europe and the United States cannot count on China to play a role in ending the war now and have to recognize that China is instead supporting Russia’s war efforts.
The transatlantic partners’ objectives when engaging China today should be two-fold:
- First, to reinforce the message on the avoidance of any nuclear escalation, building on a shared interest with China to ensure Russia’s nuclear threats do not escalate and are stopped. Realistically, Beijing will not do this because Western partners ask, but because of its own national interests.
- Second, invest limited political capital in asking China to play a role in international conferences to bring an end to the war. Beijing will make its own assessment on when to play a role. However, political capital should be invested to raise the costs of China’s support to Russia’s war efforts.
5.3 Considering how to end China’s export of dual-use items
Ending the war includes curtailing China’s growing support for Russia’s war effort. Europe is confronted with a difficult policy choice: either to continue its appeals at the highest levels - thus maintaining the existing red lines and acknowledging that Europe does not intend to use all possible tools to change China’s behavior - or to shift its red lines by increasing the cost to China of exporting dual-use equipment to Russia.
This will not be easy, as it requires measuring the consequences and China’s possible retaliation. Political leadership and courage will be needed as well as working closely with EU companies, key actors in EU-China economic relations, who are often driven by fear of retaliation. They are the first line of defense against sanctions circumvention with their products and hence need to apply due diligence to exports. More action by governments will be needed to ensure this happens.
Expanding restrictive measures to curtail China’s export of dual-use equipment would be a measured and proportionate response and a decision that the EU could take. This would have a direct effect on the companies concerned, including reputational costs.
- Listing all those Chinese/Hong Kong (and other relevant third countries) companies (in the EU: under Annex IV of EU Regulation 833/2014) against which there exists evidence of sanctions’ circumvention by imposing export restrictions towards these companies regarding dual-use goods and technology. These should cover both cases: a) the transhipping of EU origin goods b) the “backfilling” of EU export restrictions with indigenous goods and tech items, thereby contributing to the technological enhancement of Russia’s defence and security sector.
- Combining this with effective law enforcement action inside EU member states’ jurisdictions against firms exporting such goods directly or indirectly towards these third countries’ companies, including through the requirement to provide “end user certificates” under the dual-use export control regulation so as to guarantee no export to Russia, with relevant clauses to be included in commercial contracts.
- Working with G7+ partners to enable the imposition of secondary sanctions against EU companies in third country jurisdictions as well as foreign companies involved in such circumvention, in case prior measures do not lead to curbing circumvention effectively. This is currently only possible under US legislation.
- The EU should also consider creating the possibility of imposing secondary sanctions against financial institutions in third countries that assist Russia in evading EU sanctions. This would mirror the new OFAC49 authority that enables the United States to place a foreign financial institution under sanctions because it is involved in the financing or the payment of trade transactions. This may become the most effective way of stopping such transactions, as the effect of the recent US threat to use this authority on the Chinese financial services sector has shown.50
- In the longer term, when making decisions about the licensing of exports and/or investments of critical technologies under possible new economic security legislation, support for the Russian war effort should become an important factor to consider when determining whether there is a significant national security risk.
European and US decision makers need to be clear that additional listings or sanctions will temporarily push China and Russia closer together. However, the alignment between the two is here to stay and will grow, regardless of such decisions. But after two years of failing in convincing Beijing to curtail its export of non-lethal equipment to Russia, it is time to change the approach in Europe and take measures that can make a difference.
Time is of the essence in ending the war in Europe. To restore peace and stability in Europe, the EU cannot afford to hesitate further on how to end China’s support to Russia’s war efforts through dual-use equipment. It must do this in lockstep with its closest partners.