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Ukraine: China's Burning Bridge to Europe?

As the world monitors Russia's military buildup on the Ukrainian border, the actions of Russia's strategic partner in China are worth watching as well. China has been Ukraine's top trade partner since 2020 and views Ukraine as a critical entrepôt for its Belt and Road Initiative ambitions. Agricultural exports from Ukraine have also become important for China in the wake of the U.S.-China trade war, yet Chinese officials have supported Russia--or at least have felt obliged to do so--up to a point. In a January 27, 2022 phone call with U.S. Secretary of State Antony Blinken, Chinese Foreign Minister Wang Yi stated that Russia's 'legitimate concerns' needed to be addressed, though he urged all parties to remain calm and avoid inflaming tensions.

Ties between China and Ukraine have been growing in recent years. In the first half 0f 2021, agricultural trade between China and Ukraine had increased by 33% over the same period in 2020. China is a key trade partner for Ukraine, providing 14.4% of its imports and a destination for 15.3% of its exports. Ukraine began selling corn to China in 2013 and by 2019 had begun its largest supplier, accounting for more than 80% of Chinese corn imports. Also in 2013, the China's Xinjiang Construction and Production Corps--a state-owned paramilitary organization known as the bingtuan--signed an agreement with Ukraine's KSG Agro to lease 100,000 hectares (247,105 acres) of agricultural land for cultivation and pig farming over a 50-year period. Ukraine has 42 million hectares of farmland.

When Xi Jinping launched the Belt and Road Initiative (BRI) in 2013, Ukraine acquired new importance as a transit hub and market for Chinese goods. Unlike Russia, China saw Ukraine's 2017 trade agreement with the EU as an opportunity for the BRI. A BRI trade and investment center opened in Kyiv in 2018 and Chinese companies have been investing in Ukraine's ports. COFCO, China's state-owned agribusiness giant, invested $50 million in Mariupol--now a frontline city in Donetsk province, which has been besieged by pro-Russia separatists since 2014--to triple its agricultural transshipment capacity. Chinese companies also have been involved in projects to dredge the Ukrainian ports of Yuzhny (north of Odessa) and Chernomorsk (south of Odessa).

Source: Kyiv Post Legal Quarterly

Chinese companies also see opportunities in Ukraine's energy sector, including renewables (solar and wind) and nuclear power. Ukraine hopes to become self-sufficient in uranium and there have been discussions with the China Development Bank about Chinese investment in this sector. China imports nearly all of the uranium it uses. Interestingly, after the Russian takeover of Crimea, China began assisting Ukraine to retrofit its power plants to utilize Ukrainian coal instead of Russian gas. Nevertheless, Ukraine's economic ties with China remain modest. Trade turnover in 2021 amounted to $15.4 billion and China has only invested $127 million in Ukraine since 2015, compared to $42 billion in Kazakhstan, another key BRI partner.

This may change as Ukraine's economic options narrow. On June 30, 2021 Ukraine and China signed an intergovernmental agreement to promote joint cooperation in infrastructure development. Ukraine's President Volodymyr Zelensky enthusiastically proclaimed that Ukraine could become China's bridge to Europe, as China's BRI dovetails with Ukraine's "Big Construction" initiative. The infrastructure agreement raised alarm bells among some observers who noted that just before its signing, Ukraine withdrew its signature on a United Nations Human Rights Council document demanding an independent investigation of China's treatment of the Uyghurs. The Chinese government allegedly threatened to withhold deliveries of 500,000 vaccine doses unless Ukraine unsigned the document (which China denies). With the disbursement of a $5 billion loan from the International Monetary Fund stalled over good governance requirements, Ukraine also may have borrowed as much as $1 billion--12% of the country's total budget deficit in 2020--from China to finance road construction projects, leading to questions about Ukraine's potential for economic dependence on China.

China's infrastructure and military investments complicate Western ties to Ukraine. Ukraine supplies a variety of military equipment to China, including turbofan engines for aircraft, diesel engines for tanks, and gas turbines for air-to-air missiles. After the collapse of the Soviet Union, a Macau-based company purchased Ukraine's Varyag aircraft carrier at the bargain basement price of $20 million, after claiming it would never be used for military purposes. The vessel, later renamed the Liaoning, was later refurbished and ultimately would provide a shortcut for China's People's Liberation Navy to its first aircraft carrier.

With tensions rising in U.S.-China relations, American officials have sought to limit China's military investments in Ukraine in recent years. During the Trump Administration, National Security Advisor John Bolton traveled to Ukraine to prevent Beijing Skyrizon Aviation, a Chinese company, from acquiring a controlling stake in Motor Sich, a major manufacturer of engines and aircraft, which provided technology to Russia prior to its takeover of Crimea in 2014. After the U.S. imposed sanctions on Skyrizon, Motor Sich followed suit. With U.S. pressure continuing under President Joe Biden, Ukraine ultimately returned Motor Sich to state ownership, halting the sale of its assets to China.

With Russia poised to intervene in Ukraine, observers speculate that Chinese leaders will watch U.S. and European reactions closely, as an indication of their likely support for another non-allied partner of even greater interest to China, namely Taiwan. Although the possibility of a two-front threat emerging with potentially coordinated action by Russia in Ukraine and China in Taiwan looms large in the strategic thinking of U.S. military planners, there is little evidence to support this. China has been ratcheting up pressure on Taiwan for some months, and for longstanding reasons with no connection to Ukraine.

Moreover, China is unlikely to tie its core interest in what it calls reunifying Taiwan to Russian President Vladimir Putin's opaque maneuvering in Ukraine. In 2014 Russia's takeover of Crimea put China in a difficult position. A longstanding advocate of territorial integrity, China opted to abstain on the UN Security Council resolution condemning Russia's action. China has never officially recognized the Russian annexation and Chinese high-level officials are barred from traveling to Crimea, though some investments have proceeded under the radar, with minimal publicity.

As China prepares to host the Winter Olympics, fearing COVID-19 outbreaks and contending with international opprobrium over the incarceration of more than one million Uyghurs, the last thing Chinese leaders want is a Russian invasion of Ukraine to take the limelight. Chinese officials denied that Xi Jinping said as much to Putin, but the Russian president himself is no doubt aware of the importance of timing, since the 2014 takeover of Crimea took place just after Russia hosted the winter games in Sochi.

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