Russia's wartime economic relationship with China is critical, but an 'embarrassing reversal': think tank

"Moscow's wartime pivot to Beijing has helped keep Russia's economy afloat under the weight of sweeping Western sanctions - but at a cost. What looks like a lifeline today may lock Moscow into a long-term role as Beijing's junior economic partner. Russia is now heavily dependent on China for key manufactured goods and advanced inputs blocked by Western sanctions, according to a report from the Atlantic Council, a think tank, published on Friday."

"Since Russia's full-scale invasion of Ukraine in February 2022, the Kremlin has steered the country's economy into a wartime footing. Heavy defense and government spending help sustain topline resilience, despite sanctions and export restrictions. But cracks are emerging as energy export revenues have fallen sharply in a low oil-price environment. Consumer demand has also weakened amid still high inflation. Russia needs China far more than China needs Russia"

Western sanctions have pushed Russia to rely heavily on Chinese imports of machinery, vehicles, electronics, and advanced inputs that are blocked elsewhere. China purchases large volumes of Russian oil at discounted prices, offsetting lost European demand, while supplying high-tech goods that sustain Russian industry. The Kremlin's wartime economic policies, with high defense and government spending, maintain headline resilience, but lower energy revenues, weak consumer demand, and high inflation are creating strains. The economic relationship is deeply asymmetrical: Russia depends on China for critical imports and markets, while China gains growing economic influence and leverage.

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