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China, Russia Alliance Deepens Against American Overstretch

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Published : July 10th, 2017
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Category : GoldWire

– China and Russia allied on Syria and North Korea
– Beijing & Moscow economic & monetary ties deepen
– Trump needs Russia in order to maintain balance of power in superpower triumvirate
– Sino-Russian relations currently in their “best time in history” says Chinese President ahead of G20

– China, Russia call for calm diplomacy on Syria, Korea
– China, Russia “fed up with Washington’s pursuit of hegemony”
– US is “biggest source of global strategic risks” according to China state media
– Important calm and diplomacy prevails to prevent nuclear war

‘Trump and Putin meet for the first time and the handshake wasn’t what you expected!’ read the headline on my in-flight entertainment newsfeed, on Friday afternoon.

I’m not sure what the Mirror website thought I was expecting the handshake between the US and Russian leader to be like, but by all accounts it was a relatively normal handshake given it was no doubt the most important diplomatic meeting of 2017.

The handshake between the US and Russian Presidents was always going to be newsworthy, no matter who was in power but not since the Cold War have the stakes been so high in a meeting between the two leaders.

The meeting was scheduled for 30 minutes, but went on for more than 2 hours. Both men continuously praising one another. One of the outcomes of the meeting was an announcement by Trump that the two countries would work together on cybersecurity.

This prompted much derision from senior politicians, Republican Senator Lindsey Graham said: “It’s not the dumbest idea I’ve ever heard, but it’s pretty close.”

The decision to work with Russia was described as a ‘significant’ accomplishment’ by Treasury Secretary Steve Mnuchin. Then, in classic Trump-style, the US president backtracked on the proposal to work with Russia tweeting “The fact that President Putin and I discussed a cybersecurity unit doesn’t mean I think it can happen. It can’t.”

This move by Trump is not uncommon. He has seemingly flip-flopped since his election campaign on working alongside or against the world’s two other superpowers, Russia and China. When it comes to Russia, Trump’s less-than-slick management of his special White House advisory team has meant that the US President has not got far with Putin.

Last week a UN report stated that nationalism, protectionism and attitudes of “my country first” posed threats to the United Nation’s global goals. It seems that now more than ever Trump must get relations with the super powers, onto an even keel.

Trump is aware that the US has similar issues with Russia and that it must get Putin on side to a degree or at least neutral in order to confront the more powerful China. The US needs to work with President Xi Jinping on globally important matters such as North Korea. But there are elephants in the room which also must be confronted, namely currency manipulation, trade, climate change and deepening tensions in the South China Sea.

As James Rickard’s writes, “one power in a three-power game, it is essential to have an alliance with the other power, or at least keep it neutral. The US needs a neutral or friendly Russia before it confronts China.”

But, at the beginning of last week observers were asking if Russia and China were perhaps getting too close for the United States’ liking or advantage. Perhaps the calamitous arrival of Trump and his new approach to diplomacy (i.e. tweet it) has opened up an opportunity for both Putin and Xi Jin-ping to push ahead with their alliance. The outcome of which may be a lesson in how the US must stop overreaching when it comes to geopolitics.

Sino–Russian relationship: Entente or alliance?

Ahead of the G20 meeting last week China’s President Xi Jin-ping met with President Putin in Moscow. This was Xi’s sixth visit to Russia since becoming president, and the third meeting between the two heads of states in the last six months. Neither country has ever referred to the other as an ally, but the meeting was strategic in terms of the Sino–Russian comprehensive relationship, both politically and economically.

During the two day meeting, the two countries signed deals which will allow Russia to bypass Western sanctions by China agreeing to fund investments in Russia worth billions of dollars. Both the Russian Direct Investment Fund (RDIF), a sovereign wealth fund and VEB, Russia’s state development bank are subject to US sanctions. But both have now signed deals with China Development Bank. The deals will will finance infrastructure and development projects as well as a new innovation fund.

The purpose of the US and Western sanctions was to cut Russia off from long term financing in the U.S. and EU. These new deals will be set up in Russia and China’s own currencies and are a demonstration to the West that Russia cannot be cut off from major trading partners and the global market place and the US no longer has the means or power to do so.

It is worth reminding readers at this point of Putin’s comments last year that both

“Russia and China need to secure their gold and foreign reserves.”

It’s unlikely Putin was speaking out of turn by mentioning China’s monetary policy. Both countries central banks continue to increase their gold reserves and are accumulating large gold in anticipation of currency wars reigniting in the coming months.

Concerns about systemic risk and the coming devaluation of the dollar, euro and other major currencies has led to ongoing diversification into gold bullion by large creditor nation central banks such as Russia and China.

Influential state media Chinese daily, the Global Times, reported last Monday that China and Russia have decided to deepen their ties because they are “fed up with Washington’s pursuit of hegemony.”

The US and other Western countries are yet to pass comment on these new deals. It is likely that they are each treading carefully, fully aware that they need Russia and China on side when it comes to more pressing matters such as Syria and North Korea.

Whilst neither Russia nor China mentioned the US in relation to the two countries’ meetings, nor were they mentioned in joint statements, it was easy enough to connect the dots in terms of where both Putin’s and Xi’s concerns lie.

“To strengthen global strategic stability’ is a new way of speaking to remind people of the US being the biggest source of global strategic risks,” explained the Global Times.

“The joint statements (show) both Beijing and Moscow are fed up with Washington’s pursuit of hegemony. Beijing and Moscow have confirmed that their relationship is not an alliance, and it is not aimed at a third party. The affirmation is not rhetoric, but their real deliberation.

A China-Russia alliance, which will bring a game-changing impact on world order, is not in the interests of either side. They are more willing to develop all-out diplomacy and maintain a normal relationship with the Western world. However, the US efforts to encroach on China and Russia’s strategic room has rendered an interdependence between Beijing and Moscow over some core interest issues.”

In the name of national sovereignty

Russia and China appear to be working together on the basis of preserving national sovereignty. For too long the US has used many means to advance its own goals of so-called democratisation around the world. One example is NGOs, both international and domestic. Even Colin Powell once spoke of the US advancing its own goals in terms of democratising authoritarian regimes and market economics.

“I have made it clear to my staff here and to all of our ambassadors around the world that I am serious about making sure we have the best relationship with the NGOs who are such a force multiplier for us, such an important part of our combat team.”

More recently the US has been exceptionally vocal about how it will ‘manage’ regimes with which it does not agree. This has seemingly been seen as an overstep too far especially as they have been far-reaching in who to blame for various issues.

Nikki Haley is one of the most prominent figures in this aggressive form of US ‘diplomacy’. The US ambassador to the United Nations followed a bizarre White House press release about a supposed Syrian gas attack with the following tweet

“Any further attacks done to the people of Syria will be blamed on Assad, but also on Russia & Iran who support him killing his own people.”

Haley has positioned herself as both judge and executioner, not only in regard to Syria but also the more powerful Russia and Iran. So far Haley remains in her position, with little criticism from the White House.

Meanwhile, it is clear that both Russia and China are resentful of America’s actions when it comes to Syria. Both are apparently suspicious that the U.S. is attempting to stir up trouble in the hope of eliminating unwanted political leaders.

Diplomacy lessons, from Russia and China

When Putin and Xi met last week, they expressed their mutual concerns regarding both Syria and North Korea not in a tweet or in a cloud of emotion but in a far more diplomatic fashion. They released joint-statements calling for calm.

“The sides emphasize that in matters of chemical weapons in Syria, all parties, with respect to Syrian sovereignty, must support the efforts of the Organization for the Prohibition of Chemical Weapons [OPCW] and relevant UN structures to conduct an independent and comprehensive investigation in order to obtain irrefutable evidence, establish genuine circumstances and draw conclusions that are capable of withstanding the verification by facts and time.”

Calling for calm heads and diplomacy the statement went on to state that both China and Russia ‘strongly condemn any use of chemical weapons anywhere and by anyone.’

Calm heads is the opposite of Nikki Haley who is about as subtle at diplomacy as Trump is with a blonde Irish reporter invited into the Oval office.

Any alliance (whether formal or otherwise) between two countries as powerful as Russia and China, in the Middle East is the last thing the US wants to be fighting against.

The call for calm will not only reverberate well throughout countries in the Middle East and North Africa which have been devastated by the ongoing wars in the region. It will also resonated well with European nations which are becoming destablised by the massive exodus of desperate people from destroyed states into the EU, creating a wave of populist backlash.

This call for calm and peace has been particularly reflected in the Qatar crisis. Last Monday China’s UN ambassador said the best way for the crisis to be resolved was to employ the radical solution of…letting the four countries sit down, talk diplomatically, negotiate and thereby sort it out themselves.

The power of China in the face of nuclear war

Both China and Russia are concerned and strongly opposed to the controversial US missile system known as the Terminal High Altitude Area Defense (THAAD) positioned in South Korea, to defend against North Korea.

Despite assurances to the contrary, China are concerned the missiles could be trained on China itself. Russia is also concerned about the positioning of the missiles and issued a joint-statement citing “strong opposition against the unilateral installation of anti-missile systems in Europe and Asia-Pacific by some specific countries at the expense of others’ security interests.”

When it comes to North Korea, no one is ignoring the real threat that exists. But, both Putin and Xi are calling for restraint on both sides. In the same joint statement, they called for ‘a mutual freeze on Pyongyang’s nuclear program and U.S.-South Korean military manoeuvres in the region.’

The US needs to tread carefully here as China is their only real hope when it comes to settling the North Korea crisis peacefully. China is all too aware of the amount of leverage it has over North Korea and, therefore, America. The People’s Republic of China accounts for over 75% of North Korean exports, this gives it a huge amount of power when it comes to sanctions on the country.

Not everyone is convinced that China’s help with North Korea is with the desire to reduce their nuclear power. Adam Mount, a senior fellow at the liberal Center for American Progress expressed concern over China and Russia’s joint approach, “I think we need to be aware of the possibility that China and Russia could take a step back from containing the regime and move towards increased diplomatic recognition, which could someday lead to their recognition of North Korea as a nuclear state.”

Will the triumvirate ever exist?

At the moment there are three main superpowers. Will they ever exist in a true triumvirate, or is the tussle of power too great and the outcomes desired too different?

At the moment it seems they all hold leverage over one another in various ways. But, for the first time in modern history the US isn’t able to bring the most amount of chips to the table.

For too long the US has believed that threats and sanctions alone will keep the Russia and China’s ideas of grandeur, in check. But the world has been changing for a while, with Sino-Russian relations taking advantage and preparing accordingly.

It seems the arrival of Trump and his erratic and badly managed team has exacerbated pre-existing trends and given Putin and Xi with the opportunity to further advance themselves as two emerging superpowers in a world which is moving from US hegemony to a multi polar world.

News and Commentary

Gold Prices (LBMA AM)

10 Jul: USD 1,207.55, GBP 938.63 & EUR 1,060.11 per ounce
07 Jul: USD 1,220.40, GBP 944.47 & EUR 1,068.95 per ounce
06 Jul: USD 1,224.30, GBP 946.14 & EUR 1,077.51 per ounce
05 Jul: USD 1,221.90, GBP 945.87 & EUR 1,078.45 per ounce
04 Jul: USD 1,224.25, GBP 947.32 & EUR 1,078.81 per ounce
03 Jul: USD 1,235.20, GBP 952.09 & EUR 1,085.00 per ounce
30 Jun: USD 1,243.25, GBP 957.43 & EUR 1,090.83 per ounce

Silver Prices (LBMA)

10 Jul: USD 15.22, GBP 11.82 & EUR 13.36 per ounce
07 Jul: USD 15.84, GBP 12.29 & EUR 13.88 per ounce
06 Jul: USD 16.01, GBP 12.36 & EUR 14.09 per ounce
05 Jul: USD 15.95, GBP 12.36 & EUR 14.09 per ounce
04 Jul: USD 16.15, GBP 12.48 & EUR 14.23 per ounce
03 Jul: USD 16.48, GBP 12.72 & EUR 14.49 per ounce
30 Jun: USD 16.47, GBP 12.69 & EUR 14.44 per ounce

Data and Statistics for these countries : China | Georgia | Iran | Russia | South Korea | Syria | All
Gold and Silver Prices for these countries : China | Georgia | Iran | Russia | South Korea | Syria | All
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Mark O'Byrne is executive and research director of which he founded in 2003. GoldCore have become one of the leading gold brokers in the world and have over 4,000 clients in over 40 countries and with over $200 million in assets under management and storage.We offer mass affluent, HNW, UHNW and institutional investors including family offices, gold, silver, platinum and palladium bullion in London, Zurich, Singapore, Hong Kong, Dubai and Perth.
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