Vladimir Putin’s war on Ukraine must not be allowed to undo decades of Sino-German economic cooperation

• China is not Russia. Its economic ties with Germany run far deeper, and Berlin needs good relations with Beijing to retain its leading position in Europe
• Without key raw materials from China, including metals, Europe and in particular Germany will not be in a position to advance ecological change

Thomas O. Falk

Relations between China and Germany go back a long way and have intensified since diplomatic relations were established in 1972 under German chancellor Willy Brandt. Since then, both sides have benefited greatly in areas such as science, technology and education – as well as trade, key to the flourishing cooperation.

A rising China needs Germany and the rest of Europe as markets for its products to ensure economic growth. Germany needs China for its manufacturing, particularly in electronics and chemicals, and for raw materials.

Previous German chancellors Helmut Kohl, Gerhard Schröder and Angela Merkel understood that amicable and beneficial relations with China were in Germany’s best interests.

Today, China is by far Germany’s largest trading partner, with bilateral trade worth more than €245 billion (US$250 billion) last year. Germany remains Europe’s primary investor in China, with direct investment increasing from US$1.5 billion in 2010 to US$14.55 billion in 2020.

It is a relationship that works. However, Russia’s war in Ukraine is now having an adverse impact on Sino-German cooperation.

Berlin has, in the past, been highly critical of Beijing’s handling of human rights. Now China’s refusal to condemn the Russian invasion and join Western sanctions against Moscow has called into question the strategic partnership. After all, Germany’s “Zeitenwende” (turning point), postulated by Chancellor Olaf Scholz after Russia’s attack, will also see Berlin readjust its stance on Beijing.

President Frank-Walter Steinmeier announced recently that Germany must not become dependent on China for key raw materials. “In some strategically important fields, our dependence on Chinese raw materials is significantly greater than our dependence on Russian gas in recent years,” he said.

But this statement is based on reactionist views and ill-advised values rather than sound political and economic conclusions. Germany’s U-turn must not disguise that it was caught off guard by Russia’s invasion of Ukraine, despite the red flags.

Germany has over the past decades grown dependent on Russian gas, oil and coal – particularly during Steinmeier’s time as foreign minister.

Despite evidence of Russian President Vladimir Putin increasingly being seen as a pariah, the Russia-Georgia war in 2008 and annexation of Crimea in 2014 – plus contract killings on German soil and hacking attacks on the Bundestag – Merkel and Schröder continued to champion Russian-German relations.

The tone only changed following Putin’s war on Ukraine and subsequent energy crisis, with Germany now facing the possibility of running out of gas, which could leave people without heating this winter.

But China could now inadvertently get caught up in the backlash over Russia’s aggression, amid German naivety, with the false equivalency prevailing in Germany that China is basically another Russia.

This is a misjudgment, however. Russia, with an economy smaller than Italy’s, is essentially a gas station with nuclear weapons that has initiated the most significant war on European soil since the second world war.

Yes, Germany made itself dependent on Russian energy, but this is a temporary issue and the government is working hard to rectify things.

China is the present and the future, and for Berlin to maintain its leading position in Europe, German-Sino relations must continue to flourish, rather than decline.

Of course, it’s possible to be critical of China’s stance on a number of global issues. But Germany should give Beijing the benefit of the doubt and emphasise that there’s no comparison with the regime in Moscow.

Unlike Russia, Germany’s relationship with China is very much two-way. It is not about largely unprocessed raw materials such as oil or gas, but products in complex supply chains. German companies are heavily involved through their investments, while China relies on German technology.

More than two decades ago, business with China accounted for about 1 per cent of German trade volume. Today, more than one-tenth of German imports come from China. German exports to China have also increased significantly, accounting for more than 7 per cent of total exports.

Another pivotal point, especially if Germany and the rest of Europe are serious about going green, is that the European Union is 75-100 per cent dependent on imports for most metals. Among the 30 raw materials the EU classifies as “critical”, several are imported almost exclusively from China, such as rare earths (98 per cent), magnesium (93 per cent) and bismuth (93 per cent).

The EU estimates that with the move towards cleaner energy, demand for cobalt alone will be five times higher by 2030. Moreover, Germany’s ambitious electric-vehicle vision requires lithium, and EU demand could increase 18-fold by 2030.

Steinmeier can demand alternatives to China for raw materials as much as he pleases. But, without China, Europe and in particular Germany will not be in a position to advance ecological change or continue to prosper.

Germany, which has played a positive role in promoting China-EU relations, must be aware of this, and Putin’s war must not be allowed to undo decades of cooperation.

There will always be differences of opinion between Beijing and Berlin. But it shouldn’t hide the fact that positive Sino-German relations have been and continue to be a win-win state of affairs.

Thomas O. Falk is a UK-based independent journalist and political analyst

Russia’s war in Ukraine is more than just a battle of ‘good vs evil’

• Democracy is part of the story, but the truth is that Russia’s decision to invade Ukraine is complex and involves numerous factors
• Ignoring Russia’s ‘civilisational turn’ and mobilised historical memory leads to a flawed understanding and ineffective policies

Nicholas Ross Smith

New Zealand Prime Minister Jacinda Ardern received some scorn recently when she said in a speech to the Lowy Institute that the war in Ukraine should not be characterised as a war of “democracy vs autocracy”. Much of it has centred on the belief that Ardern betrayed the courageous Ukrainians fighting the autocratic Russians for their chance at a democratic future.

Democracy is undeniably part of the story of the war in Ukraine. Remember, it was not the threat of Nato expansion that sparked Russian action against Ukraine in 2014 but, rather, the prospect of Ukraine aligning politically with the European Union.

Importantly, though, the Kremlin’s fear was not democracy in Ukraine per se. Historically, Ukraine has never been close to reaching the kind of reform which would justify calling it a “liberal democracy”. Under Ukrainian President Volodymyr Zelensky, it was not threatening to change this any time soon.

Furthermore, the EU’s once-lauded ability to facilitate democratic transitions has been stymied by domestic issues. What Russia feared most was the perceived threat of having a disloyal regime in Ukraine, the most important country in its self-anointed “zone of privileged interests”.

After witnessing the Arab spring and the toppling of numerous authoritarian regimes across the Middle East and North Africa – especially the brutal demise of Muammar Gaddafi in Libya – the Kremlin chose to see the prospect of having a Western-aligned democratic Ukraine on Russia’s border as something of a Trojan horse.

Furthermore, the broader claim that Russia and China represent a serious global challenge to democracy seems to be tenuous. Russia and China are increasingly authoritarian states that have taken action to undermine liberal democracies.

But the problems in liberal democracies at the moment have more to do with internal issues – such as political polarisation, the rise of extremism and demagoguery and increasing economic hardship – rather than any external interference.

Ardern’s refusal to reduce the Ukraine war to a simple dichotomy should be applauded. She is one of only a few leaders resisting the urge to view the Ukraine war or China’s rise in the Indo-Pacific as simple tales of good vs evil. Such Manicheanism is a hallmark of neoconservatism.

The truth is that Russia’s decision to invade Ukraine is complex and involves numerous factors beyond the lens of democracy vs autocracy. For instance, the “civilisational turn” that has occurred in Russia is extremely important.

When Russian President Vladimir Putin returned to office in 2012, he began explicitly evoking the concept of Russia as a unique, non-European civilisation to justify his strongman rule at home and reassert Russia as a significant global power.

Civilisational states are fundamentally exclusive and insular. While that might result in more domestic cohesion and regime stability, internationally it can be extremely divisive. As foreign policy expert Jeffrey Mankoff argued, Putin’s desire was for Russia to embark on a grand national cause of making Russian civilisation “a cultural and geopolitical alternative to the West”.

Ukraine became an important component of the idea of Russian civilisation, particularly as Russia identifies the medieval state of Kievan Rus as its historical starting point. The politics of historical memory have been front and centre of Russia’s belligerence against Ukraine.

What started as Russian action framed on the pretence that it wanted to “help the Ukrainian brothers to agree on how they should build and develop their country” has morphed into questioning the very existence of Ukraine as a nation.

History, especially when combined with the assertion of a unique civilisation, can be a trap. It might give leaders and politicians significant power at home, but it can also unleash forces they cannot control. As political scientist Maria Mälksoo argues, states that mobilise historical memory run the risk of actually doing “self-inflicted harm to the object of defence in the very effort to defend it”.

The war in Ukraine is further complicated by the legacy of colonialism and postcolonialism. Russia’s denial of Ukraine’s sovereignty and its invasion is, at its heart, an act of recolonisation. Some have likened this to reconstituting the Russian Empire.

All of this is occurring against the backdrop of great power politics. Although hard power largely went out of fashion as a key aspect of understanding international relations in the initial post-Cold-War era, it would be foolish not to realise that power relations are crucial to the calculations of states. Changing regional geopolitical contexts should not be dismissed as unimportant.

Rightly or wrongly, Russia and China interpret Western action as an effort to undermine their power. The United States casts a long shadow and can be ignorant about how this affects non-allies, especially great powers that are notoriously fearful and paranoid.

Ardern made a compelling point when she said diplomacy cannot succeed “if those parties we seek to engage with are increasingly isolated and the region we inhabit becomes increasingly divided and polarised”.

Make no mistake – in the context of the Ukraine war, Russia is undeniably in the wrong. The Ukrainians deserve to win and come out of the conflict with a liberal democratic future and a clear pathway to EU membership.

However, pushing simplistic narratives about the conflict and broader international issues will inadvertently result in simplistic policies that do not grasp the complexity of these issues. On this point, Ardern is right to try to offer a more nuanced view.

Nicholas Ross Smith is an adjunct fellow at the University of Canterbury, New Zealand

China ‘not to blame’ for African debt crisis, it’s the West: study

• High-interest loans from private Western lenders account for most of the burden on countries in Africa, Britain’s Debt Justice charity finds
• Campaigners are calling on the G7 to stop using Chinese loans as ‘distraction’ while letting their own banks, asset managers and oil traders off the hook

Jevans Nyabiage

African countries owe three times more debt to Western banks, asset managers and oil traders than to China, and are charged double the interest, according to a study released on Monday by British campaign charity Debt Justice.

This is despite the growing accusations by the US and other Western countries that China’s lending is behind the debt troubles faced by some African countries.

The study said just 12 per cent of the continent’s external debt was owed to Chinese lenders, compared to 35 per cent owed to Western private creditors, according to calculations based on World Bank data.

Interest rates charged on private loans were almost double those on Chinese loans, while the most indebted countries were less likely to have their debt dominated by China, the study found. The average interest rate on private sector loans is 5 per cent, compared to 2.7 per cent on loans from Chinese public and private lenders.

The study was released ahead of the G20 finance ministers meeting from July 15-16 in Indonesia. Campaigners are calling on Western countries, particularly Britain and the US, to compel private lenders to take part in the Common Framework – the G20’s latest debt relief scheme.

The study found a dozen of the 22 African countries with the highest debts were paying more than 30 per cent of their total external repayments to private lenders. These included Cabo Verde, Chad, Egypt, Gabon, Malawi, Morocco, Rwanda, Senegal, Tunisia and Zambia.

South Sudan is one of the hardest hit in this category, with 81 per cent of its debt repayments going to private creditors, and just 11 per cent to China. Ghana is also paying more than half of its external debt obligations to the private sector, with 11 per cent going to China and the rest to multilateral lenders and other governments.

Chinese lenders accounted for more than 30 per cent of loan payments in six of the 22 most indebted countries – Angola, Cameroon, Republic of the Congo, Djibouti, Ethiopia and Zambia.

The study calculations showed 59 per cent of Angola’s foreign debt payments serviced Chinese lenders. And Djibouti – where China has poured billions of dollars into building ports and free trade zones, and also set up its first overseas military base – makes 64 per cent of its external debt payments to Beijing.

Debt Justice policy head Tim Jones said Western leaders blamed China for debt crises in Africa, “but this is a distraction”.

“The truth is their own banks, asset managers and oil traders are far more responsible but the G7 are letting them off the hook.”

Jones said China had taken part in the G20’s Debt Service Suspension Initiative during the pandemic, while private lenders did not. “There can be no effective debt solution without the involvement of private lenders. The UK and US should introduce legislation to compel private lenders to take part in debt relief,” he said.

The G20 initiative, unveiled in May 2020, provided 48 economies with temporary cash-flow relief, delivering about US$12.9 billion in debt service payments by the end of December when it ended.

But the exclusion of private and multilateral lenders meant countries that applied to take part in the initiative saw just 23 per cent of their external repayments suspended.

In 2020, Zambia became the first African country to default – on US$3 billion in dollar-denominated bonds – in the pandemic era. It is now in the process of restructuring about US$17 billion in external debt as a precondition to securing IMF loans of US$1.4 billion.

Lusaka owes Chinese lenders about US$6 billion, which has gone into building mega projects including airports, highways and power dams.

The initiative’s replacement, the G20 Common Framework, allows participating countries to agree to restructure debt with bilateral lenders and the International Monetary Fund (IMF). The nations are then supposed to seek similar debt treatment from private sector creditors.

Only Chad, Zambia and Ethiopia have so far applied for help through the Common Framework, but all are still waiting for debt relief.

The G7 countries have blamed China for the failure of the debt relief programme to help heavily indebted countries avoid default, doubling down in May with a statement from the finance ministers of the world’s seven most advanced economies.

“With regards to the implementation of the Common Framework, it remains essential that all relevant creditor countries – including non-Paris Club countries, such as those like China, with large outstanding claims on low-income countries facing debt sustainability challenges – contribute constructively to the necessary debt treatments as requested,” they said.

Yungong Theo Jong, head of programmes at the African Forum and Network on Debt and Development (Afrodad), said multilateral and private lenders remained the biggest creditors to African governments.

“Loans from China have increased Africa’s indebtedness, but by far less than Western lenders. All lenders must participate in debt relief. Western governments must lead the way by making private lenders cancel debts,” he said.