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The bear has lost its battle with the dragon

By Milton Catelin - posted Wednesday, 22 July 2015

Russia cannot now match the sheer financial heft of the Chinese economy or the dynamic, strategic vision of its government. Putin has proven himself a populist and ruthless tactician but does not match the cold long game minds of the Chinese leadership.

We are now witnessing Russia's humiliating decline in world affairs.

There is no doubt that Russia is playing an increasingly aggressive role with its European neighbours: from the small Baltic nations, down through Central Europe (Poland and Ukraine), and into the Balkans and Greece.


There are many reasons for this - Russia seeking to restore the hegemony it enjoyed through the old Socialist Republics of the USSR, Russia seeking to expand the benefits it enjoys as an oil and gas exporter, Russia seeking to exploit perceived Western weakness, and so on.

However, Russian policy in Europe can also be seen as a reaction to its declining fortune in relation to its old ally / competitor China, and as the desperate last gasps of a dying nation.

The emergence of the BRICS bloc (Brazil, Russia, India, China, South Africa) has obscured the still prevalent rivalry between these nations, while changing economic circumstances since its emergence has exacerbated them.

All the five have suffered economically. Brazil is in negative growth this year, Russia is contracting from sanctions and a collapsing international oil price, China's growth has at least halved and its stock market has experienced a plunge this year deeper than that of the first days of the 1929 Great Depression. While enjoying good economic news recently (unemployment is down), South Africa is beset by social unrest and it is hardly at this table because of the size of its economy. India may appear to be doing somewhat better with a dynamic Prime Minister and new administration in Delhi but its promise will only be realised after years of sustained and painful economic reform which it has only just commenced.

But China is increasingly the driving force and vision of the group, not only outshining its four comrades but deeply undermining Russian pride.

For all its problems, China is the giant in the group. Publicly the group is united as a group of equals. For example, when it came to the establishment of the BRICS' New Development Bank (NDB) this year all the five committed equal shares to its initial capital (US$10 billion each) and it is claimed the Bank will operate on an equal share voting basis.


However, it also created a US$100 billion Contingency Reserve Arrangement (CRA), meant to provide additional liquidity protection to member countries during balance of payments problems. The CRA-unlike the equally shared pool of contributed capital to the NDB -is being funded 41 percent by China, 18 percent from Brazil, India, and Russia, and 5 percent from South Africa.

It is worth dwelling on that. Russia is putting into this 'equal partnership' US$18 billion compared to China's contribution of US$41 billion. Russia's investment is equal to that of Brazil and India and each of these is investing 57% less than China.

While this may not worry the B, I and S of the BRICS, it is deeply humiliating to the R and an unwelcome reminder to R's leadership of how far Russia has declined economically and politically. Where once the world was divided between US and Soviet spheres of influence, Russia now finds itself a once great but declining player (albeit with a substantial military) in a world increasingly dominated by its once junior Communist ally, China, and a still dominant USA.

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About the Author

Milton Catelin is a London-based public affairs executive with 20 years’ direct participation in international energy and environment negotiations, diplomacy, policy and strategy. He has both led the World Coal Association and worked at the UN Environment Programme. He was awarded the 2014 Advance Global Award for Australians working in the mining & resources sector.

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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