Friday, March 22, 2013

China's new leader to meet Russia's Putin on first foreign trip

By Thomas Grove

MOSCOW (Reuters) - Decorated with Chinese paintings and red silk armchairs, a huge business complex on the edge of Moscow is the kind of enterprise China's new leader Xi Jinping wants to nurture when he arrives on Friday in Russia for his first overseas trip.

Chinese President Xi Jinping speaks to U.S. Treasury Secretary Jacob Lew (not pictured) during their meeting at the Great Hall of the People in Beijing March 19, 2013. REUTERS/Feng Li/Pool

Just off the traffic-choked highway ringing Moscow, a jumble of Chinese and Russian firms, a 400-room hotel and conference venues sprawl over the 200-square-kilometre (77 square miles), $350 million Greenwood complex, which was built by a Beijing-controlled consortium with materials shipped from China.

Just as Xi will be alert to economic opportunities, so his host, President Vladimir Putin, will aim to "catch the Chinese wind in our economic sail", as he phrased it a year ago, just before his-re-election to the presidency.

That desire will grow stronger if China overtakes the United States as the world's largest economy during Xi's 10-year term.

The world's largest energy producer, Russia, and its most voracious consumer, China, want to bolster their common clout as a financial and geopolitical counterweight to Europe and the United States, whose "Asia pivot" regional strategy has caused concern in China.

Putin and Xi, less than a year apart in age, echoed one another in interviews before the visit, each saying the Chinese leader's choice of Moscow as his first destination was evidence of the "strategic partnership" between the nations.

A smiling Xi, 59, recalled that he read Russian greats such as Alexander Pushkin and Leo Tolstoy in his younger days. Putin, 60, said Russian-Chinese relations were at "the best in their centuries-long history".

The two U.N. Security Council members' solidarity on important global issues has, if anything, strengthened in recent years.

They have joined forces three times to block Western-backed measures on the conflict in Syria despite talk of grumbling in Beijing, and Russia has followed China's lead on North Korea - two issues likely to come up in talks on Friday.

They have negotiated alongside the West on Iran's nuclear programme but watered down past sanctions in the Security Council and opposed new punitive measures as counterproductive.

Russia has added to Japan's woes over territorial disputes with Beijing by playing up its control over an archipelago claimed by Tokyo.

But that lockstep movement on the global stage has not translated into easy agreement on bilateral energy deals.

ELUSIVE GAS DEAL

While industry sources said a package of deals to be signed would make Beijing Russia's top customer for oil, prospects for a long-sought agreement on supplies of pipeline gas to China, stymied for years by price disputes, were dimmer.

Xi's presidency is seen as a chance for a fresh start in such talks, which have foundered on price. Putin's spokesman spoke of a "positive dynamic" on Thursday but said there was no deal ready for signing.

In his interview, released by the Kremlin hours before Xi's planned arrival, Putin said bilateral trade had more than doubled in five years and reached $87.5 billion in 2012.

"The two countries want more economic cooperation and we're not just talking about oil and gas companies, but also smaller companies as well. They are at the fore," said Yevgeny Kolesov, director of Optim Consulting, the first Russian consulting company to open in China.

But the trade volume is about five times smaller than Russia's with the European Union, and also far smaller than China's trade with the United States.

The rising influence of China, with its proximity to Russia's sparsely populated eastern parts and nearly 10 times more people, has given rise in Russia to worries that China may one day challenge Moscow's influence on its own territory.

Russia has created a separate ministry to channel resources to its far east, which complains of neglect and underfunding more than 20 years after the Soviet Union collapsed.

FAR EAST FEARS

Defence analysts say Russian efforts to allocate military resources, including air defences and nuclear submarines, to its eastern coast is an effort to counter China's rising military might - even as Russia sells weapons to its neighbour.

Like their populations, their economies are uneven. China's gross domestic product grew 7.8 percent last year, while Russia's growth was about 3.5 percent and was close to stagnating in February, with 0.1 percent year-on-year growth.

"Economically, Russia is very concerned about the balance ... but it hasn't shown up on a political level yet," said Fyodor Lukyanov, editor of the journal Russia in Global Affairs.

In some ways, the partnership between Moscow and Beijing - awkward allies even when both were ruled by communists - may be more tactical than strategic.

For now, China wants to show it does not want problems on its border with Russia - the site of clashes half a century ago - said Dmitri Trenin, director of the Carnegie Moscow Center think tank.

It also wants the Russian oil that helps keep its economy flowing.

"The Chinese have been tremendously successful at playing the Russians to their own advantage, much better than the Americans have done with Russia," Trenin said.

Xi and Putin are expected to attend a summit next week of the BRICS group of emerging market economies, which also includes Brazil, India and host South Africa, and the Chinese leader will visit other African nations Beijing is courting.

The Chinese leader is bringing first lady Peng Liyuan on the state visit, which has left Kremlin watchers wondering whether Putin's wife, Lyudmila, will make a rare public appearance.

(Additional Reporting by Sonia Elks and Gabriela Baczynska, Editing by Steve Gutterman and Will Waterman)

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Friday, March 22, 2013

China's new leader to meet Russia's Putin on first foreign trip

By Thomas Grove