China’s financial and economic instability, as well as the escalation of tensions between North and South Korea, attracted a great deal of attention from Russian think tanks in August.

An elderly Chinese man walks past display boards showing the latest stock prices at a brokerage in Beijing, Monday, Aug. 31, 2015. Photo: AP

In August, Russian analysts focused on topics such as the crisis in the Chinese economy and the deterioration of relations between North and South Korea. As well, they explored the traditional issues in international relations between Russia and the West.

China’s growing financial crisis

Perhaps the central theme in August was the unexpected financial problems developing in China, which began in July. In early August, the People’s Bank of China began a gradual devaluation of the yuan, which further increased global interest in China.

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Russian experts, analyzing the situation, do not agree in their forecasts – some of them believe that China is falling and pulling down with it the global economy, while others say that “writing off” the Chinese economy is too early.

Among the former are representatives of the Council on Foreign and Defense Policy (CFDP), and among the latter are the Russian International Affairs Council (RIAC), Moscow State Institute of International Relations (MGIMO), and the Carnegie Moscow Center.

Mikhail Delyagin, an expert of RIAC, considers that the world had too much confidence in the Chinese economy, and that the Chinese economy took a huge responsibility upon itself to keep its growth increasing. Now, says the analyst, economic growth in China is slowing down, posing a threat to the economies of all countries.

“China, removing the world from its overworked shoulders, will now push it into a new Great Depression, which in many respects will be more terrible than the last one, which began in 1929,” says the expert. “A few years from now, it will be dangerous to walk under skyscrapers – one could get hit by a falling banker.”

The head of the Council on Foreign and Defense Policy (CFDP), Fyodor Lukyanov, is also cautious when speaking about the prospects of China, although he believes that, “The specter of a growing ‘dragon’ largely determines the atmosphere of the world, stimulating interest in the non-West. If this specter begins to melt, it can also lead to a change in these global sentiments.” But still, he is not convinced that it is time to throw in the towel on China’s development.

Stanislav Tkachenko, an expert of CFDP, explains in detail the causes of the crisis in China by analyzing the actions of the government and the People’s Bank of China. Tkachenko concludes that China’s economy can really pull down the world economic system; however, this point is still very far away.

“Today, China’s economic growth accounts for 30 percent of entire global economic growth,” said the expert. “The crisis in this country will have adverse effects on various segments of the global economy, including the commodity and currency markets. However, it is too early to talk about this today.”

Alexander Lukin from the Moscow State Institute of International Relations (MGIMO-University) believes that pessimistic talk about China’s economy is rather premature, pointing to the existence of a certain “safety cushion” in the country.

“China’s economy, as a whole, retains its strength, and a seven percent annual growth rate gives the country all the chances for a bright future,” says Lukin.

Alexander Gabuyev  of Carnegie Moscow Center provided not only an appraisal of the current financial problems faced by the Celestial Empire, but also reviewed the impact these problems will have on Russia. Mr. Gabuyev is confident that the economic slowdown in China, for now at least, does not threaten Russia, as the connections between the two countries are not that strong, being exclusively on the level of commodity-trade relations.

“Convergence certainly exists, but for the moment, the Chinese factor in the Russian economy –is more at the level of expectations and emotions,” notes the analyst.

The worsening situation on the Korean Peninsula

North Korea and South Korea had some sharp verbal and non-verbal exchanges in August, once again reminding the world about how fragile and illusory is any final peace between the two Koreas. In early August, two South Korean border guards stepped on a mine, presumably set by North Korean saboteurs.

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In response, South Korea launched a new propaganda campaign via loudspeakers on the border with North Korea. Pyongyang ordered the destruction of these speakers, resulting in an exchange of shelling between the two sides (there were no reported injuries).

Both sides agreed to enter negotiations after a great deal of recriminations and threats were exchanged. As a result of the talks, North Korea expressed its regrets about the incident with South Korean military personnel, and South Korea shut down broadcasts from loudspeakers.

Russian experts believe that we should not expect an escalation of this conflict in the future.

Andrey Lankov, an author of Carnegie Moscow Center's website, says there is no need to panic. The analyst notes that regular crises on the Korean Peninsula no longer scare regional experts and analysts because “this is nothing more than a specific form of diplomacy, a kind of military-diplomatic ballet, in which both sides follow unwritten, but quite clear rules.”

Lankov says that the current crisis developed according to the laws of all Korean crises during the past 25 years, and its main consequence was an exchange of views between delegations from Pyongyang and Seoul.

The Korean expert feels confident that no serious hostilities will occur on the peninsula, as the elites in both South and North Korea are not interested in starting an open and large-scale military conflict.

Konstantin Asmolov, an expert at CFDP, also believes that it is highly unlikely that this incident can escalate into a full-blown military conflict.

“Of course, this incident has raised the degree of tensions on the peninsula, but the probability of it developing into a sharper conflict is questionable,” says the analyst. Asmolov also points to the fact that the most ardent supporters of using military force in North Korea and in South Korea are kept in balance by moderate politicians. Moreover, the U.S. helps to keep the hot heads in Seoul in check.

Dmitry Streltsov from MGIMO-University noted that incidents at the border would continue, being followed by periods of relative calm. Mr. Streltsov feels confident that we will not see any change in the position of Pyongyang, and that North Korea has once again demonstrated its standard modus operandi – “start out with tough rhetoric, and then retreat.” Colleagues from the Carnegie Center and CFDP also share this view that no one in Pyongyang is interested in having the border conflicts escalate into a large-scale war.

Russia-West relations

In August, the raging debates about relations between Russia and the West continued. This time, the discussion of experts moved to the plane of ideas and scenarios.

Thus, an analyst at RIAC and CFDP, Alexander Goltz, believes that the confrontations between Russia and the United States are increasingly filled with absurd scenarios and initiatives. The most recent example of this are calls made by a number of major Russian politicians to transfer the headquarters of the United Nations from the United States to Europe (Switzerland), after a “limited” visa was issued to Valentina Matvienko, speaker of Russia’s upper house of parliament.

Goltz notes with regret that, “The idea of ​​transferring the headquarters of the UN seems to be quite acceptable to Russian diplomacy, which seems to have exhausted the entire range of threats and accusations against Washington.”

Professor Tatiana Shakleina of MGIMO-University also focused her interests on the problem of different rationales among the key actors. The analyst believes that relations between Russia and the West, and particularly the United States, are far from being settled amicably, because the parties not only adhere to different paradigms, but also even have different views on the same paradigms.

Shakleina stresses the ambivalence of the ideological position of the U.S. and its allies on such basic issues as war, peace, sovereignty, and world order – all of which are the result of selective adherence to the principles of a paradigm that the West has chosen for himself. The expert believes that, given such a scenario, Russia needs an ally, and this ally should be China, which can balance the potentials of both the U.S. and Russia.

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Denis Volkov, an author of Carnegie Moscow Center's website, focuses on the growing view of the U.S. as an enemy of Russia, as well as the root cause of all possible troubles and tragedies. This trend is particularly evident in the example of the Ukrainian conflict.

“According to the majority of Russians, the West created Euromaidan, advised Kiev to begin anti-terrorist operations in the east of the country, is provoking Ukrainians to sabotage the Minsk Agreements, is interested in the continuation of the conflict (three-quarters of respondents are convinced of this) – and all this is being done to take advantage of the current situation, in order to weaken and humiliate Russia.”

This is also used to explain the reasons for the introduction of Western sanctions,” said the expert.

Volkov says that such points of view are the result of a deliberate propaganda campaign by the Kremlin, which is increasingly being drawn into conflict not only with a neighboring country, but also into a large-scale confrontation with the West.