Defying his former enemies in the U.S. and Europe may force Vladimir Putin to aid the ascent of his biggest rival in the east.

Isolated over Ukraine, Russia is relying on China for the investment it needs to avert a recession, three people involved in policy planning said, asking not to be identified discussing internal matters. This means caving in to pressure to grant China privileged access to the two things it wants most: raw materials and advanced weapons, two of the people said.

Russia’s growing dependence on China, with which it spent decades battling for control over global communism, may end up strengthening its neighbor’s position in the Pacific while hastening its own economic decline. With the ruble near a record low and foreign investment disappearing, luring Chinese cash may deepen Russia’s reliance on natural resources and derail government efforts to diversify the economy.

“Now that Putin has turned away from the west and toward the east, China is drawing maximum profit from Russian necessity,” said Masha Lipman, an independent political analyst in Moscow who co-authored a study on Putin with former U.S. Ambassador Michael McFaul.

China is wasting no time filling the void created by the closing of U.S. and European debt markets to Russia’s largest borrowers. A Chinese delegation led by Premier Li Keqiang signed a package of deals today in Moscow in areas including energy and finance. Among the accords was a three-year 150 billion yuan local-currency swap deal, a double-tax treaty, satellite-navigation and high-speed rail cooperation and an agreement on implementing a May natural gas contract.

David Fuller's view

This is a good deal for China which wants Russia’s oil, gas and sophisticated weapons.  Terms for agreement will be set mainly by China because Russia is a forced seller and very much in need. 

While increased Russian exports to China come as no surprise, they also indicate the limits of Western power.  China will do what it wants and has no interest in helping the West with its sanctions against Russia. 

While Russia has found a lifeline, the weakness of its economic position is reflected by the RTSI$ Stock Market Index, and particularly by the Ruble, shown inversely against the US Dollar.

In contrast, China’s SHASHR Index remains in the early stages of an economic recovery, despite some ongoing forecasts of a crash.  These are neither reflected by the stock market Index, nor the Renminbi which remains steady against the US Dollar.  While I doubt that the Renminbi (shown inversely) will test its early-2014 high against the Dollar, it is the only important currency not to weaken against the greenback since July.