The external logic of so-called strategic relationship "triangular" between Russia, China and the USA primarily motivated the Sino-Russian rapprochement, which could be observed in recent years. Obviously, the main value of Sino-Russian cooperation is determined by a shared need to meet real or perceived challenges from the West, and especially the USA. The strategic partnership agreed by the two countries in 1997 offers both of them the opportunity to overcome possible isolation in international affairs and helps them to assert specific national interests vis-a-vis uncooperative Western nations. The absence of overlapping or conflicting national priorities allows the two to give each other verbal support without essential expenditures or sacrifices. This was the conclusion of my paper "The General Framework of Sino-Russian Relations" published in the bulletin (1) a year ago.

I wrote that the Russian-Chinese strategic partnership seemed to lack adequate internal motivation and to be to a great extent determined by the international environment. Narrow isolationism and increasing tension with the West did not correspond to the optimal preferences of either, and both would prefer to diversify their international connections. In that sense any suspected quasi-alliance was nothing but inevitable tactics for dealing with the worst-case scenario imposed from the outside. In other words, the future of Russian-Chinese relations largely depended on American foreign policy, i.e. results of the engagement policy towards China and level of trust in Russian-American cooperation. Apparently, ideological considerations complicated the improvement of US-Chinese relations. The American allergy to any kind of totalitarianism and periodical emotional campaigns on human rights in China preserved mutual distrust. Unless the United States play down these tendencies in their approach to China Beijing will always have a strong motivation for closer ties with Moscow. On the other hand, the increasing Russian feeling of being duped, isolated and neglected by the West put her to find its most suitable partner in China. The recent events showed that the analysis was right.

The Yugoslavia crisis signaled a new mark in the post-Cold War international development. It demonstrated the US resolution to establish its political control all over the world, including those "pariah nations" that reject cooperation with the USA. Unexpectedly, Serbia and Iraq did not give up in the face of demonstration of American might. As a result, a virtual war of "wag-the-dog" type turned into a real war with hundreds of victims and enormous destructions. It was Russia who created a space for anti-American resistance, but conducting its new anti-US policy Russia enjoys support of China. China, which has maintained a silence over a Russian proposal for a strategic triangle between Russia, China and India, is now considering forging a much closer alliance with Moscow to prevent so-called "hegemonistic" plans of the USA (The Russian Premier, Mr. Yevgeny Primakov, during his visit to India in December 1999 had said that a strategic alliance between Russia, China and India would bring about greater stability(2)). Reportedly, China had issued internal circulars on the "hegemonistic" acts of Washington in the Balkans and had come to a consensus on the importance of cooperating with Russia to check American expansionism in the world(3). Thus, American policy drew the two nations even closer and domestic factors created a favorable soil for a more structured alliance.

After Kozyrev�s retirement as Foreign Minister, there were attempts to reassess Russia's position in the world and to build its foreign policy around specific Rissian national interests, albeit this would eventually cause certain conflicts between Russia and the USA. This new course is usually tied up with Yevgeny Primakov who succeeded Kozyrev as Foreign Minister. However, Primakov enjoyed support from the majority of Russia's political elite. This mirrored a growing consensus that neither in Bosnia and Iraq, nor in Kosovo the American "sheriff" should receive too broad authority. Primakov is a part of this move, but not an initiator(4). Primakov achieved an interesting position - Russia can assume anti-US stance in certain questions, but does not become the enemy of the West. For example, Russia criticized the US strikes against alleged terrorist bases in Sudan and Afghanistan, as well as the US-Britain joint operation against Iraq. However, it was Primakov's gesture to turn round his plane flying to Washington that received massive support in the society. The Balkan war revealed an outstanding level of anti-US sentiments in Russia.

Richard Pipes suggested that emotions had prevailed over common sense when President Boris Yeltsin singled out the United States as the bully responsible for the bombing and even threatened a general war as a result of it(5). He wrote: "It is true that Russians have had close emotional ties with the Serbs going back centuries, based on shared religion and Slavic ancestry. On a number of previous occasions, when the Serbs revolted against the Turks and then again notably in the summer of 1914, they had come to their defense. But in these instances, the Serbs were either tyrannized or threatened by foreign powers. In 1999, by contrast, they are tyrannizing a minority within their own borders."

Yes, the first reaction to the Yugoslav crisis was hysterical. Different politicians proposed arms sales to Belgrade, putting nuclear missiles on the alert and other sabrerattling measures. Moreover, a group of ships received an order to move to the Mediterranean, being loaded with S-300PMU-1, the most advanced air defense system capable of reaching NATO aircraft at its fire distance(6). As NATO would do its best to prevent such delivery to Yugoslavia, the military clash would become inevitable. Only the day before the departure the order was terminated. However, all this was a hectic search of appropriate answer. Later Russia confined itself to political measures, making its words of condemnation stronger and stronger.

Reading Russian newspapers, listening to Russian politicians and talking to Russian people, one would never agree that Russia�s tough stance on Yugaslavia is pure emotions. It is more than that. It is a different vision of the world and another system of assessment of international events. Apparently, the overwhelming majority in Russia does not view Serbs as those "tyrannizing a minority within their own borders". It is true that the Russians have the perception of Kosovo�s events as of an ethnic conflict in which the USA and its allies took the Albanian side (moreover, of terrorists from the Kosovo Liberation Army (7)). News about Albanian refugees, which drew overwhelming attention in the West, were balanced by the Balkans refugee statistics showing that ethnic cleansings in Croatia and Bosnia had made the Serbs the most suffering side, and NATO did not attack Zagreb, when Croats were pushing Serbs out of East Slavonia. Reports on death toll taken by NATO bombings only add to perception of NATO as an aggressor. And what is more important that it is a hard task to find somebody who really believes that the USA initiated the aggression against Yugoslavia only for humanitarian reasons. The latter is broadly seen as a dress rehearsal for establishing the US domination over the world with dismantling the entire post-WWII system of international relations(8).

The NATO aggression against Yugoslavia coincided with the emergence of negation of America as a way of life deepest in the decades. The article "Goodbye, AMERICA" (9) published in Ogonyok, a magazine oriented towards Russian intellectuals, is very representative. It received broad response, and, undoubtedly, reflects dominating feelings among Russians. The author writes that the "romance" with America, which was half a fiction, half a blind adoration is over. While two governments fought the Cold War, common people did not care about it. They remembered that America was the ally during the Second World War, later they learnt about jazz, Marilyn Monroe and Coca-Cola. American fashion and fiction became more and more popular. When the "iron curtain" became less tough, movies brought an impression that there did exist heaven on the earth. After Gorbachev�s reforms little by little an understanding came that this fabricated image of America was false, that the USA really was a rival in the forty year undeclared war. America won this war, and became easy to access. However, now more and more people find America dull, do not believe in it, its way of life and ideas, and become suspicious of everything coming from it. It is not a country of truth and freedom anymore. They loved America, when the two countries were enemies, now they are waiting for America�s fall.

Reform difficulties, debt crisis, general post-imperial shock, growing cultural inconsistency inevitably bore its fruit. But it could be not so bitter. As Maxim Sokolov, popular Russian commentator (by the way, a liberal one) put it, the major result of peacekeeping operation launched by the USA and NATO at the Balkans was achieved with the first bomb (10). Before that radical patriots claimed that the West, especially the USA, was a bitter enemy seeking the most possible weakening of Russia. Now broad social circles share this vision. The USA and "the aggressive NATO bloc" again became "potential rivals", the place they had occupied in the Russian military doctrine during the Cold War. If Western strategists wanted to bring anti-Western sentiments in Russia to the highest notch they could not do it better than President Clinton and Secretary of the States Albright. Maxim Sokolov has no scruples to call this policy an "idiocy", a demonstration of absolute inadequacy to the conditions of post-Cold War world.

No wonder, air attacks against Yugoslavia were the first event, which made all political forces to assume similar stances. Everybody � from leftists to liberals � refused to support the action. Responding to reproaches from the West, Russian media tried to achieve a balanced coverage of the crisis, picturing Albanian refugees and talking about their sufferings. As a result, the attitude towards Milosevic worsened (11), but this did not influence the popular stance against NATO. Apparently, flinging away the UN mechanism, the USA and its NATO allies create a new system of international relations, which may be dangerous for all nations of the world, including NATO member countries themselves. If this method is accepted, then the Soviet invasion of Afganistan, for example, could be justified by the fact that NDPA�s leader Amin had established a dictatorship (12). On the other hand, military actions in Chechnya and Yugoslavia only strengthened the ruling regimes. So Russian politicians negated the military action against Yugoslavia months before it started. This stance coincided with that of China. Eventually, two countries are moving closer and closer in the understanding of the contemporary world.

Russia's Defense Minister Igor Sergeev stated that Moscow assessed NATO's new strategy as a threat to its security, while NATO's aggression against Yugoslavia might force Russia to review its military doctrine. According to Russian military, the threat could emerge from NATO's intention to exceed the bounds of self-defense and to expand its operational zone to the entire world, as currently NATO is going to deal not only with an aggression against its members, but with any crisis that might affect their interests. The fact that NATO does not consider it obligatory to receive mandates from the UN or the OSCE is seen as the most dangerous factor. The war in Europe launched by NATO made these suspicions even more than sound. This means that the core of the Russian defense concept - the perception that Russia will not be involved in a major military conflict in a foreseen future - is under question.

One should note that, contrary to popular notion, Russia did not disband its military-industrial complex. In recent months Russia has deployed a regiment of TOPOL-M intercontinental ballistic missiles, highly sophisticated weapons. It was done two years ahead of schedule. In autumn 1998, President Yeltsin commissioned Peter the Great, the largest ballistic missile cruiser ever built. The war machine also turned out a new stealth bomber, and, by estimates, Russia continues to build new submarines at rates equal to the days of the Cold War.

In the development, in May 1999 Yeltsin signed special documents, which gave green light to a new generation of nuclear weapons (13). Reportedly, a radical modernization of Russian entire nuclear arsenal is to be implemented with the goal to make a limited nuclear war possible. This plan is aimed at creating capabilities of striking "non-strategic" nuclear blows anywhere in the world in the same way like the USA use cruise missiles and precision bombs. Some ten thousand of tactical low-might nuclear units are expected to become a leverage against "NATO expansion in Europe", as it will close the gap in conventional arms between Russia and NATO member countries. Low-might nuclear unit makes the threat of using nuclear weapons even more real, because it gives an opportunity to avoid global nuclear confrontation with total destruction. The plan was proposed several years ago, but it was the Yugoslavia crisis, which promoted its implementation.

Apparently, the United States, believing that the events of 1989-1992 had permanently transformed the world so that only the American geopolitical understanding was viable, resisted any Russian attempt to secure its sphere of influence even at a regional level. As a result Russia became more uneasy and aggressive. It still has enough resources to support its claims, while Russia�s aspiration to form a bloc to counterbalance NATO expansion becomes even stronger (14).

Even before NATO�s attack China insisted that all parties involved in the Kosovo issue to settle the issue through negotiations in an appropriate and just manner while exercising restraint and adopting a patient and flexible attitude (15). China stated that the issue of Kosovo was an internal affair of the Federal Republic of Yugoslavia, and it should be resolved politically through dialogue on the basis of respecting the sovereignty and territorial integrity of Yugoslavia while safeguarding the legitimate rights and interests of the ethnic groups in Kosovo. Soon after the beginning of NATO�s strikes China "strongly urged" NATO to stop attacking Yugoslavia as soon as possible and return to peaceful negotiations (16). China's Foreign Ministry emphasized that only then could peace and stability be restored to the Balkan region, and expressed appreciation for Russia's efforts to seek a peaceful solution.

In late April 1999 China again urged NATO to stop its military strikes against Yugoslavia (17). China�s Foreign Ministry calling NATO "a product of the Cold War" pointed out that the international situation had changed significantly since NATO�s establishment. However, in the new situation, when "people throughout the world share the aspiration of peace and co-operation", NATO tries to strengthen its military alliance, expand its function of interfering in the affairs of other countries, and even surpass the UN Charter and established principles of international law in order to interfere in the internal affairs of a sovereign country. This will inevitably cause serious consequences. A week earlier Qin Huasun, China's permanent representative to the UN, issued a statement saying that China favored a political resolution to the Kosovo issue, and opposed the possible imposition of any solution on the Federal Republic of Yugoslavia (FRY) (18). He expressed a deep concern over the deterioration of the situation in the Balkan region caused by the continued NATO military strikes against the FRY. He called for an immediate end to the ongoing air strikes: "it is a matter of priority that NATO cease immediately its military action against the FRY." China�s stance was that any political solution should be based on two principles: faithful respect for and maintenance of the sovereignty and territorial integrity of the FRY, and protection of the legitimate rights of all ethnic groups in Kosovo. Thus, the consent of the FRY government should be obtained when any plan is to be discussed. China was annoyed by the fact that NATO had begun air strikes without UN Security Council authorization, and not once pointed out to the violation of the UN Charter and international law. Rejecting NATO�s attempt to solve humanitarian issues through bombing, the Chinese Foreign Ministry stated that China�s and Russia�s stances on Kosovo are identical (19).

After the 7 May bombing of the Chinese Embassy in Belgrade, China launched a strong anti-US campaign, including demonstrations of protest and relevant mass media coverage. In its editorial "NATO's hysteria" China Daily expressed "strongest condemnation" of NATO's violation of China�s sovereignty and of "the flagrant trampling" upon international laws and norms (20). The editorial demanded "an immediate halt to US-led NATO's war crimes against humanity", and called the attack against the Chinese Embassy in Belgrade "intolerable aggression and a war crime". The newspaper reproduced the official point of view that the US and NATO "weak excuses" about the attack fell apart before common sense: "With at least three missiles targeting and hitting the same building from well calculated angles, it is nothing but a broad lie to define it as either a technical failure or "collateral damage or unintended consequences." According to the newspaper, consequences of the attack were not limited to China itself. The UN Charter, the Vienna Convention on Diplomatic Relations and Convention on the Prevention and Punishment of Crimes against Internationally Protected Persons Including Diplomatic Agents were among the victims in the tragedy. The editorial claimed that the attack had exposed US-led NATO's disregard of international laws and norms and further had demonstrated an ambition to dictate world politics. It went further on with the statement that the war, which NATO had said had been launched to prevent a humanitarian catastrophe, had resulted in an appalling humanitarian disaster featuring the massive displacement, suffering and death of innocent people of different ethnic backgrounds. The attacks had turned against civilian lives and infrastructures. In the conclusion the newspaper emphasized that the gunfire in Kosovo was living proof that NATO was degenerating into a servile instrument for the United States's pursuit of global hegemony. "Today, NATO's missiles fall on the Chinese Embassy. Tomorrow, destruction may fall on anyone else who dares to oppose it".

It is a very significant moment that the action started in several hours after the Embassy destruction. Actually, this was not the first outburst of nationalist sentiments. During the 1996 Taiwan crisis, the USA moved two aircraft carriers to the Taiwan Straits, which caused spontaneous opposition from students. This May the Chinese leadership not only organized the protests, but put them into more or less acceptable frameworks, as in many places demonstrations started before any party instruction appeared. Naturally, the main goal was to demonstrate the opposition, but not to abandon the cooperation with the USA.

Since the Embassy crisis erupted, senior cadres including Politburo Standing Committee members have stayed in party headquarters at Zhongnanhai (Beijing), holding two or three meetings a day. One decision made by the Politburo was that Beijing would not let Sino-US relations deteriorate, provided Washington made some genuine efforts at damage control (21). Moreover, barring an unforeseen deterioration of ties over new flash points, exchanges in economic areas, particularly China's accession to the WTO, would continue, according to schedule. The Chinese leadership hopes the moral high ground it has attained after the embassy accident might strengthen its hand at the WTO negotiation table. For example, Beijing hopes Washington would not be pushing too hard on a number of trade concessions. However, this is the verso of anti-hegemonistic policy conducted by Beijing.

In his report to the XV congress of the Chinese Communist Party, Jiang Zemin, noting that the development of the trend toward multipolarity contributes to world peace, stability and prosperity, emphsized that the cold war mentality still exists, and hegemonism and power politics continue to be the main source of threat to world peace and stability (22). "Expanding military blocs and strengthening military alliances will not be conducive to safeguarding peace and security", he said. His conclusion was: "We should oppose hegemonism and safeguard world peace. All countries should settle their disputes and conflicts through peaceful consultations instead of resorting to force or the threat of it. No country should interfere in the internal affairs of another country under any pretext, still less bully the weak and invade or subvert other countries. We do not impose our social system and ideology upon others, nor will we allow other countries to force theirs upon us."

Chinese leaders in their ideological war against Soviet revisionists and American imperialists always used the term of "hegemonism". Attack against the Chinese Embassy in Belgrade made this propagandistic cliché a part of real politics. Interests of enhancing social stability and strengthening positions of the ruling elite advanced the fight against "hegemonism" to the first lines of Chinese political doctrine.

It is not a secret, that the PRC�s leaders in the wake of economic success started to exploit a nationalist idea, which step by step substitute socialist theories in the state ideology. As Thomas L.Wilborn put it, nationalism became the major ideological force determining Beijing�s foreign policy (23). Undoubtedly, ideological concepts of Marx, Lenin, Mao Zedong and even Deng Xiaoping do not influence decision making, only creating the general framework for analytical work that study China�s international environment and its place in the world. Moreover, communism divided Chinese intellectuals, while nationalism emerged as an effective uniting force. (Is there anything surprising in the fact that Chinese students changed their drive for democracy for nationalist movement?) From this point of view, the PRC�s stance is absolutely understandable. It pays enormous attention to sovereignty issues and to counteracting any attempts to violate China�s sovereignty.

Now let us see what we have. China striving for economic cooperation with the USA, seeking access to the WTO and extremely interested in the US hi-tech products absolutely rejects thrusts of the US foreign policy, which prevents the country�s unification (reunification with Taiwan is an ultimate goal of the PRC�s leadership). Under such circumstances China is interested in counterbalancing the US domination in the world. This was obvious years ago, but latest events made this trend absolutely dominant. To this end, strengthening alliance with Russia is a good option. It is weak, but it can offer resources and advanced weapons. On the other hand, the US successful attempts to block Russia all around the world, including the CIS (24), made Russia even more desperate about reliable allies in the world.

In February 1999, President Yeltsin and Premier Zhu Rongji held talks in the Kremlin and pledged to build on friendly ties between the two giants. The two sides conceded that last summer's financial crisis that hit both nations hard was going to make their trade and business link-up more difficult to set up. Two-way trade last year again slumped 10% percent to US$ 5.5 billion, the lowest level after the peak of 1993. However, it seems the two sides were satisfied by the development of bilateral cooperation. This can be explained by the fact that energy supply from Russia to China might play a viable role in the cooperation.

The Chinese energy shortages are well known. That is a "bottleneck" in its development. For example, the country has been an overall net importer of petroleum (crude plus products) since 1993, and became a net importer of crude oil in 1996. China expects imports to meet about 50 million tons of its petroleum demand by 2000 (25). Thus, China�s goal is to obtain 12 million tons from overseas by 2000 and 50 million by 2010, and Russia along with other CIS crude oil producers may become a major supplier of oil to the Chinese market.

The perspective for natural gas export also seems bright. According to estimates by the Russian Institute of Oil and Gas, the Chinese total gas reserves amount to 21 600 billion cubic meters. Still the Institute forecasts that after 2005 the PRC will have to import natural gas: though the Chinese output will continue to grow, the shortage will exceed 6 billion cubic meters in 2005 and will achieve 10 billion cubic meters in 2010 (26). At the same time they expect that the Japanese demand for natural gas is to achieve 90-115 billion cubic meters annually (from the current 62 billion.). According to Japanese experts' estimations, provided industrial growth rates will be restore at the prior crisis level, by 2010 the regional demand for gas, oil and electricity will double. Taking into consideration energy demand in South Korea and Taiwan, it is fair to suppose that in the first decade of the next century the Asian market will become more spacious than that of Europe. So the Sino-Russian energy cooperation is not oriented solely to China, but also is considered to be a good chance for promoting Russian ties with the whole of East Asia.

In 1996-97 bilateral cooperation in the sphere of energy resources supply emerged as a very promising direction of economic cooperation between Russia and China. In June 1997 during the double visit of former Premier Viktor Chernomyrdin and Vice-premier Boris Nemtsov the Russian Ministry of Fuel and Energy and China�s National Oil and Gas Corporation signed an agreement on cooperation in crude oil and natural gas production. The most notable project the two parties agreed to cooperate on is the Irkutsk project which should run 3360-km gas supply main from Kovykta gas deposit (Irkutsk District of Russia) through Mongolia to a Chinese port (probably, the port of Rizhao on the Yellow Sea) (27). The Kovykta deposit with reserves preliminary estimated at 1.5 trillion cubic meters of natural gas and 80 million tons of gas condensate might play a pivotal role in Sino-Russian relations and economic interdependence in the entire Northeast Asia.

A group of "Sidanko" oil company, "British Petroleum" and UNEXIMBank - in November 1997 they achieved an agreement on the strategic alliance (28) - was expected to be the major actor in implementing Kovykta project. The estimated cost is to exceed US$ 10 billion. Russia is supposed to supply 20 billion cubic metres annually for approximately 30 years. These deliveries include 10 billion cubic metres for China itself and the second part for third countries (apparently, Japan and South Korea) (29). The period of stable supply must be. The project implementation will not be easy due to complicated geological and exploitation terms.

The project is beneficial for Russia itself, as at the same time Irkutsk District will develop its own network of gas pipes, create new jobs and enterprises. The region will get an annual supply of 9.2 billion cubic metres. Chemical plants of Siberia and the Russian Far East will get an opportunity to stabilize their sources of supply. That will demand US$ 700 million and the local administration hopes to receive US$ 150 million in tax payments.

In Korea and Japan there is a real interest towards Sino-Russian projects on energy cooperation. Korean companies headed by the National Gas Corporation have announced their interest in the project implementation. Nihon Keizai has revealed that "Sinnihon Seitetsu", Japanese steel producer, and oil companies "Sekiyu Sigen Kaihatsu" and "Sekiyu Kodan" very attentively watch the steps in the Kovykta project implementation as they consider it to be highly profitable (30). On the other hand, a semi-governmental consortium, the Japan National Oil Corporation represents the Japanese interests in the project. The consortium, involving Sumitomo, Marubeni, Nippon Steel, Tokyo Gas, Osaka Gas and others, expressed a strong interest in joining all stages of the project. Furthermore, twenty-four Japanese companies have set up a forum to promote the construction of natural gas-pipelines linking Russia with Japan via Mongolia, China and South Korea (31). Participants include Toshiba Corp., Nippon Steel Corp. and Tokyo Electric Power Co. The Asian Pipeline Research Society of Japan, based at the Mitsubishi Research Institute, opened a study how to negotiate contracts with countries for natural-gas production. It will also look into how to construct pipelines over or through permafrost but will not touch upon problems faced by individual companies - such as trading houses - involved in natural-gas projects.

The Russian financial crisis of August 1998 negatively affected initial plans. Both, "Sidanko" and UNEXIMbank experienced financial problems. However, on the eve of Chinese Premier, Zhu Rongji�s visit to Russia in February 1999, it was revealed that "Gazprom", Russian gas monopolist would join the project (32). In January 1999 Rem Vyakhirev, "Gazprom" head and Zhang Peiyan, Chairman of PRC�s State Planning Committee held negotiations on the subject.

Today Russia�s gas supplier "Gasprom" (controlling about 95% of the gas output and accounting for 7-8 % of Russia's gross domestic product) has two major markets. Those are the domestic market (consumes around 65% of the total output) and Western European market (around 12% of the total output). "Gazprom" planned to meet the expected growing demand in Western Europe by tapping gas deposits on the Yamal Peninsula. Thus, "Gasprom" officials assumed very cautious stance towards the Asian market. However, there were suspicions that the company might fail to expand their deliveries to Europe, as some European counties feel alarmed about "Gasprom" growing monopoly.

Under such circumstances "Sidanko" initially was the only player in Siberian natural gas trade. "Sidanko" oil company was created on the basis of the "Russia Petroleum" joint stock company which initiated a large-scale project for the exploration of oil and gas fields in Eastern Siberia. The formation of a new "integrated carbon company" in mid-1990s meant considerable expansion of "Russia petroleum" by the merger with regional Siberian and Far-Eastern conglomerates. At the same time a sharp fall in production at the Komsomolsk and Khabarovsk oil refineries has created a real threat of disrupting the supplies of oil products from these plants to enterprises in the Far North, the Far Eastern military district and the Pacific fleet. To deal with the problem, it was suggested that the government should consider setting up the Siberian-Far Eastern Oil Company (Sidanko)(33). Later UNEXIMbank bought this industrial behemoth, and the group�s head Vladimir Potanin, using his ties in the Russian government, managed to push the company to be the major actor in the Irkutsk project.

Now "Gazprom" changed its "neutral" stance on the Irkutsk project. Allegedly, the company "was asked" to do so for political reasons. The Chinese side wanted to have stronger guarantees of the project�s reliability, and the participation of semi-governmental "Gazprom" can provide them. Moreover, according to new plans, on the second stage of project implementation the gas main to China can be joined with the Yamal gas deposit, thus, providing the second source of gas supply and expanding "Gazprom" markets. The Kovykta project is expected to start in the next two-three years. Russia can receive from the project US$ 1.5 billion annually.

During Zhu Rongji�s visit to Moscow Russia and China signed an agreement of technical and economic verification of the Kovykta project. Along with this, "Russian United Energy Systems" (UES) company and China�s State Energy Company signed and agreement on cooperation. They are to study doubling power exports to China to 400 million kWh a year, and build a "power bridge" which could carry 15-18 billion kWh to China per year. Another important agreement deals with Russian oil export to China: Russian "Yukos" oil company and "Transneft", the owner of Russia�s pipeline network are to build an oil main from Irkutsk District to North China to export up to 30 million tons of crude oil annually. The two sides also think over exploration of oil fields in Krasnoyarsk District and Yakutia.

Last years the sector of arms sales become more and more vigorous part of Sino-Russian cooperation. Due to budget constraints China cannot expand its orders outright, but it gradually increase its acquisitions from Russian arms producers. Notably, in 1999 China again increased its defense expenditures by 12.7%, up to 104.65 billion renminbi (US$ 12.64 billion) (34). Military spending comprises 1.2% of GDP and 8.4% of budget expenditures.

Russia seems to be loosing the last prejudice against arms transfers to China. General Nikolai Zlenko, head of the International Military Cooperation Department, Russian Defense Ministry expressed readiness to promote export sales of Russian advanced armaments, including MiG-29, MiG-31 and Su-27 aircraft, Il-78M tanker aircraft; Ka-50, Mi-28 and Mi-35 combat helicopters; Mi-8, Mi-17 and Mi-26 transport helicopters; S-300PMU-1, S-300V, Buk, Tor-1M and Igla air defense missile systems; Tunguska air defense gun-missile system; Smerch and Uragan multiple launch rocket systems; T-72, T-80 and T-90 tanks; BMP-2 and BMP-3 infantry combat vehicles; automatic control systems; communications systems; electronic countermeasures systems; small arms; and other weapons (35).

At present the PLA's Air Force undertakes rearmament on the basis of imported and domestic built planes. For example, in 1998 China tested F-10, multipurpose fourth generation fighter. It is expected to be ready for serial production in the next two years. The F-10, which can be compared with the US F-16, should become the basic fighter of China's Air Force. In mid-1980s China acquired from Israel avionics, radars and other technologies initially designed for Project "Lavai". In early 1990s the F-10 was adapted for AL-31 engine from the Russian Lulka-Saturn company, which supplies it for Su-27/Flanker production. The F-10 uses certain elements of "stealth" technology. With launching its Air Force modernization, China started to decommission its obsolete Q-5 and F-6 fighters (analogues of MiG-19 and MiG-21 produced in Russia in 1960s), which amount up to 3500 pieces.

In order to facilitate the modernization China purchased from Russia 46 Su-27 fighters, contracted the delivery of another batch of 50 Su-27 and bought a license for its domestic production under the name of F-11 (36). Shenyang Aircraft Corporation planned to start the production of F-11 in late 1998, but met difficulties with the assembling (first 50 planes are to be assembled from the parts supplied from Russia, and then the license production will start). By estimates, it will need two years to achieve planned level of Su-27SK output (37). China wants to produce 200 Su-27s in ten years. However, it spend three years to put in operation the Su-27, the fact vividly showing China�s deep dependence on the Russian technical assistance.

In the development, the Chinese military advanced in negotiations on the procurement of 20 Su-30, two-seat long-range version of the Su-27, intended as long-range interceptor, "wild weasel" aircraft and striker. The negotiations were hindered by the fact that together with the aircraft the PLA wants to obtain missiles of the last generation. At first, Moscow was not happy about it, but resumed negotiations in March 1999.

Apparently, one should note that the cooperation with China is of vital importance for Russian arms producers. Now Sukhoi Design Bureau seeks to reach a two times increase in the Su-27-based export sales (38). To accomplish this task, 8 modification versions of the Su-27 fighter are offered by the company, including the Su-32FN reconnaissance/strike aircraft, the Su-30MKI multipurpose fighter, the Su-33 carrier-based fighter, the Su-37 multi-role fighter, etc. This is the matter of survival, as currently the Sukhoi company's budget is 70% percent export-formed, with only 30% provided by the government order.

Another important field of cooperation is China�s acquisition of long-range radar detection and control systems (Falcon type). In 1997 the PLA allocated US$ 250 million to buy from Beriev company one A-50I aircraft with radar system from "Israel Aircraft Industries", and to order another three (39). Such planes are essential for enhancing tactical and strategic command and control systems of the PLA.

The main reason for enhancing the PLA's Air Force military capabilities is the aspiration to close the gap with Taiwan, which with the procurement of F-16 and Mirage-2000 enjoys superiority in the air, and to put eventually the Taiwan Straits under the PRC's control. With the same aspiration China beefs up efforts to transform the Chinese navy from a "brown water" coastal defense force into a power projection "blue water" force capable of meeting and defeating US and Western Navies. Here the PLA again found a helping hand from Russia. One of the most significant contracts was the procurement of Sovremenny-class destroyers (Project 956). On 16 April 1998 "Northern Dockyard", shipyard in St.-Petersburg, launched Project 956E destroyer, the first of two ships ordered by China�s Navy in 1997 (40). It will be ready for delivery in late 1999. The second one is to be delivered in 2000. Every ship costs of approximately US$ 500 million.

Each Sovremenny-class destroyer is armed with two four-tube missile launchers for eight Mosquito (SS-N-22 Sunburn) supersonic anti-ship missiles (ASMs), while one salvo of eight missiles is enough to sink two cruisers or three-four destroyers. With one salvo fired, two Chinese Sovremenny-class destroyers may sink a group of enemy ships, comprising a cruiser and three destroyers. The group of Sovremenny-class destroyers, which reportedly is to achieve 11 ships, might change the strategic situation in the Taiwan Straits. Eventually, this might pose a challenge for security commitments taken by the USA in the region.

The Chinese order to procure the Mosquito missiles was the first foreign export order for this unique naval weapon. The missile is considered to be the world's only anti-ship weapon, which physically can not be intercepted by any of today's shipboard defense means. This is due to it excellent design. At the final stage of flight, the Mosquito approaches the target at an extremely low altitude. The emerging supersonic shock wave produces such a tremendous pressure on the water surface, that a "meniscus" phenomenon occurs, when water surface is physically pressed through, the missile flying in a peculiar-shaped "gutter"' below the sea level. Naturally, the enemy radar systems cannot detect the missile, and the target attacked has simply no time for self-protection.

Now the Arseniev Progress plant (the Maritime region) manufactures a batch of over 50 3M-80E Mosquito supersonic ASMs, to arm two Sovremenny-class destroyers, ordered by the Chinese Navy (41). The ASMs is due to be manufactured before late 1999, when the customer should accept the destroyers. By experts' estimates, China may order additional number of missiles to be manufactured after the battle ships are delivered.

Chinese order to manufacture Mosquito ASMs helps Russian manufacturers to maintain their unique production technologies. About 300 enterprises are engaged in cooperative production of this missile. About 50 of these enterprises are main suppliers, owning key production technologies. The Raduga Design Bureau, the Mosquito's developer, would like to significantly expand the export sales of the Mosquito ASM, which still has no analogues in the West (42). The missile can be exported not only as part of ship-based complexes, but also as a separate item. It could be purchased separately to be installed on existing surface ships, as well as to be used with shore-based missile units. The Raduga Design Bureau is ready to carry out extensive modernization of the missile, providing a dramatic increase in its speed, range and combat efficiency, improving its radar signature and cryptosecurity characteristics, as well as the missile's operational tactics.

Meanwhile, Russia has delivered a new submarine to China - the second of the same class in the recent years (43). The Project 636 diesel-electric submarine, known as Kilo-class in the West, can carry 18 torpedoes and costs about $300 million. In the past, China bought two submarines of an earlier version from Russia. China's fleet of submarines, including advanced Kilo-class subs, might be key to enforcing a possible blockade of Taiwan, in case it decides to use force to assert its claim of sovereignty over the island.

The low-noise Project 636 submarine has been developed by the Rubin Central Naval Design Bureau in St.Petersburg and is the latest Project 877EKM-version, called "a black hole in the ocean" by foreign experts. The Project 877 submarines have been delivered to the Soviet and Russian Navy, as well as abroad. There is no series-division of the Project 877 submarines in the Russian Navy. Such a division is used only with export versions of these submarines. All the 30 low-noise submarines, currently in service with the Russian Navy, are generally considered to be of the Project 877-type, although 15 of these are the earlier-developed 877EKM and 15 - the latest 636 versions. Currently, construction of the Project 877EKM submarines is close to be completed, with only one submarine left under construction in St.Petersburg for the Indian Navy. All in all, Russia has exported 18 Project 877EKM submarines, including nine to India, three to Iran, two to Algeria, one to Poland and Romania each, and two to China (44).

In 1997, the first Project 636 submarine was launched. This submarine is the further development of the 877EKM having improved range, firepower, acoustic characteristics and reliability. With the order of two subs, China has become the first customer for this submarine. The first submarine of the two ordered was delivered to China in 1997. The world's most "silent" submarines of the Project 636 will be built at least through 2006, to be later replaced by more advanced Amur-type submarines. Construction of two fourth generation diesel-electric submarines has been already launched in St.Petersburg. The Russian Navy has ordered the first Project 677 Lada submarine. The second one - the Amur-1650, is constructed for export. With its lower displacement level, the Amur-type submarine will have even higher combat efficiency and considerably lower noise level, which is characteristic of the latest advanced technologies, implemented by the Russian submarine-building industry. The Amur-type submarines will be export-offered to the countries already operating the Project 877 and 636 submarines.

Along with the general move for modernization of its Navy, China plans to build its first aircraft carrier in 2010. Here one can see rather mysterious developments. In April 1998 the Ukraine announced that the Agencia Turistica e Diversoes Chong Lot Limitada company of China, headquartered in Macao, won the international tender to sell the Varyag heavy-weight aircraft-carrying cruiser (45). The ship was sold for US$ 20 million, and this cost proves it will not be used as scrap metal. The cruiser has an estimated weight of 30-35,000 tons. With a US$ 150-165 per ton price for ship scrap metal, the Varyag's cost can not exceed US$ 16 million. Chong Lot proposed to tug the Varyag out of the Black Sea, through the Suez Canal and around southern Asia to Macao. The ship would get in Macao�s harbor peaceful use as a floating hotel and gambling site. Even before the deal was announced, officials in Macao had warned the Chung Lot that they would not be permitted to park the huge ship in their harbor. Moreover, it was revealed that Chung Lot does not have offices in Macao and no such company was listed anywhere in Macao.

Later the Chong Lot company decided not to sign the relevant procurement contract with the Ukrainian government. There was a suspicion that the Chinese company had acted as a dummy for China�s Defense Ministry. Allegedly, with the results of the tender getting an undesirable publicity, the Chinese party decided to quit. A very interesting moment is that Director General of the Rosvoorouzhenie company, Yevgeny Ananiev stated that the Russian part had made "appropriate proposals" to the Chinese part, as they had strong doubts concerning the ability of the Varyag's future owner to make the ship operable even for the tourists without any assistance from Russian companies, which had developed the aircraft carrier (46).

Several months later, a new piece of information came, stating that in mid-August 1998 a mysterious Chinese company has bought the Minsk, a decommissioned Russian aircraft carrier (the 20-year-old, 43,000-tonne Kiev-class carrier) from the South Korean Young Distribution company, sparking fears China may use it to boost its military might (47). The ship was sold on condition it would be dismantled for scrap metal, and not used for military purposes. Reportedly, an unknown Chinese entertainment firm promised to convert the aircraft carrier Minsk into a tourist attraction (48). This very specific aspiration to gamble in obsolete aircraft carriers looks like an attempt to acquire relevant technologies without drawing attention from the neighbors suspicious about China�s military build up.

In the wake of the Chinese Embassy bombing, Viktor Chernomyrdin, Russian President�s Special envoy for Yugoslavia arrived in Beijing on 11 May 1999. The agreement on the visit was reached in a phone talk between Russia�s President Yeltsin and his Chinese counterpart President Jiang. The two leaders discussed the situation in Yugoslavia and called NATO�s action barbaric (49). On his arrival, Viktor Chernomyrdin had talks with President Jiang and Premier Zhu on 11 May 1999. The two sides agreed that there was only one way to solve Kosovo crisis, a political one (50). They also shared the stance that principles for solving the crisis elaborated at the group of eight countries (G7 plus Russia) could be implemented only after the termination of air strikes. A preparation of the relevant resolution to be adopted by UN Security Council was also discussed. China and Russia shared the vision of the USA as the one using NATO to put under its command not only European structures (OSCE, EU), but the UN too.

There was nothing new in the political postures of the two sides. The most interesting thing is that the two countries started to adjust their stances on foreign policy issues through political consultations. Moreover, last year witnessed creation of a group for such consultations. Russia and China have been holding bilateral consultations since late 1998 on how to cope with a US proposed antimissile system to provide an antimissile shield to the United States and its allies. China proposed the working-level talks, and security experts from the foreign and defense ministries of the two countries have been meeting every two months to exchange information about the theater missile defense (TMD) system. The two countries may end up making a decision on a united approach, which could take the form of a joint request to the U.S. and Japan (51) to terminate the development of the TMD program, or even on a joint deployment of weapons system to counter the U.S. missile shield.

Reportedly, Russia was initially cool to China's proposal for talks but eventually relented in the wake of mounting disappointment with the US, when Washington ignored Moscow's calls to stop bombing attacks of Iraq in December 1998. Russia has expressed concern that the missile shield may violate the Anti-Ballistic Missile (ABM) Treaty, signed between Russia and the U.S. in 1972. Russia signed a protocol with the US in September 1997 approving TMD research as long as it does not infringe on the conditions of the ABM Treaty. Now, when the USA stated that they might quit the ABM Treaty, this became one in the chain of perceived humiliations. On its side, China opposes the TMD, as Taiwan wants to come under the umbrella, and China�s Foreign Minister Tang Jiaxuan even stated that China cannot rule out the use of force in its sovereignty claim over Taiwan should the island come under the TMD.

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The US actions against Iraq and Yugoslavia demonstrated its readiness to bypass the UN Security Council in order to conduct the policy the US administration consider appropriate. Apparently, this deprives Russia and China of the status of world leading nations, which the permanent membership in the UN Security Council gives them. There are a lot of other challenges posed by the US policy (the TMD program, strengthening ties with CIS members, "human rights" campaign) that force the two nations to seek a counterbalance to the US overwhelming might and to promote "multipolar" world. Russia�s domestic reassessment of its attitude towards the USA and the attack against the Chinese Embassy in Belgrade, which added oil to China�s national sentiments, drew them closer and closer. The two countries started to adjust their political stances along each other. Meanwhile, Russia with ailing economy has lost the last prejudice against trading energy resources and weapons, which might provide absent pillars for a sustained development of Sino-Russian relations. Respectively, emerging of a more structured bloc seems to be even more possible. Undoubtedly, the US foreign policy drives the world to a new opposition of blocs, the thing which everybody was happy to see to vanish as a result of Gorbachev�s perestroika.

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