Did Russia just "bow to Beijing" in "opening" Vladivostok?

The arrangement dates back to 2007 and the development is a Chinese domestic de-regulation. The likelihood of Russia ceding Vladivostok to China is zero.

Radek Sikorski, a Polish Member of the European Parliament and previously Poland’s Defense Minister, Foreign Minister, and Speaker of Parliament, recently wrote in Foreign Affairs on June 20

As if bowing to Beijing, Moscow has said it will open the port of Vladivostok to Chinese transit trade for the first time in 163 years.

Similar reports are also available in mainstream media, such as Le Monde on May 26

Beijing greenlit to use Russian port of Vladivostok for its domestic trade

Approving the transportation of goods between northeastern China – which has been deprived of access to the sea since the port was forcibly handed over to the Russian Empire in 1860 – paves the way for a stronger collaboration.

Stars and Stripes, the U.S. military newspaper, reported on May 17

Russia welcomes Chinese shipping to Far East port for first time

Russia has opened the home port of its Pacific naval fleet to Chinese commercial shipping, a sign of deepening ties between the two nations amid the Russia-Ukraine war.

In case you don’t have a lot of time: they are wrong, perhaps partly as a result of runaway Chinese social media discussions as well as incomprehensive Chinese media reports. The new development is a Chinese domestic regulation change, NOT a decision by Russia. It is also not a breakthrough, as it is simply an expansion of an arrangement dating back to 2007.

Transporting bulk goods by sea is cheaper than via trucks or railways, and northeast China is a long way from China’s economic center in the east. Long story short: if the transportation time is not a big problem, then route 2 (via Vladivostok) is better than route 1 (via China’s northeastern port of Dalian), which is better than transporting the bulk goods purely on land.

But without domestic regulatory accommodation, route 2 means the goods leave China for Russia and then enter China again, and you can imagine the cost of tariffs, border checks, etc.

What China does now is simple: certain transportation via route 2 is NOT considered export-and-then-import, but technically never leaving Chinese customs supervision, as long as the goods and their carriers abide by certain rules.

（Credit: markyang, Wenxuecity)

In other words, simply put, China cut its own regulations at its border checkpoints for certain goods in leaving China and re-entering China.

In Chinese terms, it’s called 内贸外运 domestic trade by international transportation/routes. The key is the trade is legally considered domestic even though it crosses Russia.

That’s it.

The misleading accounts, both domestically and internationally, follow a notice from the General Administration of Customs of China on May 4, 2023, that 进一步拓展 further expands the scope of cross-border transportation of domestic trade goods in Jilin Province, in order to implement the strategic plan for revitalizing the old industrial base in Northeast China and promote cooperation in cross-border transportation of domestic goods through overseas ports.

Approved adding Vladivostok in Russia as a cross-border transit port for domestic trade shipments in the existing scope of domestic goods cross-border transportation services in Jilin Province. Furthermore, Zhoushan Yongzhou Container Terminal in Zhejiang Province and Zhapu Port in Jiaxing will be designated as entry ports for domestic goods cross-border transportation.

During the cross-border transportation process, transport companies must take effective measures to prevent the spread of animal and plant diseases and the introduction of foreign species.

Other matters shall be governed by the Announcement No. 42 of 2014 issued by the General Administration of Customs.

The 进一步拓展 further expands and the reference to the 2014 announcement makes it abundantly clear this is simply NOT new.

The 2014 announcement, made on May 30, 2014, says

In order to implement the strategic plan for revitalizing the old industrial base in Northeast China and promote cooperation in cross-border transportation of domestic goods through overseas ports, the General Administration of Customs decided to further expand the scope of the pilot program for cross-border transportation of domestic goods. The relevant announcement is as follows:

Allow grain, timber, copper, and other certified commodities to be included in the scope of cross-border transportation of domestic goods in Jilin Province. Grain and copper will be transported in containers, while timber will be transported in bulk.

In addition to the existing Shanghai and Ningbo ports, add Huangpu, Quanzhou, Shantou, and Yangpu ports as entry ports for cross-border transportation of domestic goods in Jilin Province.

Allow cross-border transportation enterprises engaged in domestic goods transportation in Heilongjiang and Jilin provinces to use return containers to transport goods other than controlled goods requiring export permits and goods subject to export duties. Return containers will be sealed by customs at the entry ports for cross-border transportation of domestic goods and transported back to the exit ports for cross-border transportation of domestic goods along the designated routes.

Other matters shall still be governed by Announcement No. 5 of 2007, No. 49 of 2010, No. 21 of 2011, and No. 61 of 2013 issued by the General Administration of Customs.

The highlighted words mean even this 2014 announcement was not the beginning. So let’s go back to Announcement No.5 of 2007

In response to Heilongjiang Province's request for the transportation of domestic goods from Russia to China's southeastern coastal areas via maritime routes, the General Administration of Customs permits reputable enterprises registered with customs in Heilongjiang Province to partake in the cross-border transportation of domestic goods.

Suifenhe is designated as the exit port during the pilot phase, while Shanghai, Ningbo, and Huangpu were designated as the entry ports. The Russian ports involved in the transit were Haishenwai (Vladivostok), Dongfang, and Nakhodka.

Now it’s very clear as early as 2007, China greenlit Vladivostok as a transit point for Chinese domestic trade.

How significant is the new development?

A report from credible Chinese media, such as China’s leading business magazine Caixin, says

The land transportation distance from Jilin to the seaport has been greatly reduced.

….

A senior freight transporter in Shanghai told Caixin that in the past, domestic trade goods from Northeast China were mostly shipped from Yingkou or Dalian [route 1] and then transported to destinations such as [southern China’s] Xiamen and Guangzhou.

However, this method is more convenient for the cargo in Liaoning Province. For Jilin and Heilongjiang, the distance to Liaoning ports generally exceeds 1,000 kilometers, resulting in higher transportation costs. In comparison, the distance from Suifenhe [of Heilongjiang] and Hunchun [of Jilin] to Vladivostok is only about 200 kilometers, significantly reducing the cost of land transportation.

The person mentioned that by using overseas ports for southbound transportation of goods from the north, not only are costs reduced, but it also helps strengthen the connectivity of industrial and supply chains between China and its neighboring countries.

A professor from the School of Economics and Management at Harbin Institute of Technology mentioned to Caixin that apart from cost savings, routing Northeast China's cargo through overseas ports for southbound transportation can provide a long-term solution to alleviate the bottleneck in the transportation of goods at [China’s domestic] Shanhaiguan Railway, especially for bulk cargo traders.

However, the freight transporter mentioned that in the short term, a major contradiction is that the major ports for transporting goods from China to Russia are experiencing long-term congestion due to a sudden increase in cargo volume. Despite the proximity, it is not easy to transport domestic goods to Vladivostok.

Is this going to somehow work magically? If so, you probably should have heard of some magic between 2008 and 2023, given this is something that’s been tried for over a decade.

Finally, perhaps in response to runaway reports and social media reactions, the General Administration of Customs of China issued a specific clarification on May 15th

On May 15th, when asked about the transshipment business of bulk goods from Northeast China through neighboring country ports, the head of the Port Supervision Department of the General Administration of Customs stated that in order to reduce the logistics costs of southbound transportation for bulk goods in Northeast China, China has allowed goods from this region to be transported to adjacent country ports for transshipment before entering southern ports of China since 2007, following the international practice of transshipment. China has accumulated years of practical experience in international transshipment customs operations.

In 2007, the General Administration of Customs issued an announcement allowing goods from Heilongjiang Province to be involved in international transshipment business through various overseas ports, including the port of Vladivostok in Russia. The related business has been running well.

In May 2023, the General Administration of Customs announced the inclusion of the port of Vladivostok in Russia as an additional overseas transshipment port for Jilin Province. This cooperative model reflects mutual benefits among relevant countries. The General Administration of Customs will actively support the development of this business based on continuous monitoring and evaluation.

Too bad this went largely unnoticed, including by the three sources at the beginning of this newsletter.

Last but not least, Radek Sikorski, the Polish MEP and previously Defense Minister, Foreign Minister, and Speaker of Parliament, also raised an interesting point

The Chinese government has kept quiet about it, but Radio France International reported in March 2023 that China’s Ministry of Natural Resources had issued new guidelines for maps, requiring the addition of old Chinese names alongside Russian geographical names in eight places along the Russian-Chinese border, including Vladivostok, which should now be referred to as Haishenwai.

Now we are at it, this newsletter has dutifully translated the official, public documents of China’s General Administration of Customs, which referred to the city as Haishenwai (Vladivostok) in 2007 and Vladivostok twice in 2023.

a very good report from the BBC Chinese-language service included a fair comment

"The reactions on social media reflect a certain historical sentiment among some Chinese people towards the city of Vladivostok, and this can be understood," explained Zhang Xin, Deputy Director of the Russia Research Center at East China Normal University. However, in reality, negotiations between China and Russia regarding territorial boundaries have been ongoing for decades, starting from the Soviet era. It was not until the beginning of this century that breakthrough progress was made, resulting in the comprehensive delimitation of the China-Russia border and the resolution of territorial disputes. This represents a significant advancement in bilateral relations. Therefore, in terms of legality and politics, there may be very limited scope in retrospectively determining the historical ownership of Vladivostok.

"As for Russia further ceding Vladivostok, including military presence, or even as some netizens suggest, returning it to China, I believe the likelihood of that happening, in reality, is zero," said Zhang Xin.