Trump Lures Putin Away from China

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Mainstream political pundits are frothing at the mouth over Trump’s overtures to Russia.

Trump recently shocked the Western world by stating, “I think Putin will keep his word…I’ve known him for a long time now. We had to go through the Russian hoax together.”

President Trump also accused President Zelensky of “gambling with World War 3” in front of a live TV audience. The exchanges between Trump, Vance, and Zelensky were absolutely stunning. I’ll include a link to the full discussion at the bottom of this post.

Meanwhile President Putin has said he’s open to partnering with the U.S. to access trillions of dollars worth of rare minerals in newly-conquered Russian territories. Putin has generally expressed his willingness to re-open and expand trade with America.

Both countries have changed their tune dramatically over the past few months.

Why has America’s relationship with Russia suddenly changed for the better?

Part of the answer lies in the fact that Russia has essentially won on the battlefield. The ground war in Ukraine is finally approaching its conclusion.

But there’s more to the story. Back in October of 2024, candidate Donald Trump stated the following:

The one thing you never want to happen is you never want Russia and China uniting…I’m going to have to un-unite them, and I think I can do that. I have to un-unite them.

Now it’s clear why Trump is building bridges to Moscow. He aims to pull Russia closer as part of the effort to contain China.

A Challenging Task

While I understand Trump’s goal here, I believe that breaking ties between China and Russia will prove to be an uphill climb.

Over the past 5 years China and Russia have forged a tight alliance. Trade between the countries has soared.

Source: Wikimedia

China is a primary buyer of Russian oil, natural gas, and grains. Due to Western embargoes on Russian energy products, China has been able to purchase discounted oil and gas from Russia since the start of the Ukraine War.

Meanwhile, Russia has become dependent on Chinese tech, tools, cars, and other goods. Products which it previously imported from Europe and America are now produced domestically or imported from China.

The two countries also have forged deep military ties. China imports missile defense systems, jet engines, and other military products from Russia. And Russia depends on China for drones, microchips, rare minerals, and other critical defense materials.

China and Russia also frequently conduct joint military drills involving large fleets of naval and air assets.

It’s going to be hard to break this quasi-alliance. But if anyone has a chance, it’s DJT.

Trump’s Leverage

Russia has much to gain from a peace deal. If sanctions are ended, Russia will get a substantial economic boost.

Putin would no longer have to sell oil and gas at big discounts to India and China. Russia would once again be able to sell into the lucrative European and American markets. The gas pipelines into Europe alone were a huge cash cow for Putin for decades. If they open back up, that alone would make a huge difference.

Russian stocks would likely be able to trade again on international markets, after having been frozen for 3 years (more on that here). The Moscow Exchange (MoEx) index is currently trading at 3.3x earnings. That is… dirt cheap.

Being cut off from global markets has essentially crippled Russian markets. We’re going to keep a close eye on this story, because I believe we may soon get a chance to buy Russian equities at once-in-a-lifetime discounts. I’m talking about reliable cash-flow machines with yields as high as 15%.

And depending on how the peace deal goes, Russia may also be able to once again access top-end AI hardware. Since the start of the war they’ve been cut off from top-notch semiconductors, and have had to rely on third-tier equipment and smuggling.

Russia might even get back its $300 billion in stolen central bank assets.

There’s a lot on the line for Putin, so it’s easy to see why he is approaching the peace deal with such optimism.

It looks like Russia and the U.S. will finally be able to re-establish normal international relations, and that’s a good thing for the entire world. Proxy and cold wars aren’t good for anyone (except defense contractors).

But I’m still not convinced that Trump will be able to break the bonds between China and Russia. Even before the war began in 2022, the two countries were moving closer together. And now, they’re far tighter than ever before.

Trump will almost certainly be able to lessen China and Russia’s interdependence, but I’m not convinced he’ll be able to sever ties. Let’s watch and see what happens…

Stay tuned for more on this important story.

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