Russia and China boost energy ties

Deputy Prime Minister Igor Sechin will spend the weekend in Beijing, at the formal invitation from the Chinese government.

The prospect of closer energy ties between Russia and China frightens the West, with the EU fearing a reduction in Russian gas supplies, and the US worried about the strengthening of the two countries’ geopolitical relationship.

“Russia is a major supplier of energy resources and, to some extent, technology, while China is a major consumer of energy resources, and this is what determines the high potential of the two countries’ cooperation,” Vladimir Paramonov, representing the Cross-Border Cooperation Association in the Republic of Uzbekistan, told RBC Daily.

Today, China is the second largest consumer of energy in the world, after the United States, with Chinese oil and gas consumption set to rise further over the next few years. The country has long been preparing for a shortfall of these resources. There are plans to reduce energy consumption by 20 percent per GDP unit, but experts warn that these measures alone could be insufficient, and Beijing is looking to its Central Asian neighbors and Russia, which have the necessary resources.

Russia’s increasing energy exports to China would mean a lessening of the supplies to the EU, which makes Moscow’s dialog with Beijing a tool to bolster Russia’s political weight in Europe. “This is an alarming sign for Washington as Russian supplies would ease China’s reliance on American resources. Moreover, an energy alliance with China would strengthen Moscow’s position in Europe,” Konstantin Simonov, General Director of the Center for Political Studies, told RBC Daily. Energy cooperation would also foster closer political ties between Russia and China, helping to ease friction over the Shanghai Cooperation Organization and the Collective Security Treaty Organization, and boosting the two countries’ international standing.

Meanwhile, strange as it may seem, one of the key obstacles impeding the Russia-China energy alliance, lies within Russia itself. “Our political elite are divided over China. Some political groupings are not interested in reorienting Russia’s policy from the West to the East. And Igor Sechin is one of the few people in the country who lobbies for a political alliance with China,” Simonov said.

Indeed, foot-dragging in Russian-Chinese talks to extend the East Siberia-Pacific Ocean pipeline to China can largely be blamed on Russian companies, while Beijing has repeatedly manifested its interest in the project. “Russia is also unhappy with the existing format of economic relations with China, including the fuel and energy sphere, where the scheme ‘raw materials from Russia in exchange for ready products from China’ is very humiliating for Moscow,” Paramonov stressed.

Yet, despite all their differences, Russia and China will have to build relations based on their common long-term interests. “Russia, China and Central Asian countries have a common long-term interest: economic development of Eurasia,” which requires the political will of all parties, according to Paramonov. Moscow and Beijing will have to play the key roles, setting an example for other countries in the region. The powerful Russian-Chinese alliance could squeeze both the US and the EU out of Central Asia.

Source: RosBusinessConsulting - July 25, 2008.