The Journal of Turkish Weekly: Limits of China and Russia Energy Deal
Increasing tensions between Russia and the EU led Russia to prioritize developing its relations with Asian countries. Russia has recently increased its dialogue with Japan, South Korea, India, Indonesia, Pakistan and China, and has signed various agreements in different sectors. Among these Asian countries, extending relations with China is one of the most vital goals because China is the biggest trade partner of Russia, with $88bn in trade volume in 2014 and hopes of an increase to $100bn in 2015. Moreover, the Russian economy largely depends on the export of energy resources, and China is most likely to be Russia’s biggest consumer for future gas deliveries due to China’s increasing energy consumption. Also, China is the only country in the region that can provide financial support to the Russian economy, which has recently been experiencing recession due to western sanctions. Although Russia favors selling gas to Europe, there are economic and political limitations that Putin discussed at the St. Petersburg International Economic Forum: “We have to admit that energy consumption in Europe is moving slowly due to low economic growth rates, while political and regulatory risks are increasing.” To further explain Russia’s desire to expand relations with China, Putin said “given these circumstances, our desire to open up new markets is natural and understandable.”
Energy agreements will link two giants
As a result of this economic rapprochement, Russia and China signed two mega energy agreements in last year that will help Russia to diversify its export destinations. The first was a $400bn mega deal, the biggest single trade agreement in history, which was signed between the China National Petroleum Corporation (CNPC), China’s largest energy company, and Russian energy giant Gazprom in May, 2014. According to the agreement, Russia will provide 38 bcm of gas to China for 30 years starting in 2018. The deal includes the construction of a pipeline called “Power of Siberia” that will transfer gas from eastern Siberia to northern China, Beijing-Tianjin-Hebei metropolitan area, and the Yangtze River Delta in the east. This new infrastructure will also make gas available for Russia’s Pacific ports. Thus, Russia could provide gas not only to China but also to Japan, South Korean and other Asian markets. MORE