Image Courtesy: NS Energy
Article 02/2020
The year 2019 marked the 70th anniversary of diplomatic bilateral relations between Russia and China. Cementing Sino – Russian bond, “Power of Siberia” gas pipeline — a massive cross-border undertaking not only central to China’s energy security but also for sustaining special ties between Beijing and Moscow was remotely inaugurated by Chinese President Xi Jinping and Russian President counterpart Vladimir Putin. This ‘Emblem of Strategic Rapport’ gas pipeline links one of the most remote eastern parts of Siberia in Russia with far-flung Yangtze River delta in the Shanghai region of China. The colossal physical manifestation traverses three Russian constituent entities, namely the Irkutsk and Amur Regions and the Republic of Sakha (Yakutia) covering 8,000 km in total length, with 5,111 km inside China, passing through nine provinces and municipalities. Under the agreement, Russia is set to deliver 1 trillion cubic meters of natural gas to China over the next 30 years. This 30-year project is anchored by a $400 billion gas deal.
Under the project, gas is being sourced from Chayandinskoye and Kovytka fields in eastern Siberia of Russia and is then piped to Blagoveshchensk — the last town on the Russian side of the border. From there, it is tunnelled under the Amur River, before entering Heihe on northern China finally to Shanghai. This marks the first cross-border gas pipeline between the world’s largest gas exporter Russia and largest energy importer China, adding an eminent eastern dimension to Russia’s energy matrix. The strategic intent is to pump natural gas into China sourced from Russia’s far-flung eastern regions (Yakutia), thereby providing additional opportunities for the acceleration of socio-economic development in its underdeveloped eastern regions primarily through petrochemical infrastructure building, gas grid expansion including advancements in ‘gas processing’ and ‘gas-based chemical facilities’.
For China, the significance of the pipeline project lies in the fact that it will cater to industries situated in the northern part. The strategic calculus also allows China the world’s largest energy importer and consumer to move away from coal to cleaner alternatives and help secure its demand for energy security together with bolstering special ties between Beijing and Moscow. Russia is also home to the largest reserves of natural gas on the planet which is 20% of the global total. The pipeline is a hedge against a potentially shrinking market in Europe, due to souring diplomatic relations. Geopolitical analysts observe that the brand new pipeline is an emblem of closer energy integration in Eurasia.
Emerging Sino – Russian Cooperation: The Political Power of Gas
Modern day Russia was built on hydrocarbons. The bedrock of its economy since the 1960s have been gas pipelines that run to Europe. While demand for Russian gas in Europe has risen in recent years, prices have fallen crudely. Pressure from Western sanctions led by the US due to Russia’s annexation of Crimea in 2014 – is accelerating the Moscow’s pivot away from the European Union towards the energy hungry East. Many EU countries, fearful of Russian actions in the global geopolitical landscape compounded by fears of US sanctions, want to reduce their reliance on Russian hydrocarbons. This explains Russia’s ‘Hydrocarbon Pivot towards the East’. Russia is heavily dependent on its ‘Petroeconomy ’, this pipeline will add to the value of its exports. Adding to it is Moscow’s strategy of positioning itself as a ‘Strategic Hydrocarbon Node’, catering to gas customers to its west and its east. Kremlin is also set to commission two other landmark energy projects — the ‘Nord Steam 2’ undersea Baltic gas pipeline to Germany and the ‘TurkStream’ pipeline to Turkey and Southern Europe. Together these initiatives show a strategic effort by Russia to limit gas transit through Ukraine and diversify its customer base.
The success of this pipeline hinges on the traditionally fickle relationship between Beijing and Moscow. Russia using ‘Hydrocarbons’ as a foreign policy tool through these pipelines is ‘Geo-Economic’ leverage that it is trying to pull taking advantage of the strategic opportunities. At the surface, such optics seems to be good but the downside of such investments emanates a risk and price to be paid. A slump in the global energy market coupled with lower than estimated demand from the Chinese side could see a significant decrease in revenues for Russia, which could hurt the new-found bonhomie between Russia and China. China with alternate sources of supply available in Asia and the Middle East holds the cards in this ‘Great Gas Gamble of the East’, thereby making its strategic equations vulnerable to fluctuations with Russia. When oil and gas prices fall Russia’s strength as one of the key suppliers of ‘Hydrocarbons’ will see a downward spiral, thereby trapping Russia with circumstances beyond its control and giving China an upper hand in strategic leverage over Russia. Russia is yet to see a well-developed diversified economy and is heavily dependent upon ‘Hydrocarbons’ as it accounts for 60 percent of its exports and contributes nearly 50 percent of its federal budget. With its southern neighbour’s economy, much larger and advanced China is the senior partner with the leverage to pull the cords.
Further areas of growing Sino – Russian Cooperation:
In the past, Russia exhibited hesitant in selling its most advanced weaponry to China but post 2014 Russian arms exports to China have grown both quantitatively and qualitatively. Recent Russian sales of its Sukhoi-35s fighter jets and S400 surface to air missiles to China is a sign of Russia overcoming such strategic hesitations. Kremlin has also formally cleared its advanced Su-57 fifth generation fighter aircraft for export to China.
On September 2018 ‘Vostok’, the biggest Russian military exercise since the end of the cold war was held in Russian Far East Siberia. It involved participation from China in a Russian exercise on a large scale.
In the Shanghai Cooperation Organisation (SCO) both Russia and China is widely considered as ‘Alliance of the East’. The continuing economic sanctions directed against Russia led by the US, the U.S. – China rivalry in trade and commerce, Western censure of China’s actions in Hong Kong, the US – Iran rivalry are bringing both Russia and China much closer than ever, with a common objective to create an alternative to ‘Western-led Global Order’.
The Eastern Economic Forum 2018, an international forum held in Russia each year to encourage foreign investment in the Russian Far East, saw significant participation from China. The delegation included representatives of major Chinese companies, such as Alibaba, Asia Fortune Forum, Bank of China, COFCO, CAMC Engineering, State Grid Corporation, China Railway International Group, etc. It was also the first time Chinese President Xi Jinping has attended the annual EEF.
Both Russia and China are part of BRICS and its other institutions such as the New Development Bank which is often perceived to be a counter to Western institutions like the World Bank. This conveys a convergence based out of convenience and the result of mutual and deep-seated distrust of the Western-led global order.
In an era of ‘Geo-Political flux’ and complex web of inter-dependence moving towards an increasingly ‘Multipolar’ world order and the newly laid gas pipeline between Russia and China is set to positively impact the dynamics of their relationship in the foreseeable future.
(Balasubramanian C is a Research Officer at the Chennai Centre for China Studies. He has completed his Masters in Public Administration and Bachelors in Commerce from Madras University. His areas of interests include Sino –Russia Relations, Indian Ocean Region, Geo-economics, Security and Strategic Studies. The views and opinions expressed in this article are those of the author)
