Russia_China_gas

Significance of “Power of Siberia” in Russia-China Relations

Abhishek Mohanty

Abhishek Mohanty is a Fellow at the ERA Institute. He is currently pursuing M.A. degree at the Russian Academy of National Economy and Public Administration.

The strategic partnership between Russia and China is one of the significant axes of contemporary world affairs, where energy cooperation has contributed immensely to the development of bilateral ties. With the official launch of the “Power of Siberia” gas pipeline in December 2019, mutual cooperation has gained substantial momentum. While Russia has been the principal oil and gas supplier to European countries in the 21st century, the Power of Siberia is the first cross-border pipeline between Russia and China, adding impetus to Moscow’s efforts to boost trade with eastern countries. This article seeks to analyze the motivations for the development of this pipeline and how it will shape the future Russia-China relations.

In 2012, Russian President Vladimir Putin in his election article, “’Russia and the Changing World’ wrote about catching the “Chinese wind” in the “sails” of the Russian economy. The inference was quite evident. Russia should exploit the prospects emerging from deeper political and economic cooperation with China. This concept seemed to be relevant when Russia hosted the Asia Pacific Economic Cooperation (APEC) for the first time in Vladivostok in September 2012. Nevertheless, at that time there were no anticipations that China would substitute the Western investors. Russia was interested in expanding its economic cooperation with the non-western world and sought to strike a balance.

However, in 2014, after the annexation of Crimea and the subsequent sanctions from the US and European Union, Russia accelerated its economic cooperation with non-western countries, especially China. In May 2014, Russian President Putin paid an official visit to China, where he signed more than 50 agreements in several economic and technical sectors. Out of them, the gas deal between Russian and Chinese oil giants Gazprom and China National Petroleum Corporation (CNPC) was prominent. Both sides agreed to the joint construction of a 3,000 km-long Power of Siberia gas pipeline with around $400 billion investment and $25 billion advance payment from China.

The strategic gas supply agreement emphasized Russia’s intent to enter into China’s rising market for gas, while expanding its gas exports away from Europe that accounts for roughly two-thirds of Russia’s total gas exports. Likewise, China saw Russia, the country with the world’s biggest natural gas reserves, as a long-term strategic partner for sustaining its energy security. It also found piped gas from Russia as a lucrative opportunity compared to the expensive liquefied natural gas (LNG) imports. The Power of Siberia pipeline at present receives gas supply from the Chayandinskoye gas field situated in the Yakutia region of Russia.

The other strategic intent of Russia is to offer additional opportunities towards the speeding up of socio-economic development in its underdeveloped Siberian and far-eastern regions, mainly through petrochemical infrastructure development and gas grid expansion including enhancements in gas-based chemical facilities and gas processing units. Interestingly, after establishment of Ministry for the Development of the Russian Far East and Arctic in 2012, the then President Dmitry Medvedev had cautioned about the risk of Russia’s Asian regions turning into a mere “resource appendage” of Beijing. Due to the post-2014 shift in Russian geopolitical attitudes, those uncertainties seem to have faded away.

In the energy sector, Russia has overtook Saudi Arabia as China’s biggest oil supplier and Gazprom — Russia’s largest gas company — plans to more than triple gas deliveries to China through its new pipelines, amounting to nearly half of existing Chinese demand. Bilateral projects like the polymer plant in Amur are being prefigured by both sides, but previous initiatives, such as a water-bottling plant on Lake Baikal and logging projects in the Siberian forests, have faced protests in Russia. And while Russia-China trade fell in the first half of the year due to the global economic slowdown, bilateral trade had scaled in 2019 to a record of more than $110 billion. In December 2019, Russia began transporting natural gas to China through the Power of Siberia pipeline and President Vladimir Putin in March 2020 announced his intentions to initiate the construction of a second pipeline, Power of Siberia 2.

According to Artyom Lukin, professor at the Far Eastern Federal University, “In his February 2019 annual address to the Federal Assembly (the Russian parliament), President Vladimir Putin put Asian countries first in the foreign policy section of the speech — ahead of Europe and the United States — and spoke in positive terms about Russia’s relations with China, India, Japan and ASEAN. Putin’s statement is another indication of what has come to be known as Russia’s “turn to the East”. It is quite evident that Russia-China economic cooperation will grow relentlessly, until China disregards the western sanctions. Nevertheless, Russia will also try to get involved deeply with other Northeast and Southeast Asian countries and seek fresh investments for the development of Siberian and Far East regions, as the Kremlin will certainly not want to burden itself with Chinese overdependence.

This article is produced by the Eurasian Research and Analysis Institute, Inc. (ERA Institute), a public, 501(c)(3) nonprofit institution devoted to studying Eurasian affairs. All views, positions, and conclusions expressed in this publication should be understood to be solely those of the author(s).

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