May 19, 2014
China Has Russia Over a Barrel
Chinese officials are notoriously tough negotiators, especially when they know you're in a pinch. Just ask Gazprom, Russia's natural gas giant, which is on the brink of capitulating to Beijing on a massive energy project, 10 years in the offing. Gazprom and China National Petroleum Corp., one of China's oil giants, are gearing up to sign a 30-year multibillion-dollar deal to send natural gas from Russia to China through a colossal new pipeline network.
A week before Russian President Vladimir Putin was set to meet his Chinese counterpart, Xi Jinping, in Shanghai on May 20-21, Russia's deputy energy minister described the deal as "98 percent ready." However, a Chinese deputy foreign minister was far cagier, noting in mid-May: "We are still exchanging views with Moscow, and we will try our best to ensure that this contract can be signed and witnessed by the two presidents."
On the surface, this seems the kind of win-win outcome that Chinese diplomats regularly tout as the solution to nearly every international problem. Russia sits on the world's largest natural gas reserves, much of it buried in the Siberian hinterland north of its border with China. As the world's largest energy consumer, China is an obvious partner for Russia's economy, in which natural resources make up 70 percent of exports and over 50 percent of government revenue.
But energy trade between Russia and China is surprisingly limited, with only 9 percent of China's oil imports and 1 percent of its gas imports coming from Russia. China is eager to increase and diversify its energy supplies away from overreliance on expensive and volatile sources in Africa and the Middle East that have to pass through precarious sea lanes in the Strait of Hormuz and the South and East China seas. (Beijing really does worry about all the talk among U.S. strategists on how to blockade China's energy supplies in the event of armed conflict.)
Yet China has been unwilling to pay the premium prices that Russia has traditionally charged in Europe. Now, with Russia's worsening economy and an increasingly competitive Asian energy market, Beijing holds most of the cards -- and time is not on Moscow's side.
More from CNAS
-
‘The U.S. Has Got to Get Involved’: Townsend on NATO Boosting Polish Air Defences
Video
Jim Townsend, adjunct senior fellow at the Center for a New American Security, discusses what actions NATO countries need to take amidst Russia’s incursions of NATO airspace.W...
By Jim Townsend
-
Commentary
Defense / Transatlantic Security
Europe’s Delusions Over What It Means to Deter RussiaToday’s European leaders are in a Singapore trap, crafting a training mission designed to signal resolve rather than achieve an actual military objective....
By Franz-Stefan Gady
-
The Wrong Way to Do Diplomacy With Russia
Commentary
In fact, the summit helped Putin legitimize Moscow’s grievances, giving Russians who might doubt the wisdom of the invasion reason believe that it was, as Putin promised, just...
By Celeste Wallander
-
Commentary
Indo-Pacific Security / Transatlantic Security / Middle East Security
A Project for a New World OrderIndeed, the gathering in Beijing suggests that the axis, rather than withering following the war in Iran in June, has momentum....
By Richard Fontaine & Andrea Kendall-Taylor
