Energy alliance for better future
Dmitri Medvedev&’s first visit to China as Russia&’s prime minister will further cement Beijing-Moscow energy relationship.
This alliance rests on a simple formula: substantial Chinese credits for long-term Russian energy supplies. Thus, cash-rich China buys a measure of energy security, and Russia gets much-needed cash for its budget. In the current geopolitical setting, however, this essentially pragmatic relationship acquires features of an energy alliance.
Since 2009, China has been Russia&’s biggest trading partner.
Russia&’s advantage as an energy source, in Chinese eyes, is that its supplies cross into China over land, and directly.
Russian-Chinese energy deals are complex. Beijing places a big order with Moscow and expects to get a discount.
This has worked for oil, with Rosneft concluding a series of agreements with China National Petroleum Corporation, and now also with China Petroleum and Chemical Corporation (or Sinopec) ~ in an attempt at in-country diversification of partners.
It has not yet worked for gas. And although a final agreement on the gas price is expected before the end of this year, it has been "imminent" since mid-2011.
Also, China has been able to engage Russia&’s largest private gas producer, Novatek, in a long-term deal. The deal, concluded last June, marks a new milestone.
Russia, until recently reluctant to allow China&’s State-owned companies direct access to its energy resources, has softened its stance.
The alliance is a product of growing bilateral relations, but it also reflects development in the global energy market.
Non-energy geopolitics also plays a role. Since being elected Russia&’s president in 2012, Vladimir Putin has focused on Eurasian integration.
Putin has also focused on the Russian Far East and Siberia, and has been experimenting with different bureaucratic models to launch its development.
Through the Far East, Putin is looking for an opening to Asia and the Pacific, which, because of its dynamism, he regards as more important than Europe.
In this context as well, China is Russia&’s key partner.