By Joseph Dobbs, European Leadership Network
Russian aggression towards Ukraine this past year has seen Vladimir Putin, the Russian president, lambasted by Western leaders. China has desisted from such criticism and instead signed two major gas deals worth hundreds of billions of dollars, co-operated in establishing a new development bank, and conducted joint military exercises. For some, Russia and China’s co-operation demonstrates their potential to challenge the global order. But in reality Russia’s pivot east faces too many hurdles to represent a viable alternative to working with the West.
Russia and China have much in common. Both states are increasingly nationalistic and share a common perceived threat of Western containment. In Russia’s case this threat comes primarily from the potential expansion of the North Atlantic Treaty Organisation (Nato). China’s perception of US containment strategies derives mainly from the American military presence in East Asia. Leaders in Moscow and Beijing have both watched with unease as the West supported the Arab Spring and the so-called “colour revolutions” that rocked the likes of Georgia, Ukraine and Kyrgyzstan. Read more
By Vladimir Kolychev, VTB Capital
Russian President Vladimir Putin announced this month that Russia should aim to sell its oil and gas for roubles globally, because “the dollar monopoly in energy trade was damaging Russia’s economy”.
This was the clearest indication yet that Russia is serious about its plan to shift away from using the US dollar. Western sanctions against Russia have accelerated this process and encouraged Russia’s close economic alliance with China. Some may question this move but for Russia, a shift away from the dollar makes perfect sense. Read more
As European leaders threatened yet tougher sanctions to punish Russia for its aggressive policies in Ukraine on Monday, Vladimir Putin was thousands of miles away in oil rich east Siberia making friendly with a visiting Chinese official.
“On the whole we are very careful about allowing our foreign partners in, but of course for our Chinese friends there are no limits,” Russia’s president said.
China is emerging as the winner in the Ukraine crisis even as Russia’s relations with the US and the European Union go from bad to worse. It has secured a huge gas deal with Gazprom and is making strides towards greater involvement in the Russian oil and gas production. Read more
Rosneft has raised the stakes in its campaign to strip Gazprom of its monopoly over Russian gas exports. In a sharply worded statement on Tuesday, Russia’s state oil company threatened to take Gazprom to court unless it opened up a planned pipeline to China to rival gas producers.
Gazprom has been gearing up to build the Power of Siberia pipeline since signing a $400bn gas export contract with China in May. Linking vast Gazprom controlled gas fields in east Siberia with the Russian Pacific, the 4,000km pipeline will feed gas to domestic consumers and to the Chinese border. Read more
By Andrew Foxall of The Henry Jackson Society
Russia may have completed decade-long negotiations to sell gas to China in a deal worth US$400 bn over the next 30 years, but the agreement barely begins to paper over the all-too-obvious cracks in Russia’s weakening economy. Moscow’s stock market reacted positively to the deal, but it is down 4.8% year-to-date. Elsewhere, all other indicators of economic prosperity in Russia have decreased since the start of 2014.
Russia is more dependent on the global economy than it ever has been. And it seeks even greater dependency – as President Putin made clear in his opening remarks to the St Petersburg International Economic Forum earlier today. On the one hand, dependency brings with it obvious benefits. On the other, it leaves a country much more open to the vagaries of investor sentiments and perceptions of political risks as well as expected economic returns. Read more
By Ben Aris of bne
The shouting match between west and east continues but the Russian stock market is up sharply this week, as President Vladimir Putin travels to China where he is expected to sign a string of big investment deals. Read more
Russia’s Sukhoi Civil Aviation has reached a preliminary agreement to supply up to 100 Superjet-100’s to China in what would be by far the biggest sale yet of its flagship regional passenger jet. Apart from swelling Sukhoi’s order books, a Chinese deal could help Russia circumvent possible western sanctions.
Sukhoi Civil Aviation signed a memorandum of understanding (MOU) to sell up to one hundred Superjet-100s to O’Bay Aircraft, a privately held airline based in Henan province in north China. As part of the deal, the two sides are considering a joint assembly venture to make SSJ-100’s in Zhengzhou, the capital of Henan province. Read more
The battle between Russia and Belarus over potash assets that has roiled global fertiliser markets this year has not thrown Moscow-based Eurochem off track. The Russian agrochemicals group is expanding its international reach with a joint venture to produce fertilizers in China.
Eurochem announced plans on Thursday to enter a joint venture with Toronto-listed Migao Corporation, the China-based specialty potash fertilizer manufacturer, that will open the door to the highly prospective Chinese market for crop nutrients. Read more
Scheme of the ESPO oil pipeline route | Source: Centre for Eastern Studies
Rosneft’s plans to step up oil deliveries to China will strain Russia’s new eastern oriented export pipelines to the limit. A preliminary deal struck on Monday will see Kazakhstan come to the rescue shipping oil on Rosneft’s behalf through its own pipeline to the Chinese frontier.
It’s a set back for Transneft, but the Russian state oil pipeline monopoly will probably have to lump it. Read more
Rosneft has agreed to allow CNPC to help develop east Siberian oil resources in a move that underscores deepening energy ties between Russia and China. Coming on the eve of an official visit by Dmitry Medvedev to Beijing, the deal provides a positive backdrop for talks about a long delayed contract for Gazprom to supply gas by pipeline to China.
Rosneft and CNPC signed a memorandum on Friday calling for the creation of a joint venture to explore and produce oil in east Siberia. Development of Srednebotuobinsk, a world class oilfield sitting close to the East Siberia Pacific Oil export pipeline (Espo), will serve as the foundation of the future venture, Rosneft said in a statement. Read more
The $55bn sale of BP’s troubled Russian partnership, TNK-BP, to Russia’s Rosneft has created a new oil major – from size, that much is clear.
But what will be the effect on trade? Harder to say, but the International Energy Agency has mapped out a few scenarios in its April report. Some would have a big impact on oil supplies to other countries. Read more
A three day visit to Moscow by Xi Jinping got off to a flying start on Friday with the signature of a clutch of agreements that will deepen energy ties between Russia and China.
As the Chinese president told reporters after meeting Vladimir Putin in the Russian capital, “We did not come to see you for nothing.” Read more
Xi Jinping has picked Moscow as the first foreign capital he will visit as Chinese president, raising hopes that Russia and China will finally agree the terms of a gas supply deal that has been in the works for more than six years.
Gazprom sees the fast-growing Chinese market as critical to its plan to globalise Russian gas trade, but has so far been unwilling to reduce gas prices enough get China to sign up for supplies. But with rival Russian gas producers suddenly courting China, Gazprom may have to cave in. Read more
By Sergei Karaganov
Many traits in Russian contemporary development cause me grave concern. Systemic corruption, for example; weak institutions; the manipulation of politics by an authoritarian leadership; and the economy’s excessive dependence on energy exports.
But as a seasoned observer, who witnessed Russia surviving several crises, I am tired of panicking. I believe that Russia has a future as long as there is at least some political and economic modernization. And this future depends on international cooperation, not least with the other Brics. Read more
It’s not surprising that energy experts have poured cold water on the Kremlin’s latest efforts to promote a plan to export Siberian gas across the Korean peninsula.
Relations between North and South Korea were bad when the project was first floated in 2008 and have deteriorated since then. However, there is speculation that Dmitry Medvedev, the Russian president, who held gas talks with Kim Jong-il, his North Korean counterpart, this week, was sending a message to China to hurry up and clinch a gas deal with Russia or risk seeing supplies diverted elsewhere. Read more