Sunday 18 March 2012

The Axis of Energy

Tamsin Lee-Smith

Russia is the world's largest hydrocarbons producer, China is the worlds largest consumer of these commodities businesstoday

In a recent presentation to King’s College London’s Russian Security and Eurasian Research Group, Professor Roland Dannreuther advocated the importance of energy to the geopolitics of the 21st century. Energy is not just an instrument of national power in itself, he argued. It has the capacity to underpin other forms of power: military and political as well as economic and technological. With global demand set to increase by over 50% in the next 23 years the relationship between producers and consumers will become even more important.
Nowhere is this perspective more significant than in the relationship between China and Russia at the moment. With its vast reserves in natural gas, oil and coal Russia is the world’s largest hydrocarbons producer.  China by contrast is the world’s fastest growing consumer of these commodities. Their rapid economic growth has fuelled energy demands that outstrip domestic supplies. Chinese oil imports alone have doubled in the last ten years and by 2020, they will have over-taken the United States.

The producer-consumer affair between these great powers should be strengthened by their proximity. The transfer of commodities across their 4200km border should be prone to fewer risks than long-haul journeys from the Middle East. As former CIA energy analyst Erica
Downs says, Russia and China make a
perfect match.

These sentiments have certainly been expressed by the countries respective leaders. ‘Never before have our ties been characterized by such a high level of mutual trust,’ declared the then President Medvedev in 2010. The occasion was a meeting with his Chinese counter-part Hu Jintao, where they discussed some fifteen commercial deals including the construction of oil and gas pipelines.

Vladimir Putin and Wen Jiabao RT
 However, this courtship is certainly not without tensions. One agreement that would see Gazprom, the Russian state gas monopoly, supply 68 billion cubic meters of gas annually for 30 years to the Chinese National Petroleum Corporation (CNPC) has stalled. In fact, Gazprom and CNPC have been in talks over the construction of a pipeline since 2004, and a final deal has yet to be struck. China is said to be prepared to pay only $100 per cubic metre of gas less than the Russians demand.


For all the tones of ‘Neighborliness, Friendship and Cooperation’, there has been a lingering historical distrust between the two nations. This is not helped by their increasing competition for influence in Central Asia. China’s use of supply routes through Turkmenistan and Kazakhstan constitute an especially sore issue for Russia. As with Ukraine, Moscow still believes that Central Asia should be part of its empire.

Chinese energy companies have also forged recent partnerships with producers in Congo, Equatorial Guinea, and Nigeria. The problem here lies not in diversification, but the fact that Russia is thought to need China more than China needs Russia. The better their cooperation with the Chinese, the stronger their negotiating power in Europe.

Russia and China’s recent vetoes at the UN Security Council may signal their shared interest to counter Western hegemony. But China's forays into Central Asia and Africa are a constant reminder to Russia that their relations vis a vis each other will be less cooperative. Oil
and gas are no substitutes for water when it comes to pouring liquid over troubles.

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