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
-
Friends with Benefits: How Russia’s Opportunistic Partnerships Stymie Nonproliferation Efforts
Commentary
To respond to Russia’s increasing disregard for the nonproliferation regime, the United States and its allies must raise the costs of violation....
By Nicholas Lokker
-
Can Ukraine and Europe Win Alone? with Gustav Gressel and Franz-Stefan Gady
Podcast
The Trump administration began negotiations with Russian officials in Saudi Arabia last week, and its exclusion of both Kyiv and its European backers from the table cast doubt...
By Andrea Kendall-Taylor & Jim Townsend
-
‘The Trump Administration Is Doing a Lot of Putin’s Work for Him,’ Says Former CIA Analyst
Video
Bianna Golodryga speaks to Andrea Kendall-Taylor, Senior Fellow at the Center for a New American Security, about talks between the US and Russia in Saudi Arabia.Watch the full...
By Andrea Kendall-Taylor
-
China’s Role in the Axis of Autocracy
Congressional Testimony
As defense cooperation among China, Russia, Iran, and North Korea grows, it will enable these countries to offset vulnerabilities relative to the United States....
By Andrea Kendall-Taylor
