Caspian Report - Issue: 08 - Fall 2014

Altai pipeline. Despite the deal with
China, Russia, in the short term, will
remain reliant on the European
market. The 38 bn cubic meters it
plans to export to China is dwarfed
by the 161.5 bn cubic meters it exported
to Europe in 2013. It can
be hoped that this major deal has
shaken up the energy world. First,
losing Russia’s east Siberian gas to
China marks a historic failure for
the EU and also, partially, for the US.
The EU will most likely increase the
cost they pay for natural gas there in
the EU. It will certainly increase the
pressure on the European countries
to find alternative gas supplies. Second,
Russia and China became strategic
partners when their leaders
announced that they would oppose
Washington’s dreams for a unipolar
world after the United States and
NATO attacked the Federal Republic
of Yugoslavia in 1999. In one way
or another, a Beijing and Moscow
gas deal does not signal anything
new or a shift in Russian economic
policies and ties with China. Michal
Meidan, an independent consultant
in energy geopolitics says, “In the
past, China was looking to Russia,
while Russia was looking to Europe,
and vice versa. Both sides are finally
looking to each other.” 32 Thirdly, the
two sides aim to achieve a win-win
balance. The Kremlin may open a
new beginning direction through
East since destination of the Siberia
reserves but this not a genuine turn
away from Europe for China.
Russian gas deal has probably
killed the Asian price differential
by effectively setting a new benchmark
for natural gas prices in Asia.
Given that China will soon have access
to natural gas estimated to be
as cheap as $9 or $10 a million BTU.
The tapping of Siberia’s massive
energy wealth, both oil and natural
gas, will raise Russia’s profile in the
region significantly. Indeed, the final
THE KREMLIN MAY OPEN A NEW BEGINNING
DIRECTION THROUGH EAST SINCE DESTINATION
OF THE SIBERIA RESERVES BUT THIS NOT A GENUINE
TURN AWAY FROM EUROPE FOR CHINA.
orientation of the associated energy
transport infrastructure – toward
China or toward Japan – may play a
decisive role in the evolving balance
of power in East Asia. 33
In conclusion, the signing of this
contract on 21 May 2014 has provided
“breathing space for Russia”
after the Crimea problem. This contract
reflects a partnership based on
a balance of mutual interests. China
demands more energy and new advanced
weapons from Russia. Russia
wants access to the expanding
energy market in Asia for economic
gain and diplomatic reinforcement
in UN Security Council. As a result,
Russia turned to China to hasten
the conclusion of their natural gas
deal, which had stalled for the past
ten years. Most importantly, Russia
demonstrated to EU customers that
Gazprom has other export options.
However, from a realpolitik viewpoint,
it is to be hope that despite
Russia’s military power and the efforts
toward regional integration via
the Eurasian Economic Union initiative,
China will continue to increase
its highly economic and political influence
in the Central Asia region.
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CASPIAN REPORT, FALL 2014
32.
“Why China is Driving a Hard Bargain with Russia over Gas”, The Wall Street Journal, 19 May, 2014, http://
blogs.wsj.com/chinarealtime/2014/05/19 why-china-is-driving-a-hard-bargain-with-russia-over-gas/.
33.
Lyle Goldstein & Vitaly Kozyrev: “China, Japan and Scramble for Siberia”, Survival: Global Politics and
Strategy, Volume 48, Issue 1, 2006.