Russia’s ‘energy pivot’ to China: Myth or reality?

By Michael Ruehle & Julijus Grubliauskas

Since the beginning of the Ukraine-Russia crisis, the Russian media has been arguing that Russia would shift its energy exports away from Europe to the East, in particular to China.

Construction of the Russian section of the Power of Siberia gas pipeline in progress

Construction of the Russian section of  Power of Siberia gas pipeline in progress. The project will provide China with 38 bcm of gas

There are plenty of reasons why Moscow is pushing this narrative. Over the past years, Russia’s dominant position in the European energy market has suffered several severe blows: new natural gas interconnectors, better storage facilities and new import terminals for Liquefied Natural Gas (LNG) have made the Eastern half of the continent less dependent on Russian energy supplies.

At the same time, the EU has initiated antitrust cases against Gazprom, supported Ukraine through the ‘reverse flow’ of gas, and, after Russia’s illegal annexation of Crimea, imposed sanctions. Against this backdrop, it is hardly surprising that a frustrated Russia would be looking for less reticent customers elsewhere.

Alas, this ‘energy pivot’ is not likely to happen as advertised. While several major energy projects are currently being discussed between Russia and China, a closer look reveals that they will not constitute real alternatives but at best supplements to Russia’s European energy market. For a number of reasons, Europe will remain Russia’s primary destination for energy exports, in particular natural gas.

The flagship project of the emerging energy cooperation between Russia-China, the Power of Siberia gas pipeline, would provide China with 38 billion cubic metres (bcm) of gas. Yet even if the project were to deliver 61 bcm, it still pales in comparison with 146 bcm that Gazprom exported to Europe in 2014. Moreover, the gas fields that will feed the Power of Siberia pipeline are not located in Western but Eastern Siberia, thousands of kilometres away from the fields that feed the European gas pipelines. In other words, the Eastern gas fields are too remote to be commercially viable for exports to the European market in the first place.

Finally, China is not yet prepared to pay the gas price that some European countries are paying to Gazprom. In contrast to the Power of Siberia pipeline, the projected Altai pipeline to China would be fed by the Western Siberia fields, the same that provides gas to Europe. This project originated a decade ago but remained in limbo until it was surprisingly revived last year.

However, for several reasons, neither Russia nor China appears keen to actually start implementing the project.

First, the Altai pipeline would arrive from Russia at China’s largely deserted northwest, yet it is in the industrialized southeast where the gas is really needed. This would require China to build additional pipelines across the country.

Second, Russian gas in the eastern part of China competes with supplies from Turkmenistan, which have yet to reach their full potential. This Turkmenistan-option will allow China to negotiate a Russian price that would be lower than the European price level.

A third element of the Russian ‘energy pivot’ – Russian-Chinese cooperation on oil – should not raise much concern in Europe, since oil is a globally traded commodity.

Recent statements in the Russian media that Russia had become the largest supplier of oil to China, thus overtaking Saudi Arabia, are less spectacular than they may seem: they only mean that China is importing less oil from other suppliers, who will now compete for the European market.

Other elements of the emerging Russia-China energy relationship – cooperation on LNG and the exploration of Arctic energy resources – depend largely, and paradoxically, on Russia’s cooperation with Western industry. The development of Russia’s LNG export capability remains heavily dependent on its access to Western technologies, and the same goes for the energy exploration in the Arctic.

Before China can be the beneficiary of Russian LNG exports and tap into Arctic oil and gas resources, Russia needs Western technologies and investment, which are currently to a large extent subject to EU-US sanctions.

Even if Russia were able to access the required technologies, neither oil nor LNG produced in the Arctic would be able by themselves to solidify the Russia-China energy relationship: Both commodities can be traded on the global market, and it appears unlikely that China would limit itself to buying the rather expensive energy extracted in the Arctic without considering alternative suppliers.

In sum, Russia’s ‘energy pivot’ to China should not cause European energy consumers sleepless nights. Due to a series of infrastructure projects, European countries have increasingly more alternatives to Russian gas and oil and thus enjoy a strong negotiating position vis-à-vis Russia. No matter how much this may frustrate Moscow, stable energy revenues from Europe remain of critical importance to the Russian state budget, particularly in the current low oil price environment.

Accordingly, Russia continues to make every effort to strengthen its energy influence in Europe, from seeking bilateral deals with European energy companies to intensive lobbying. A real ‘pivot’ looks different.

The authors work in the Energy Security Section of NATO’s Emerging Security Challenges Division. The views expressed here are their personal views

 



Categories: Asia Times News & Features

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  • Daniel Berg

    Ha ha ha, Nice NATO propaganda,

  • deliaruhe

    So what happened to the deal in which China develops the resources in eastern Siberia? While Russia was not exactly happy with the price of the gas that China is prepared to pay, Russia can’t be fussy at the moment. But that won’t last forever, as there are several other Russia-China deals in the works right now.

    In short, I’m not exactly understanding the point of this article against the backdrop of reality.

  • ted

    Surprise that even Asia Times would put a piece of propaganda crap article on.Hopefully,there not caving into what West.Which has put nothing but Propaganda Mainstream Media News.If they have more and more of these types of propaganda crap.They going to lose more of open minded and freethinking people.But,then again.There IMF Executives in BRICS Banks.At some time they are going to try to control the Media in East.Like what what happen in West.When that shift changes.More and more idiots who do not have a clue what reality is will be coming in drones to read articles here.

  • Fernando Martinez

    It’s a garbage article

  • Zhanglan

    “after Russia’s illegal annexation of Crimea” in the 3rd paragraph I gave up any hope that this might be a serious, balanced and impartial article

    it’s not; it’s tripe, and it demeans Asia Times to publish it

  • Zhanglan

    see the footnote: The authors work in the Energy Security Section of NATO

  • Kenington

    Propaganda from an American think tank or should that be a unthink tank?

  • George Silversurfer

    Nato energy security strategy… Ok

  • Bianca

    Consider the source… Surprised Asia Times gives its valuable space to cheap propagandizing.

  • c1ue

    An interesting article. The main points aren’t necessarily invalid, but I have to wonder about the overall credibility given the failure to discuss several key issues:
    1) Russian plans to bypass Ukraine as a transit operator
    2) Turk Stream/South Stream
    3) Russian/Iranian energy cooperation (or lack thereof)
    4) China’s various trade transit infrastructure building activities in Pakistan/Silk Road
    Equally, while the authors do make a good point on the relative scale of presently realized natural gas flows to Europe vs. to China, their economic argument is weak: that the 38 bcm to China is irrelevant because of the 146 bcm presently being exported to Europe.

    For one thing, if the 38 bcm is purely additive to present Russian natural gas exports – this represents a significant boost to Russian exports. If, on the other hand, the 38 bcm represents an alternate to present European exports, this lends greater pricing power and flexibility to Russian natural gas exports. The lumping together of all Russian “westward” facing natural gas exports is also more than a little disingenuous as a significant proportion of these exports are effectively subsidies to former Soviet Republics, relatively poorer European nations and/or transit nations.

    It is also interesting that the authors of this article failed to note that a large proportion of Russian natural gas is produced in central Russia – between Ukhta and Norilsk. This isn’t Siberia, but is relatively equidistant – if not closer – to China than Europe. The pipeline deal Russia made with China will bridge a lack of connectivity between Western Russia/European natural gas supply and Eastern Russia/China+Asia demand:

    https://img.washingtonpost.com/blogs/worldviews/files/2014/05/Screen-Shot-2014-05-21-at-2.24.46-PM.png

    These oversights might be due to article length constraints, or might be due to other motivation like the NATO employment of both and Baltic origin of one of the authors.

  • kobe

    The writer is too dumb to admit that he is a NATO troll, garbage article

  • Bianca

    Tanking tank?

  • Bianca

    Hopefully it will not happen. At some point imperial reach gets overextended.

  • Bianca

    “..In sum, Russia’s ‘energy pivot’ to China should not cause European energy consumers sleepless nights. Due to a series of infrastructure projects, European countries have increasingly more alternatives to Russian gas and oil and thus enjoy a strong negotiating position vis-à-vis Russia. No matter how much this may frustrate Moscow, stable energy revenues from Europe remain of critical importance to the Russian state budget, particularly in the current low oil price environment.

    Accordingly, Russia continues to make every effort to strengthen its energy influence in Europe, from seeking bilateral deals with European energy companies to intensive lobbying. A real ‘pivot’ looks different.”
    This is how NATO propaganda works European countries have presumably more alternatives to Russian gas and enjoy strong negotiating position! This is a creative fiction — at best. Europe is engaging in building two kinds of infrastructure. One, by forcing helpless Balkan nations to build pointless interconnectors to each other, while none of them have any reliable gas sources and the other — Russian. Current sources of Russian gas are through Nord Stream, the direct line between Russia and Germany, through Belorussia and Ukraine. Connections through Ukraine are vulnerable, as Ukraine is now not paying for its gas to Russia, and is stealing European gas that transits across its territory. The only thing Europe has done to cope with this, is to reverse-flow European gas to Ukraine in the name of “solidarity” and to discourage steeling. Example is Slovakia. On urging by EU, it sends its own gas (Russian gas) back to Ukraine, and is now facing real problems as neither Ukraine or EU would pay for it. This is just another band aid designed by EU to put pressure on EU members to subsidize Ukraine. Balkans is prime example of European mess. Having invested heavily politically and financially to get gas directly from Russia via “South Stream”, Balkan region losses were immense when EU caved in under immense US pressure, and the project was cancelled. Now, Russia is offering to make gas available through Turkey, on Greek border, but –predictably — Brussels and US and against it. Without anything to offer to Balkans region as an alternative. Utter and dismaying bullying and arrogance.
    What do you think the people of the region that is being deprived of energy sources think of such politics? Over two decades, the region has been deindustrialized, and is now shadow of its former self. Greece is not an exception to what has hit Balkans – Greece just happens to be in Eurozone. The entire region is suffering from EU policies that are consigning them to the vision of Marie Antoinette style villages and “service industry” with no hope for the future.
    Russia is indeed actively lobbying — and the European companies that want Russian energy partnership are also lobbying. European interests, especially interests of poorer states, are of no concern to Brussels. Over 3,000 US corporate lobby firms are in that city to insure that Commissioners do not make undesirable decisions.
    While Brussels is dead set against allowing Balkans to get energy from Russia, it has no problems satisfying German need for MORE Russian gas. A month ago, it was announced that ANOTHER line will be added to Nord Stream to increase already high capacity of the pipeline in order to supply additional European customers, namely Norway, Denmark and UK. So much for European diversity of energy sources. Because of the nineteen century preoccupation with “spheres of interest” , American corporate driven policy is targeting Balkans in a manner that is both brutal in politically and damaging economically .
    What you can see in most countries of South East Balkans is huge popularity of Asian integrations. There are daily news and reader commentaries on Eurasian Economic Community, Silk Road Economic Belt, SCO, BRCKS, new development banks, India-Pakistan accession to SCO, various economic corridors, growth of roads and rail lines in Central Asia, and of course, Russia-China strengthening alliance. Polls show that many countries (especially Serbia) would prefer alliance with Russia and Asia, to staying within EU fortress. Presently, if given FREEDOM these countries would opt for Eurasian integration, and release from EU. Yes, they are occupied today by NATO. , with NATO infrastructure in member states, as well as those not in NATO. But given the sentiment of people — occupations cannot last forever.
    The crisis in Europe is only starting — as the pressure is mounting to deny poorer states to do what is in their interest — get energy from Russia, and trade with the up and coming East. Europe should stop creating a bunker, and open up to trade and competition. If it is not clear to Europe yet, Iran’s gas will flow to Pakistan and India fueling their economic corridors to continental Asia. And for the one and only great hope — Azerbaijan’s gas fields, Europe just got a cold shower. Azerbaijan joined SCO, along with Armenia, and promptly answered to German preaching on human rights.
    Potential sources of gas for Europe are not many. Pipelines from Russia or across Turkey, from various sources, including Russian. But the chance of getting control of other sources, such as Azerbaijan or Iran – are dimming. Both see more advantages to growing Asian market. And the methods of delivery are still only two: natural gas pipelines or liquefied gas. Each with its advantages and disadvantages — depending on situation, geography, environmental concerns, end-use, geopolitical risk, infrastructure requirements, volume, and overall cost. Europe is slowing down economically now for many years. But as a declining power, Europe is making a fatal mistake not to take advantage of its tremendous assets: technology and human capital. Both could profit from the growth of Asia if they would embrace partnership, not power-games with region. Instead, the are relying on US corporate muscle to try to impose advantages for their companies, and influence the governance of other countries. It is backfiring, as the latest SCO summit demonstrated. But for Europe, not trying to find another model outside NATO to build relationships in this — very obviously — multipolar world, it could be a serious mistake. .

  • Mr. Bernard Wijeyasingha

    There are just a couple of issues that stand out.
    The people of Crimea voted to join Russia. That is similar to the people of Sikkim voting to join India. When the independent nation of Sikkim voted to join India in the 1970’s it was called a “merge” (even though Indian troops surrounded the palace). Same with Russia. Crimea merged with Russia by popular vote That is one issue
    The second is that Russia is expanding in a similar manner as China. Often called “Russia”s oil pipelines” Russia has plans to expand her pipelines in to South Asia, including several into Europe. This information can be verified by simply Googling it.

  • darius the great

    so your saying Russia had the right to annex the Crimea -_-?

  • darius the great

    china does not give two shits about russia

  • darius the great

    and will any of these Russia-china deals actually make a difference, china sees Russia as far to unstable to do much business with

  • Kenington

    Good observation!

  • Zhanglan

    no; I am saying that this article is biased and reflects the particular viewpoint of the authors’ employer. I don’t need to read a lengthy article on the Asia Times website to get that when I can either receive it in snappy pre-chewed soundbites from Reuters/Bloomberg/BBC or go straight to http://www.cia.gov to read the original version

  • franciscoalmeida_br

    darius, Crimea seceded from Ukraine through a massive 89% referendum, which was by far much more legitimate than the West-backed Kosovo’s secession – which had no referendum at all, and Kosovo was under military occupation of invader’s forces, aka NATO troops.

    Ironically , the “forgotten” illegal annexation actually happened in 1954, when Crimea was brutally taken away from Russia and GIVEN as a gift to Ukraine by URSS’s General Secretary Kruschev – himself an ukrainian, by the way.

  • franciscoalmeida_br

    the author works for NATO, that’s all.

  • darius the great

    yet a month earlier only 41% support unity with Russia -_-? Russian official were there to “help conduct

  • darius the great

    elections”

  • darius the great

    I can’t believe I fucked that up ;_;

  • darius the great

    also in koscovo, the serbs tried to do what they did to the bosniaks and NATO said hell no and bombed them until they stopped.
    you are obviously a pro-russian

  • teddyfromcd

    THIS article is what one might call :” preaching to the choir” – the choir being the western/nato/cia employers of such an author.

    the moment i read one of the authors’ names — a lithuanian/baltic — namely : of those tiny countries that are BIG screamers against russia YET NEED RUSSIAN ENERGY —

    i knew it was going to be such a piece of writing.

    a HOPEFUL one: hoping that russia actually REMAINS ”dependent supplier to eu” ….due to ”pricing problems with china”….

    as IF that can’t eventually be arranged by russia and china for more important reason: the EURASIAN integration project that IS more important than pricing, in the final analysis.

    furthermore — purely on russia’s self-interest as to pricing …since even among allies , pricing competition can and does exist (even in every day life between people — one buys homemade cake from Friend A rather than B because the former just charges a bit less…and that’s just business — but their friendships remain) — even if russia has a difficulty about lower price paid by china — it too can influence price ”between customers” — as russia also eventually , in the same time period as the pipelines are built here and there , can compete to supply more countries in eurasia, such as thailand, laos, cambodia, india, etc….

    PLENTY of customers around…just as there are plenty of suppliers.

    the REAL PROPBLEM – in the long run — is FOR europe/nato — WHO are dependent on FOREIGN ENERGY — be it from russia, middle east, central asia, or america.

    IT IS EU/NATO — that the writer ought to be writing about as to what they CAN do – should russia decide – in retaliation for sanctions and continuing aggression by USA/NATO/EU —

    THAT it gives in to china’s lower price ask – BUT ALSO DEMANDS HIGHER PRICE from EU payments…which eu — can NEVER do without russian gas or oil…even if middle east, central asia add supplies…

    and russia /iran/ now perhaps evn saudi arabia — can coordinate prices – to ”supply europe at high prices”

    to make up for loss of revenue at ‘/low prices from china or south asia’…

    DOES the author think russia can NOT play such games? and know which pawns in pricing to sacrifice to gain the HIGHER PURPOSE of cementing its ‘russia/china/ eurasia integration’.

    while MAKING EU –NATO — DEPENDENT ON FOREIGN ENERGY — especially from russia —

    to PAY for russia’s ASIA PIVOT?

    LOL.

    th point of this article is NOTHING — just hoping that the russia/china rapport will fail.

  • franciscoalmeida_br

    Darius, labeling me as “pro-russian” won’t change facts.
    It only discredits your statements , shame on you.
    Ideas are to be debated here , not individuals.

    In Crimea , several recent polls/surveys conducted by an array of western accredited institutions have confirmed the legitimacy of their referendum.

    Besides, you blatantly ignored the mentioned illegal annexation of 1954. That for 60+ years submitted some five million native-russians to unwillingly become ukrainians, just overnight.

    note : I am Brazilian, I don’t give a damn about your quarrels , all I know is that you in US are trying to conquer the world, and Russia + China are the last independent countries standing in the planet – and all I care is about your peoples willing to trigger a nuclear war with Russia, which would extinguish the entire human kind – only cockroaches would survive.

  • darius the great

    doesn’t seem like illegal annexation when the republic just handed it over.
    you don’t have to be Russian to be pro-Russian and you are obviously pro-Russian when you down right swallow that Russian propaganda that think it’s Russia and china against the world (Even though china doesn’t give a crap about Russia) and also think we want nuclear war. Why would we declare nuclear war when we can just sanction their economy to death, seems to be doing a pretty good job so far, and plus oil is cheaper ;).
    also name these “western accredited institutions” the confirmed the legitimacy of their referendum.

  • franciscoalmeida_br

    Here is the brutal amount of facts that are “missing” in your arguments:

    1) – US State Dept Under Secretary Victoria Nuland clearly declared “we invested $5 billion in promoting democracy” , aka regime change. Several NGOs worked, backed by Soros Foundations. Isn’t it meddling in other countries affairs? Oh, yes, but … “not when we US do it”.
    2) – The former corrupt President was legally elected, thus the Legislative Order sacking him – without a due impeachment process – was blatantly unconstitutional AND immediately US + EU acknowledged the empowered Junta as “legal” government”. What da hell is it ???
    3) – Some provinces refused to acknowledge an illegal government, and seceded. So what?
    4) – Next day, Kiev’s Troika labeled ENTIRE population in rebel provinces as “terrorists” , and started to deliberately shell , precisely aiming CIVILIAN facilities (hospitals, schools, condos, kindergartens) rather than military ones, and made it in order to force 5 mm pp to evacuate the entire region. Then US + EU condoned , turned their face. What on earth is this??? Massive violation of Human Rights ! Colective punishment is a violation of Genebra Convention.

    And it’s me who is pro-russian???

    Thus said , above facts makes you … what ? an anti-russian , at best.

    (note: labeling people rather than fighting ideas, is a sordid , cunning over-simplify aggressive initiative , created to manipulate simple minds, but … I couldn’t resist , I had to make you taste your own poison).

    IN TIME : regarding “western accredited institutions”, go do your own homework, Google is for free, spend your own time as I spent mine.

  • darius the great

    1. You are assuming that the united states government is in control of the open society foundation (an NGO in of itself) which it isnt. When is promoting democracy, meddling in other countries affairs? Your acting like we going in there and dictating what they should do?

    2. Well I shoot I guess we should have left him In power huh? Corruption is not a big deal I guess??

    3.you freaking liar, they didn’t sucede because of the government, they sucede because they wanted to become part of Russia (which Putin riled up).

    4.what such order to bomb civilians? When did kiev declare everyone is the occupied provinces terrorist? Are you pulling things out of your ass? Are you gonna say the Ukraine shot down MH17? Do you even know how to spell Geneva? (Genevra lol, guess not)

    The only “western accredited” had obvious ties far-right extremist groups.the Russian government invited individuals belonging to European far-right, anti-semitic and neo-Nazi parties to serve as observers. At least some of the international observers were managed and financed by the Eurasian Observatory for Democracy & Elections (EODE), a far-right Russia-based self-proclaimed election monitoring organization.

    You are prorussian because you only listened to Russian side of the story and only Russian side.

  • franciscoalmeida_br

    responses:

    1) – oh, geez ! Google is for free ! Go google yourself : “US- promoted color revolutions, regime change”, and you’ll find massive articles, testimonies and proofs that THE SAME ngos , they acted in Ukraine, Egypt, Lybia, and others.

    2) – “we should have left him In power”, OMG ! Who are you to bring down a government? Gods? Besides, their Constitution presents a Impeachment Process, can’t you respect Due Process??? What about the “rule of law”?

    oh ! You think you are “exceptional nation” , thus the Law doesn’t apply to you, correct?

    3) – No, again, go googling it up, they firstly declared the Junta government illegal.

    4) – “what such order to bomb civilians? When did kiev declare everyone is the occupied provinces terrorist?” . Oh, dear … again, many OFFICIAL declarations, statements of Kiev Junta did it. Massive video clips proving shelling focus civilians . Heard of YouTube??? (note : for you it seems that google doesn’t exist !!! You possibly listen only to MSM main stream media, mostly WH+Pentagon blow-horns propaganda: CNN, MSNBC, WP, ABC, CBS, WSJ, etc).

    5) – Genebra is such the spelling in all Latin languages, and I speak Portuguese.

    6) – About MH-17 there are absolutely NO credible investigations to blame neither of sides. Don’t put words in my mouth , have some manners if you can.

    7) – No , I don’t read Russian news only, absolutely. I read all the crap that comes from your MSM + Bill O’Reilly, Sean Insannity, Rush Limbaugh, Glenn Beck, etc.

    But only if you could listen to Ron Paul you’d be a REAL American, a patriot like Benjamin Franklin, Alexander Hamilton, John Jay, Thomas Jefferson, James Madison, and George Washington. America was not intended to be an aggressive empire, period ! And you’d get out of foreign interventions, where, just as ONE example, you killed 1,5 million Iraqis in a lies-based invasion. Afterwards, no regrets, no apologies, no nothing !!!

    Sorry, Dude, I love American people, but … I hate your oligarchy-controlled, puppet government as much as you should in case you were pro-Constitution, a REAL American. And thus you have NO moral ground to bash anyone in the face of the planet during the next 200 years.

    And you wonder : “why do they hate us?”. Would it be perhaps because you bombed and killed their relatives, maimed their children, cut their limbs?