[LINK] "Sino-Russian energy relations reversed: a new little brother"

[rfmcdonald]

Open Democracy's Morena Skalamera suggests that the new dependence of the Russian economy on oil and natural gas exports to China may not be in Russia's long-term advantage.

Closer Russo-Chinese energy ties mean that China may agree to take up the slack of investment in the wake of sanctions, pouring money into energy field development in exchange for increasing stakes in Russia’s upstream, already seen in CNPC’s recent acquisition of a 10 per cent stake in Rosneft’s subsidiary Vancorneft. In practice, China is committed to provide the financial liquidity that Russian companies desperately need in light of collapsing investment and severe recession.

Thus, Russia’s geopolitical victory offered Putin a desired dose of grand visuals to bolster the regime’s narrative of an easy Asian pivot. But the realities of Russia’s position vis-à-vis China belie a different and less advantageous set of emerging paradigms. Any equity stakes that China may see as a result of the deal will weigh significantly on the profitability of the deal in practice.

Since China does not depend on Russian gas the way Europe does, price guarantees and upstream stakes will most likely become sine qua non in future deals. The same is likely to be true for making Russia’s pipelines conform to preferred Chinese routes, as seemed to happen in October 2014 when Gazprom announced the potential cancellation of Vladivostok LNG. This giant project is likely to be substituted with a third gas pipeline to China, in addition to the agreed Power of Siberia and the planned Altai pipeline, thus greatly refocusing Russian resources on bolstering supplies to China.

In turn, this would signal the abandonment of Gazprom’s strategic aspirations to diversify its energy ties to the Asian-Pacific market to service Japan as well as South Korea, putting all of the proverbial eggs in the China basket.

All of this points to a scenario in which Russia will come to operate as a resource appendage to China—one that, in order to supplant western partnerships, accedes to China’s seniority in the energy partnership in exchange for the loans and investments necessary to drive energy development and production. Thus, the picture of what is likely to happen if the price of oil stays low, if western sanctions against Russia do not abate, and if China continues to develop at a relatively robust pace, is not a pretty one for Russia.