Plays China Energy Card
By Vladimir Radyuhin
25 March, 2006
Russia has made a new move
to assert itself as a global energy broker and make other countries
play by its rules. On a visit to China this week, President Vladimir
Putin pledged to build two natural gas pipelines to China, as well as
jointly develop Russian offshore gas fields. The two proposed gas pipelines
would deliver 60 billion to 80 billion cubic metres of Russian gas to
China a year, Mr. Putin said in Beijing. He also confirmed Russia's
promise to build a diversion to China from a proposed oil pipeline from
eastern Siberia to the Pacific coast.
In their joint declaration,
Mr. Putin and Chinese President Hu Jintao described the plans as "strategic
diversification in the energy sphere." So far, Russian energy exports
have been mainly to Europe.
The Kremlin's Chinese projects
are sending a strong signal to both Europe and Japan that they will
have to compete for Russian energy resources with China. Even though
Russian officials said the new pipelines would not interfere with Moscow's
other energy export commitments, Europe and Japan have every reason
to feel worried.The planned volumes of oil and gas deliveries to China
may stretch Russia's available resources to the limit.
Half of the annual gas supplies
Mr. Putin has promised China — 30 billion to 40 billion cubic
metres — will come from western Siberia, which accounts for the
bulk of Russian gas production today. Output in western Siberia's ageing
gas fields is expected to fall from about 500 billion cubic metres today
to 300 billion cubic metres by 2015. Meanwhile, Europe's demand for
Russian gas over the same period is projected to grow from the current
140 billion to at least 200 billion cubic metres. Domestic gas consumption
in Russia is also set to grow.
In this situation, Russian
promises to China put Moscow in a strong bargaining position vis-à-vis
Europe. Following Russia's gas price war with Ukraine earlier this year,
the European Union stepped up pressure on Moscow to open up its gas
market to Western companies and let them buy energy resources directly
from Central Asia, rather than from Russia. EU calls for diversifying
Europe's energy sources away from Russia are seen in Moscow as blackmail.
European Commission President
Jose Manuel Barroso met Mr. Putin last week to demand that Russia ratify
the Energy Charter Treaty, which would give foreign countries access
to Russian pipelines and restrict Moscow's ability to set energy transit
fees. The EU is also reluctant to let Gazprom have a bigger presence
on European gas distribution markets and to agree to the Russian demand
for long-term contracts to guarantee a stable market and prices for
Russian oil and gas in Europe. President Putin effectively told Europe
from Beijing that Russia has other options, and if the EU, which gets
half of its gas imports from Russia, does not accept Moscow's sales
terms, Russia can just redirect gas flows to China.
Mr. Putin sent a similar
message to Japan when he confirmed plans to build a branch of the east
Siberia-Pacific oil pipeline to China. The Pacific pipeline is projected
to carry 80 million tonnes of oil a year, out of which China will get
30 million. However, Russia's proven oil reserves in the region cannot
support such export volumes, and China may get all available oil for
Tokyo has promised to invest
billions of dollars in the Russian Far East if Russia pumps all oil
to the Pacific port of Nakhodka — closer to Japan than to China.
But it could not secure a firm commitment from Russia. Neither could
Beijing, as Mr. Putin baulked at setting a time frame for the side pipeline.
These tactics are part of
Mr. Putin's strategy to win possibly bigger benefits from Russia's natural
resources in terms of political clout, investment, and technologies.
Ahead of the G8 summit in St. Petersburg later this year, Moscow is
showing the world's rich energy-consuming nations that the global energy
market is no longer a buyer's market but is a seller's paradise.
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