Sino-Russian Shanghai Summit: Natural Gas Deal “supports Russia”, but simultaneous Naval Exercises indicate no Military Alliance

On Tuesday, prospects that Beijing and Moscow would get to an agreement over a natural gas supply treaty after many years of negotiations looked good, according to Victor Larin, Director of the Russian Academy of Sciences’ Far East Institute. Societies in both countries were watching the negotiations closely and discussing them “warmly”, said Larin, and situations like these frequently indicated that two sides were close to an agreement. Russia was in a position to provide China with needed energy, and in turn, the treaty would provide Russia with the funding it needed for its own economic development. Larin was quoted by Economic Information Daily (经济参考报, via  People’s Daily, and so was a Russian sinologist whose name would read Bie’erge’er in Chinese. He was quoted as saying that energy cooperation could reach well beyond gas supplies from Russia, and include oil processing, Russian involvement in nuclear power plant construction in China, Russian electricity supplies into China, and cooperation in wind and solar energy development. The main obstacle the sinologist still saw was pricing.

Discussing Russia’s “Looking East”, Larin said that Russia was currently actively developing Siberia’s Far East, and Russia would only be able to make this happen with the help of Asian countries, and particularly with help from China. Russia needed Chinese investment, equipment, and Chinese human resources.

拉林在谈到俄罗斯“向东看”时说,俄罗斯正在积极开发西伯利亚和远东地区,只有依靠亚洲国家特别是中国的帮助,俄罗斯才能实现这一目标,俄罗斯在开发上述地区过程中需要中国的投资、设备和人力资源。

Sina quotes the Chinese website of RIA Novosti on Thursday as reporting that Russia was going to invest 55 billion USD in the implementation of the gas supply treaty, while china would invest 22 billion USD. According to the agreement, Russia will supply China with 38 billion cubic meters of gas over thirty years. The treaty’s overall value is 400 billion USD, RIA/Sina quote Gazprom CEO Alexei Miller.

It took almost a decade to conclude the negotiations, the Washington Post wrote on Wednesday. While Russia believes that gas supplies to China can start in 2018, the Christian Science Monitor quoted a consultant who warned that after the political declarations are made this week, and even if Putin comes home waving a huge new gas deal with China, Gazprom may prove unable to deliver the goods, and that 2020, rather than 2018, might mark the beginning of gas supplies at the earliest. The olifields that would have to serve the contract were running behind schedule, and any diversion of existing supplies to serve the expanding Chinese market risks disrupting ties with another priority customer, Japan. It could become necessary to pipe gas from more distant fields, and in the worst case, a costly measure like that could mean that Russian taxpayers are committed to subsidizing Chinese consumers well into the future.

Sino-Russian naval exercises in the East China Sea are taking place for the third time this year, but without intentions to form a Sino-Russian military alliance, a RIA Novosti report quotes both sides. The exercises began on Tuesday.

Guancha, a Shanghai-based website and therefore at the scene of the Sino-Russian summit, suggests that the 400-billion deal between Beijing and Moscow is “a blow to the West”, or rather, that this was the view of much of European and American public opinion (….. 欧美舆论大多认为,中俄走近对西方来说是个打击). The gas treaty would strengthen Russia’s ability to resist Western pressure. Guancha also quotes the Wall Street Journal (WSJ) as saying that the gas supply treaty provides Russia with support at a time when its relations with the West are worsening. While the EU was looing for gas suppliers beyond Russia, the treaty with China strengthened Russia’s position. (A word of warning: I haven’t found the quoted WSJ article online and can’t tell if Guancha quotes it correctly.)

The support the treaty offers Russia might come at a price – two WSJ reporters took the data available about the treaty on Wednesday and computed an implied price for the gas of about $350 per thousand cubic meters, which would spell a good deal for China. If true, that is – other guesswork quoted in the article suggests that Russia would nearly get 380 USD, i. e. basically what it gets from Europe, too.

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