The highlight of the two-day state visit by Russian President Vladimir Putin to China on Tuesday is probably going to be the signing of the long-awaited 30-year mega gas deal. The Russian media have been speculating such a strong possibility.
The Chinese official remarks, however, remain cautiously optimistic and flag that the “main difference”, namely, over the price of gas, “still lingers.” To be sure, it is a political call now for the Kremlin.
Russia took a tough stance in the recent years insisting that the price of gas should be linked to the price of oil, which is the formula it maintains in dealings with Europe. With the passage of time, China’s negotiating stance (which rejected such a linkage), has strengthened.
Time worked in China’s favor. Beijing has been in no tearing hurry to conclude the deal while it kept lining up LNG supplies from other sources — Qatar and Australia — and kept up the momentum of overseas upstream investments, including in Canada, as well as boosting further supplies from Turkmenistan and other Central Asian countries.
China is also estimated to have the world’s largest source of shale gas. On the contrary, Russia’s negotiating hand has weakened. A ‘Look East’ strategy for energy exports is increasingly a matter of compulsion rather than of choice, as the United States pushes for Europe’s diversification of energy imports to reduce high dependence on Russia.
At any rate, Europe’s energy needs have come down and is preparing for an influx of North American feedstock. Suffice to say, for a variety of factors, the gas deal will now have to be struck on China’s terms. The Russian negotiators are practically left with no option but to compromise, even as the Russian economy moves into recession and increased income from the gas sale to China is becoming vital for Moscow.
The Russia-China natural gas deal is in many ways symptomatic of the true character of the two countries’ so-called bilateral “comprehensive strategic partnership of coordination.” Prima facie, the deal may create an impression of an emergent alliance between the two countries suggestive of a fundamental shift in global power balance.
But that will be a misperception. The painful birth pangs of the gas deal alone testify to a pragmatic partnership based on cool calculations of mutual benefit. The two countries “coordinate” selectively on international issues but have a long way to become alliance partners.
In fact, the mindset favoring an alliance doesn’t exist in either country and Russian elites have openly preferred that Moscow should play a “balancing role” in the Asia-Pacific. Putin, in fact, has been pushing for a big makeover in Russia’s ties with Japan, China’s acrimonious tensions with Japan notwithstanding.
But Russia’s rift with the West over Ukraine has found Japan falling in line with the G7 collective decisions regarding sanctions against Moscow. Russia’s growing frictions with the West have no doubt worked to China’s advantage.
If the US is bent on “bleeding” the Russian economy in the context of the Ukraine crisis — Ambassador John Tefft’s nomination to head the US embassy in Moscow suggests a tough line by the Obama administration — Moscow’s dependence on the Chinese market as a driver of growth will become pronounced.
Essentially, an unbalanced relationship is moving progressively in China’s favor by the day. For Russia, it is going to be an entirely new experience, historically speaking, to settle for the role of a junior partner in relations with China. Putin’s visit will be closely watched for signs of new thinking in Moscow.
– May 16, 2014