[ANN]China's Russian oil courtship
The Straits Times (Singapore) Asia News Network
LONDON - The most interesting diplomatic visits are those which the concerned parties would like to go unnoticed. This was certainly the case with the trip made by Russian Energy Minister Viktor Khristenko to China last week.
Both sides kept mum, and the sensitivity attached to the visit was understandable as it concerned one of the most critical developments in Asia: competition between China and Japan for Russia's energy resources. But all the indications are that, far from clarifying matters, Khristenko's mission merely muddied the waters even further. Russia now looks set to continue enjoying the courtship of both China and Japan.
Last year alone, China's energy consumption jumped by an estimated 12 percent as a result of the country's phenomenal economic growth. From fairly modest beginnings, the Chinese are now the biggest consumers of oil after the United States and may yet overtake the world's biggest economy. Much of China's supplies currently come from unpredictable sources and are expensive to transport. Diversifying its sources of energy has now become one of China's most important preoccupations.
The Chinese are wooing Middle Eastern governments and - to the increasing irritation of the United States - they are investing heavily in Iran and Sudan. Beijing also justifies the rapid expansion of its navy by pointing to a need to protect its sea transportation routes. One way or another, the growing dependency on oil is rapidly transforming the country's foreign and military policies. China is becoming a true global power not so much as a result of predetermined policy but more out of necessity.
Nowhere is this clearer than in its relations with Russia.
Having dismissed the Russians as a spent force, an old superpower in decline which, apart from weapons, has little to offer, the Chinese have suddenly shifted to assiduously courting Moscow. Early last year, China National Petroleum Corporation, a wholly owned government outfit which accounts for 79 percent of domestic oil supplies, offered to take a major stake in Russia's energy industry.
The strategy made perfect sense. With vast oil and natural gas resources, Russia, already the world's single largest oil supplier, is a perfect match for its southern neighbor which looks set to soon become the world's biggest consumer. The Chinese understood only too well that Russia could not divert its supplies overnight, even if it wanted.
Since the 1960s, the bulk of Russian oil and gas has gone to Europe, Moscow's main energy market. And although there are vast proven reserves in eastern Siberia - much closer to the Chinese border - to exploit them will require a huge investment, particularly in new pipelines.
Beijing was prepared to give precisely such a commitment. During talks in Moscow last September, Chinese Prime Minister Wen Jiabao offered no less than $12 billion in financial loans and grants. The Russians smiled politely but offered no response.
Meanwhile, every Chinese effort to buy a stake in a Russian oil company has been rebuffed or obstructed through bureaucratic measures. And, to make matters worse, the Russians let it be known that, while considering the construction of a pipeline to China, they were also pondering a Japanese offer to construct an alternative pipeline to the Sea of Japan.
During the last few weeks, though, everything appeared to be changing. Having re-nationalized Yukos, Russia's second-largest oil company, President Vladimir Putin suddenly announced that he was considering inviting the Chinese to take a stake in its assets. Moscow even went a step further by specifying that China National Petroleum Corporation may be allowed to take a 20 percent stake in the old assets of Yukos. No wonder then that Khristenko was received with open arms in China last week.
But has there been a major breakthrough for Beijing?
Hardly.
It's just a continuation of the old Russian game with a few new twists. Russia clearly has an immediate political interest in suggesting that China could invest in its oil industry. Western shareholders who lost money after the state snatched Yukos back are now pursuing their claims through U.S. courts. By playing the China card, the Russians are maneuvering to deter the United States from pushing the legal process too far.
Secondly, Putin, who had previously opted for the pipeline to Japan rather than China, wanted to avoid upsetting Beijing any further. So touting the possibility of future Chinese investments in Russia's oil industry without making any specific commitment represents a clever exercise in political damage control.
But, when such immediate needs dissipate, the chances are that Moscow will remain opposed to forging deeper energy partnerships with China. The reasons for this reluctance, which baffle Beijing, are deeply ingrained in Russia's history and politics.
Siberia is sparsely populated, and for years the Russians have expressed fears for their territory because of what they claim is increasing illegal migration from neighboring China into the province. Just about the last thing any Russian leader would consider is granting China either exploration rights or a financial stake in Siberian oil fields.
Putin has been adamant about retaining absolute government control over his country's pipelines. It is considered a matter of national security. The Chinese offers to build new pipelines will therefore continue to fall on deaf ears.
Though the Russians are only too aware of China's growing importance, there are greater political considerations. Germany, Europe's pivotal state, is increasingly dependent on Russian energy supplies. This dependency has given Moscow a unique influence over European affairs, something which an energy link with China cannot offer. And oil deliveries to Japan, as well as the possibility of future direct sales to the United States, are more alluring than China.
In short, the strategic benefits of China are still considered too slender, if compared to the political advantages Russia derives from its existing customers. It's certain that China will get a slice of Russia's natural gas industry, the energy resource of the future. But the Chinese will receive less than a fifth of its eventual output.
So the China-Russia courtship will continue, but it seems that China is destined to remain the unfulfilled partner in the relationship.
The writer is director of studies at the Royal United Services Institute. - Ed.
By Jonathan Eyal
2005.01.24
koreaherald.co.kr |
