What pushes Beijing and Moscow to sign century-long energy contracts?
25.10.2014 13:29

Russian Prime Minister Dmitry Medvedev came to China in October with a two-day official visit. During his stay in Beijing, he talked to Chinese Internet users at the Xinhua news agency, saying that Russias oil major Rosneft and Chinas Sinopec had signed a memorandum that envisaged an increase of Russian oil supply to China by 10 million metric tons a year, which would amount to 100 million metric tons in ten years. The total cost of this supply will reach $85 billion.

This news soon topped the news rating on Chinese websites and next day appeared on the first pages of some Chinese newspapers.

The energy sector is definitely a very promising area of Chinese-Russian cooperation, as the Russian premier said. This year, the parties have signed a number of unprecedented documents in the sphere. The $270 billion contract for supply of 46 million metric tons to China for 25 years deserves a separate mentioning. It is no wonder that Russian Energy Minister Alexander Novak has described 2013 as a breakthrough year in energy cooperation between Moscow and Beijing.

China and Russia have cooperated in the strategic energy sphere for a long time, but it was only at the beginning of this year that this cooperation acquired special dynamics. Chinese experts point out that China and Russia mutually complement each other in the sector, which guarantees mutual benefits from bilateral cooperation, and name several reasons that have caused bilateral energy interaction to grow more active.

First of all, China, as the worlds biggest energy consumer, can become the best option for Russia to increase its hydrocarbon exports as demand for Russian oil and gas is falling on its traditional European market and the slate gas revolution is beginning to transform the situation on the global energy market. Professor Wang Zhen from the China University of Petroleum says that Russian oil production has been growing steadily since 2000, and the bulk of the increase comes from the Far East. Because of it, entering Asian markets, especially China, is the optimal choice for Russia.

Second, money received from pre-paid contracts for energy supply to China may help Russia to overcome its economic difficulties. The country is now witnessing the most severe economic winter since the financial crisis of 2008. Feng Yujun, director of the Institute of Russian Studies of the Chinese Academy of Contemporary International Relations, says that taking up markets in Asia Pacific, especially in China, is Russias strategic task, fulfillment of which will ensure its financial stability and implementation of the promised social guarantees.

Third, China, in its turn, wants to diversify channels of energy supply, so development of energy cooperation with Russia will guarantee its energy security. Let me recall that in 2012 Chinas dependence on imported oil reached 58% and on imported gas 30%. Wang Zhen emphasized the breakthrough that had been achieved at the Chinese-Russian gas talks, saying that it would contribute to energy reconstruction and environment protection.

Dmitry Medvedev recalled that Russia had plenty of energy resources and China a huge sales market. In this connection, energy cooperation between Beijing and Moscow will benefit both countries and their population.