The Not-So-Mighty Russia-China Gas Deal
05/23/14
Paul J. Saunders
Energy, Russia
Why shifting from celebratory toasts to moving gas out of the ground could prove challenging.
This week’s 30-year $400 billion Russia-China natural gas deal
has justifiably attracted considerable attention for both its scale and
its symbolism. Indeed, it is an important agreement that could have
profound consequences. Nevertheless, there may also be less to the
immediate arrangement than meets the eye.
On
the surface, the agreement appears to be a major accomplishment for
President Vladimir Putin and for Gazprom, Russia’s state-controlled
natural-gas monopoly, even if the company made price and other
concessions to secure the agreement with China National Petroleum
Corporation, China’s largest energy producer. Mr. Putin accurately
described the deal as "the biggest contract in the history of the gas sector of the former USSR"
and, as this thinking goes, artfully deflected Western efforts to
isolate Russia politically or economically over the annexation of
Crimea, implied that a new Moscow-Beijing axis could produce a global
political realignment, and secured an important new role for Gazprom in
Asia’s vast energy markets.
Some
appropriately question just how much Moscow had to give away—Russia
needed this deal, and international observers expected it, so failure
could have left the Kremlin looking somewhat deflated. The fact that the
Russian president himself acknowledged that the Chinese had been “difficult, hard negotiators”
and that the final pricing appears to be below what Gazprom originally
sought adds weight to this. Others speculate whether it is really in
Russia’s national interest to be too close to China or express
skepticism that Moscow and Beijing can ever get along due to mutual
suspicion and competing aims. But these are long-term questions and may
not be answerable until after Russia, China, Europe, Asia, the United
States and others have already experienced the consequences.
Read full articlehttp://nationalinterest.org/feature/the-not-so-mighty-russia-china-gas-deal-10518
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