Publication: Eurasia Daily Monitor Volume: 2 Issue: 32

As maneuvering continues around Russia’s major oil and gas pipeline projects, Russian experts seek to clarify trends in the ongoing multilateral energy game. There appears to be a consensus that Siberia’s hydrocarbon riches are set to become an important source of energy supplies for Northeast Asia, notably China. Despite the recent decision to build a pipeline to Japan, not China, Russian experts claim that Beijing could still be interested in oil pipelines from Siberia.

This changing landscape provided the background for an academic conference in Moscow on February 10. Jointly sponsored by the oil giant BP and the Moscow State Institute of International Relations (MGIMO), the conference focused on “Energy Parameters of International Relations in Northeast Asia.” Speaking at the gathering, Alexei Voskressenski noted that Russia’s natural resource reserves have global significance, because they are important for both East and West. They are also attractive to China, which is working to secure its energy needs by assigning its state-controlled firms to consider energy imports as well as investments outside China, Voskressenski explained.

International oil players agree that Siberia’s hydrocarbon riches are now attracting attention, mainly due to their proximity to the rapidly growing Northeast Asia energy markets. As BP is focusing on oil and gas in new regions, Russia is increasingly important to us, said Billy Mitchell, President of BP Korea.

China considers the security of oil supplies to be a matter of major concern. Apart from risks related to political destabilization in the Middle East, China’s maritime oil supply routes now also face a terrorist threat, argues MGIMO’s Vyacheslav Belokrenitsky. Therefore, oil and gas pipelines from the north now look safer for China, although a planned oil pipeline from Kazakhstan would also run through Xinjiang, he said.

Consequently, presenters indicated that the need to secure energy supplies tends to affect Chinese policies in Central Eurasia. Beijing could move to boost its influence in Central Asia and Eastern Siberia to satisfy its energy needs, according to Belokrenitsky. The Shanghai Cooperation Organization (SCO) represents an important move towards institutionalizing this trend, Voskressenski said.

However, experts concede that Moscow’s December 2004 decision to approve a Japan-bound East Siberia-Pacific oil pipeline did little to encourage China. The fate of the Angarsk-Daqing pipeline project has demonstrated that the Russian market remains risky for China, said Sergei Luzyanin. Apart from energy and military supplies, he argued, Russia is not an economic priority for China.

Although Russia now has only a vague commitment to build a branch from the Pacific pipeline to China by 2020, Moscow has not completely ruled out a pipeline branch to China. Analysts argue that the lack of an oil pipeline to China may eventually create negative repercussions for Russian hydrocarbon export plans in Northeast Asia.

Russia now must take into consideration the possibility that China and Japan could eventually clinch a deal and re-orient their respective energy needs towards the oil rich Central Asian and Caspian regions, according to Sergei Trush. This scenario would marginalize Russia, which would be left without access to energy markets in Northeast Asia, he said.

On the other hand, Moscow understands that Asia’s ongoing rivalry for energy supplies makes any possible deals between China and Japan unlikely in the immediate future. The current level of multilateral energy cooperation in Northeast Asia is still far from adequate, Voskressenski said, referring to competition between China and Japan over Russia’s pipeline routes.

In order to deal with oil export challenges in Northeast Asia, MGIMO’s experts suggest coordinated efforts among the former Soviet oil-producing states. Russia and Kazakhstan could eventually form a sort of oil consortium that could help both Moscow and Astana to secure a niche on the Chinese energy market before pipelines to China are built, Luzyanin suggested.

Moreover, some Russian experts question the wisdom of planning pipeline mega-projects to connect Siberia and Russia’s neighbors in Northeast Asia. In the past three years, China has dramatically boosted its domestic coal output and consumption, seemingly a move towards energy self-reliance, argued Alexander Salitsky. Given this trend, Russian oil supplies to China by rail — being flexible in terms of volume — would remain economically viable, while oil and gas pipelines from Siberia to China could prove an expensive economic mistake, he said.

In the meantime, the Northeast Asian energy game is also seen as a part of China’s larger geopolitical strategy. Beijing views multi-polarity as means to achieve its geopolitical and economic goals, argued Voskressenski. China is now challenging the concept of weakening state sovereignty in the wake of expanding globalization. However, Voskressenski said, a self-reliance model for China seems no longer feasible, as Beijing has to work out its development strategy bearing in mind the country’s growing demand for imported energy resources.

Hence, most Russian experts consider it unlikely that Beijing will adopt an energy strategy based on self-reliance. Therefore, China is still seen as an important partner in the drive to utilize Siberia’s hydrocarbon riches.