Publication: Eurasia Daily Monitor Volume: 2 Issue: 181

While Moscow reiterates its pledges to beef up Russia’s strategic partnership with China, some Russian officials are warning that Russia would not accept the role of raw materials supplier for China’s energy-hungry economy.

As Sergei Mironov, chairman of the Russian Federation Council, traveled to China September 25-26, official pronouncements appeared almost exclusively optimistic. Chinese Prime Minister Wen Jiabao told Mironov that “further enhancement of the Sino-Russian relationship is in line with the current situation and the development needs of the two countries.” The bilateral relationship “has entered a new era of development since the two countries established a strategic partnership,” he said. Wen also suggested promoting bilateral ties in line with the China-Russia “Joint Declaration on the World Order in the 21st Century” signed this summer.

Mironov emphasized that Russia has made it a priority to strengthen Russia-China relations, including cooperation with China in the high-tech sector and natural resource development. Mironov said Russia would encourage and support Russian companies to boost bilateral economic and trade cooperation (Xinhua, September 26).

At a meeting with Mironov, Chinese President Hu Jintao also indicated an interest in further developing the strategic partnership between the two countries (Interfax, Xinhua, September 26).

But alongside these upbeat statements, Russian officials have made clear that Moscow would not accept a subordinate role as a source of raw materials for China. While Russia should utilize its comparative advantage in having enormous natural resources, should use this opportunity to develop manufacturing and technology, explained the Russian Ambassador to China, Sergei Razov. “Of course, an abundance of raw materials is our advantage, which we should use. However, this does not mean that, in the long term, Russia can limit itself within the role of a supplier of raw materials for the dynamically developing Chinese economy,” Razov told participants at a Russian-Chinese inter-regional economic cooperation forum in Dalian.

“Raw materials have been dominant in the structure of Russian exports to China. Machinery and equipment account for no more than 3% percent of all exports,” said Razov, “while oil and oil products, ferrous metals, timber, and chemical products account for 70%.” Furthermore, “I believe the current trade structure in general and Russian exports in particular do not fully reflect the real potential for cooperation, and it is important to take more joint efforts to diversify trade,” Razov advised (Interfax, September 26).

Russian companies quickly moved to support Moscow’s eagerness to boost high-tech cooperation with China. The Ilyushin and Tupolev corporations, for example, have offered China a series of joint projects to develop new civilian aircraft, according to Ilyushin deputy chief Vladimir Belyakov, who also attended the Dalian economic cooperation meeting. He mentioned the MS-21, a medium-range plane that is supposed to replace the Russian-made Tu-154s. “If everything goes according to plan, the first new airplanes will take to the skies some time in 2012,” Belyakov announced. Russia is offering the project on a shared financial risk basis, with up to 400 aircraft to be manufactured in China. “Neither Boeing nor Airbus has offered China such terms,” Belyakov added (RIA-Novosti, September 24).

Russia has long eyed China’s lucrative aviation market, as well as other sectors as potential buyers of Russian machinery. In early September, Russia clinched a major deal to supply Il-76 transport airplanes for the People’s Army of China.

On the other hand, Moscow recently indicated that gas from the Kovykta deposits would be used in the domestic market, instead of exported to China, presumably to demonstrate its reluctance to become China’s raw materials supplier.

Speaking to journalists after a meeting to discuss the development of Irkutsk region, Russian Economic Development and Trade Minister German Gref explained that the ultimate route for a pipeline from the Kovykta gas field would be dictated by the market. “Kovykta gas will flow to the marketplace. If that place is China or Korea, then good, if it is the domestic market, even better,” Gref said (Interfax, September 21).

RUSIA Petroleum has invited Gazprom to join the project. While Gazprom has yet to reveal its final position on Kovykta, the Russian gas giant has indicated plans to funnel Kovykta westward. Gazprom has been understood to view the Kovykta gas field as an alternative source of gas supplies to European Russia and exports to Western Europe in order to forestall possible gas shortages.

Reserves in the Kovykta fields are estimated at about 2 trillion cubic meters (more than 70 trillion cubic feet) of gas. RUSIA Petroleum holds the license to develop Kovykta. Its main shareholders are TNK-BP (62.42%), Interros (25.82%), and the Irkutsk regional government (11.24%).

In the meantime, TNK-BP has signaled that it prefers the eastward route for Kovykta exports. TNK-BP is ready to begin a feasibility study on the Kovykta project, Oleg Rumyantsev, advisor to the TNK-BP president, told the Dalian forum. “A key to developing East Siberian fields is the creation of the Asian energy export corridor from East Siberia to northeast China,” he said. Priority should be given to integrated Sakhalin and East Siberian gas projects,” Rumyantsev added (RIA-Novosti, September 24).

Russia’s stated reluctance to become China’s raw materials supplier is an indication of Moscow’s uneasiness about fully committing itself to partnership with Beijing. It remains to be seen whether the Kremlin would continue practicing its trademark ambiguity, even in relations with its “strategic partner,” Beijing.