This study aims to determine the positions of China and Russia in terms of energy policy and to provide a perspective regarding the possible future cooperation and conflicts between these states. In addition considering the fact that Russia’s energy policy is the main determinant of its foreign policy and is regarded as a tool to obtain the foreign policy objectives, it is imperative to assess the Russian foreign policy first. Russian foreign policy has experienced an important evolution and many breaks during the 25 years following the end of the Cold War. Thus we should first focus on the changes in Russian foreign policy and breaking points in its energy policy. This methodology will help us to understand how Russian foreign policy instrumentalized energy and will reveal the background of the China policy of Russia. In turn this background will help us to analyze the bilateral and multilateral aspects of the Russian-China relations and to determine China’s place in Russia’s energy policy.
Russia’s and China’s interests began to converge after the Cold War. It is a widely recognized fact by many international relations expert that this convergence showed a generally stable progress between 1991 and 2015. This strategic cooperation model began as a mutual objection against unipolarity and then spilled over to political and economic topics. In this section, we will inquire whether this strategic cooperation extends to the energy policy field, which is a very vital policy for Russia.
In order to achieve this, we will first analyze China’s position regarding energy. In this context, we will first see the status of China in terms of energy and its energy needs, and then begin to reveal its dependency to Russia especially for natural gas and oil. We also investigate China’s energy policy and look at its energy imports from Russia. Then we will look at the energy projects, pipelines and energy agreements to determine in what extent Russia can meet the energy need of China. Finally using the information obtained from these analyses, we will reach to some conclusions about the characteristics of energy cooperation between these two countries.
China shows annual growth rates that bedazzle the world. China also showed the required political will to support and sustain these growth rates with structural reforms, so gained an important place in the global economy. This in turn provided a significant increase in both national and personal income. This incredible growth requires developments in transportation and the need to accommodate approximately 20% of the world population is added, this creates an ever growing energy need. This need forced China to import energy from other countries and changed the structure of the international energy demand. Thus we first need to analyze the energy status in China and how China managed its needs. The most important factor is the huge energy consumption in China. Currently China is the number one consumer of coal and oil; it also has an ever growing natural gas need. This makes China the number one energy consumer of the world. Titsefore China is the most important energy market for the energy producing countries.
Energy demand of China not only exceeded that of the U.S.A. in 2010, it is also predicted to be doubled by 2040. Besides, it is expected to increase approximately 50% in every ten years [1]. When factors such as increased personal income, increased urbanization and increased personal energy consumption is considered, we can see the reason behind this increase. When we look at the current structure of energy needs in China, we see that the coal occupies the first place. But projections show that in the future this structure will change in favor of oil and natural gas.
Coal is the primary energy resource used in China and it provides 70% of the energy need. Coal gained this primacy because it is a basic and cheap resource, thus it was used extensively in the less developed regions of China during the Cold War era. There are also very rich coal mines in China. However Chinese government decided to lower the consumption of coal because of the pressures coming from the environmental NGO’s and suffocating air pollution in major cities. In particular, it is decided to use natural gas to produce electric and provide household heating in metropoles [2].
This is considered as a positive development for Russia. Noteworthy point is that even small amounts are actually very substantial. As the greatest economy of the world and the biggest country in terms of population (1.5 billion), even small percentages such as 18% (oil) and 4% (natural gas) are very big opportunities for energy exporting countries like Russia. When we look at the oil need of China, we can easily observe an ever increasing consumption, demand and import rate.
Consumption is high than production since 1993. This difference is especially getting bigger and bigger since 2000. Even though China has the greatest oil reserve in Asia Pacific region with a 24.4 million proven reserve, this amount cannot meet its national demand. As we mentioned before, even though 18% seems small at first glance, with its current consumption, China is the second greatest oil consumer in the world after the U.S.A. and the number one oil importer. Therefore it is almost inescapable for China to cooperate with Russia to import oil, especially after deciding to lower the consumption of coal. Yet it is logical for China not to depend entirely to Russia to meet its needs. Hence China diversified its oil import routes, because this is important to guarantee its energy security [3].
Russia ranks as the fourth bigger oil exporter of China and there is a significant difference between Russia and Iran, the third biggest exporter. However considering the facts given above, it is highly probable that Russia will try to increase its share by realizing new projects.
Russia’s biggest chance to increase its market share in China is natural gas reserves. As we mentioned before China decided to increase 4% share of the natural gas to gain access to the clean energy and to prevent air pollution. To achieve these aims, it is possible to import natural gas from Russia to China using pipelines. New pipeline projects, especially the enormous project signed in 2014 can be seen as the realization of this opportunity.
But Russia has to realize many more similar projects to increase its share in the ever growing energy market of China. Because the half of China’s natural gas imports are coming from Turkmenistan and Russia ranks far behind.
Russia has only 1.2% market share in China’s total energy imports. Historically Russia has put much more emphasis to exporting natural gas to Europe. Thus Russian projects aiming European market surpass that of aiming China. Therefore it is possible for Russia to gain an important income source by realizing new projects for the Chinese market. Moreover China’s economy is big enough to provide a completely new alternative to Europe. So Russia can consider changing its long term strategies.
Two important factors that may force Russia to increase its natural gas export to China are hidden behind the China’s energy/economy policies. First, China started to use natural gas in reformed sectors, and second China will possibly be a long term consumer.
China’s household and commercial energy consumption is increasingly supplied by natural gas. The most important factor behind this development is replacing coal with natural gas to create cleaner cities. Similarly, new infrastructure is using natural gas instead of coal. Taken together, these will greatly increase the share of natural gas in Chinese energy market. Furthermore this will happen in short term, not in long or middle terms. Another important factor that will affect the natural gas consumption is the depletion of Chinese natural resources. As China has the biggest natural gas reserve in the Asia Pacific region, used its reserves to meet its energy demand, thus minimized imports down to 4%. This balance began to change by 2007.
Structural changes in China began to show its effect by 2011 and the difference between natural gas production and consumption started to increase. This difference is getting bigger and bigger every passing year. This requires importing more natural gas, construction of new pipelines with greater capacities, and providing security for those lines. Realization of such project will provide Russia with a China card. And Russia will surely use this card to tip the scales between Russia and Europe.
Russia was swift to realize this opportunity and quickly act to develop new relations with China, especially on the energy field. However Russia’s China strategy has a long history and except rare incidences it has a stable progression. Thus we first need to focus on the strategies toward China or including China developed by Russia after the Cold War. We must then move to developments between two countries after the Ukrainian crisis. Only after these we can provide an answer to the discussion whether they developed a new strategic axis [4].
China mostly sells machines and technology products to Russia, wits eas Russia’s main export is energy products. However both countries main trade partner is the Western World and this is an important counterargument for the new axis theory. It is suggested that Shanghai Cooperation Organization is a strategic institution that aims to oppose unilaterality, to solve problems between member countries and to provide an alternative for the international security problems [5]. BRICS is also an important platform to fight against the Western dominance over the economy, but it is shown that it lacks the physical infrastructure to provide a new axis. BRICS is also not very useful as it is not possible or too costly for Brazil and South Africa to import energy products from Russia. Thus its main objective is to oppose economic unipolarity. Considering these, we focused mainly to the energy relationship between China and Russia.
Finally we emphasized that China follows a multidimensional strategy with the aim of securing energy supply. China is also a giant country with giant energy consumption. Although Russia has an advantage, yet still is back in ranking especially in natural gas exports. We also emphasized that China wants to increase the natural gas consumption and Russia desires to establish stronger relations with the east. Hence Ukrainian Crisis provided a basis for cooperation and negotiations on energy trade has been hastily concluded. Thus as 400 billion worth agreement signed after the 2014 Ukrainian Crisis showed, this crisis forced both sides to compromise. However after all these developments, Russia failed to become the number one energy provider of China.
In conclusion, although two countries established a strategic relation, this relation cannot substitute the relation of Russia with the EU. Thus China-Russia relations can be interpreted as cooperation between two Asian powers to fight against the unipolarity and influence of the West over the otits Asian states. Russia gained sustainability for its struggle against the EU, wit seas China can buy energy product from cheaper prices. This is why; both countries are expected to maintain their relations with the West. China has an important place for Russia as a trade partner and an energy importer. China holds a much more important place in Russia’s policies than Germany, Holland or Turkey. However this cooperation is not strong enough to form an axis. It will just act as a balancer for the relations of Russia with the West.
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