In the year since Russia and China signed a landmark $400bn natural gas pact in May 2014, rapid developments in the energy sector and the geopolitical situation offer a chance to re-examine the deal. Indeed, the aftermath of the pact saw a return to a world of cheaper oil—a situation driven by a number of factors outside of Russia’s control. The buffeting winds of broadbrush western sanctions have deepened the uncertain fiscal outlook for Russia’s hydrocarbon-driven economy, calling its financial resilience into question.
We must ask whether Russia’s aspirations to make itself into an Asian power are doomed to failure. In lieu of infusions of vital technology from the west, Moscow’s ability to honor the existing contracts with China remains unclear. In fact, despite grandiose plans, great political fanfare and the narrative of an emerging strategic alliance between Beijing and Moscow, any benefits of the progressively deepening trade integration will be increasingly uneven—and in China’s favour.
Russia resurgent?
After the Sino-Soviet split came to an end in 1991, Beijing began to express interest in Russian oil. In 1996, Boris Yeltsin visited China for the second time. The atmosphere was cordial, but no energy deals accompanied the florid rhetoric. Only with time—the gradual onset of domestic calm for post-Soviet Russia and the unbridled growth of China’s gas-guzzling economy—did trade in oil increase to significant levels. Between 2000 and 2010, Sino-Russian trade increased nearly tenfold, reflecting an increased demand for Russian oil.
