China and Russia will not ship oil and gas across a transit country. Both countries have a solid international reputation in terms of their solvency and credit worthiness. They do not need to fear potential “gas wars,” such as those that marred Russia’s relations with Ukraine and Belarus.

       It's obvious that Russia is the world’s sole energy superpower, in terms of energy resources and exports, but it has other advantages as well.

       Energy self-sufficiency and the continuing growth of the economies in Asian countries, as well as growing energy needs and proximity to production sites and consumers make Asia a highly promising market for Russian energy resources exports.

       Oil and gas production and the development of the energy market should be coordinated in time. Faced with a growing energy demand in Western Europe and expanding exports to the West, the Russian authorities are acting wisely by simultaneously developing oil and gas deposits in East Siberia and the Far East, and conducting marketing operations and strengthening Russia’s foothold on the Asian energy markets. Sakhalin-1, -2 and -3, the Kovykta gas condensate deposit, the East Siberia-Pacific Ocean oil pipeline and an offshoot from Skovorodino to China, as well as preparations to build a Russian-Chinese gas pipeline are evidence of Russia’s far-sighted view of its further development of the industry and the country.

       Oil and gas export and the laying of gas pipelines are not isolated or minor deals, but a long-term process that requires a thorough analysis of their impact on the environment and the socio-economic development of the regions involved, along with complex talks and a huge investment.

       This is why Russia’s strategy in Asia, like its energy policy in other parts of the world, is designed for a long-term perspective.

       Furthermore, Russia needs to develop close partnerships for cooperation, and to ensure that its partners have access to energy exploration and development projects and take part in the transportation, processing and distribution of energy resources. By so doing, Russia will create the conditions for mutual dependence and, as much as possible, for establishing joint ventures and ensuring participation in share capital so that partners are equally involved in projects and share the responsibility.

       Third, by developing its energy resources in the eastern parts of the country and strengthening its foothold on the Asian markets, Russia will establish conditions for the socio-economic development of its Siberian and Far Eastern regions, and for strengthening strategic security in the eastern region.

       Fourth, competition between major Asian economies and between Asian and European markets of energy imports will facilitate the development of various markets and help Russia to make strategic partners and receive a fair price for its exports.

       The Russian gas pipelines in the European and eastern parts of the country have not yet been integrated. The strengthening of energy cooperation with East Asia not only will not weaken, but on the contrary, will stimulate energy cooperation between Russia and the European Union. If demand grows in the East, Russia will be able to integrate its eastern and western gas pipelines in order to optimize energy sources and thereby avoid the consequences of a potential decline in gas imports by Western Europe; after all, “when the sun sets in the west, dawn begins in the east.”

       Russians are as intelligent and pragmatic as Asians. They understand that “strategic partnership is an expensive commodity, but not as expensive as national interests.” For Russia, the higher the export price, the better, and the more customers it has the greater profits it will earn. There are many examples of this, such as oil and gas contracts between China, Kazakhstan and Turkmenistan, which stimulated the construction of the Russian-Chinese gas pipeline and developed the roadmap for the construction of a gas pipeline across North and South Korea. This in turn promoted talks between China and Russia on the construction of a natural gas pipeline from Russia to China.

       China and Japan are currently Asia’s largest economies. China imports 50% of its oil and gas, whereas Japan’s oil and gas imports satisfy 99.7% and 96% of its requirements, respectively. East Asia’s third largest economy, South Korea, is also a major importer of energy resources. Russian-Japanese economic cooperation is limited by an acute territorial dispute. Russia’s energy cooperation with South Korea is hindered by inadequate transportation resources, a problem which could be resolved by making an agreement with a third, transit country. But the road of Chinese-Russian energy cooperation is paved and well lit.

       As for the Russian-Chinese gas pipeline, about which there have been several years of fruitless discussions, I think there is the potential for success. The leaders of the two countries have made a political decision and are gradually smoothing over their differences with regard to pricing, which means that there are conditions necessary to reach an agreement soon that will satisfy both countries.

       China and Russia will not ship oil and gas across a transit country. Both countries have a solid international reputation in terms of their solvency and credit worthiness. They do not need to fear potential “gas wars,” such as those that marred Russia’s relations with Ukraine and Belarus. Furthermore, both countries are diversifying their oil and gas supply routes and are demonstrating flexibility, so they are unlikely to bring matters to a deadlock.

       Views expressed are of individual Members and Contributors, rather than the Club's, unless explicitly stated otherwise.