Sino-Russian energy relations reversed: A new little brother

- The article evaluates Sino-Russian energy cooperation with four crucial issues in mind: ownership of the Russian upstream resources, and Chinese technical participation in the plans to exploit these resources; ownership and financing of the pipelines linking Russian oil and gas to China; the decision on the pipeline routes; and the decision on the price.
- The article reviews the details of the recent Sino-Russian gas deal as well as the preceding oil agreements.
- It points out that Sino-Russian gas cooperation followed a different path than the two giants' oil trade due to the intrinsic differences between oil and gas as commodities.
- The next section discusses the so-called Altai pipeline. The article then focuses on Vladivostok LNG, a giant project that is likely to be substituted with a third gas pipeline to China.
- Lastly, the article reviews what the author believes to be the most likely future developments in Sino-Russian energy cooperation.

In the wake of Russia's souring relations with the West over Ukraine, the clinching, on May 21, 2014, of the long-anticipated Sino-Russian gas deal has prompted a flurry of speculation on the deal's implications, not only for global energy markets but also for geopolitical security among the big powers in the rapidly changing world order. In Moscow, officials insist that the deal with China is only part of a more overarching “pivot to Asia.” In fact, in 2013, Russia sent more than 30% of its oil exports-more than 1.2 million barrels a day, the most ever-to Asia. But almost half of that energy is heading to one place in Asia: China, the biggest beneficiary of the deal. Russia's heightened tensions with Europe have created very favorable conditions for Chinese energy diplomacy with Russia. As Moscow's relations with the West deteriorate, Putin seeks to show the world and the Russian people that he has alternative friends to the East. Be that as it may, the incentives leading to the mega deal were in place much earlier.The article is laid out as follows. I review the details of the recent Sino-Russian gas deal and also of the preceding oil agreements, as well as their implications for Sino-Russian energy cooperation. I point out that Sino-Russian gas cooperation followed a different path than the two giants' oil trade for one crucial reason: the intrinsic differences between oil and gas as commodities. Unlike oil, gas is comparatively easy to produce but expensive to transport and difficult to replenish. As a result, gas can be much more readily used as a strategic policy tool. After reviewing the differences between oil and gas trade, the next section discusses the so-called Altai pipeline. I then focus on Vladivostok LNG, a giant project that is likely to be substituted with a third gas pipeline to China. Lastly, I review what I believe to be the most likely future developments in Sino-Russian energy cooperation.The political economics of the Sino-Russian energy relations involves four crucial issues: ownership of the Russian upstream resources, and Chinese technical participation in the plans to exploit these resources; ownership and financing of the pipelines linking Russian oil and gas to China; the decision on the pipeline routes; and the decision on the price. Evaluating Sino-Russian energy cooperation with these four crucial issues in mind, I conclude that Russia and China will continue to move toward greater energy trade integration. The benefits will, however, be increasingly uneven, to China's advantage.