On December 2nd, Vladimir Putin and Xi Jinping launched the Power of Siberia gas pipeline via video link. Gas exports to China are intended to help Russia reduce its dependence on the European market. In the past ten years, Beijing has been bolstering its influence in the post-Soviet space. Why? Let us explain.
The Power of Siberia pipeline, worth $16 billion, has connected Yakutia’s gas fields with the Chinese border. It is supposed to deliver 38 billion cubic metres of gas to China. This is one-and-a-half times more than Gazprom supplies to Italy, but a half of what is transported to Germany, and five times less than it supplies to all EU member-countries.
Russia was the first country that Xi Jinping visited as Head of the Chinese Communist Party. Since 2013, Vladimir Putin has met with his Chinese counterpart 28 times. For example, in 2018, he only negotiated more frequently with leaders of post-Soviet countries, and the leaders of Turkey and Japan.
The Kremlin views China as a partner in the confrontation with the West, and a sales market with no threat of sanctions, as well as a source of new technology and investments.
Western analysts believe that China’s interests are more pragmatic – the country perceives Moscow as a supplier of necessary resources.
Almost three-quarters of Russian exports to China are oil and gas. In 2016, Russia became the main supplier of oil to China, overtaking Saudi Arabia.
For more than ten years, the Kremlin had been trying to agree on the construction of a gas pipeline with China, but in vain. In May 2014, however, straight after the annexation of Crimea and the sanctions’ rollout by the West, Vladimir Putin went to China, where he signed a contract for gas supplies for the next three decades.
In 2014, Russia decided to provide China not only with gas, but also with advanced weaponry. Earlier, Moscow had shied away from this, for fear of Chinese reverse engineering. In 2018, Russia delivered S-400 missile systems to China, and in 2015 – Su-35 fighter aircraft.
Russia supplies grain and poultry meat to China, while the Chinese grow some of their food products in Russia. According to a recent investigation by the BBC, Chinese farmers are renting 352,000 hectares in the Russian Far East, which is ten times the area of Malta. Timber is also brought from Russia to China; the deliveries are often illegal. What’s more, there are plans to transport drinking water from Kamchatka to China by tanker.
China sells electronics, machinery, clothes, cars, and plastic products to Russia, and also supplies its neighbouring country with technology it needs. For example, Russia purchases half of its oil‑production equipment from China. The Chinese state-owned company Huawei is developing a 5G mobile network, and recently supplied Russia with the face-recognition system that is now in operation on the streets of Moscow.
But China has not yet been able to live up to the Kremlin’s hopes for investment growth. In 2018, Beijing invested $2.6 billion in Russia, which was 60 times less than Cyprus, the major investor, and 9 times less than Germany or France. In the Russian economy, China invested even less than Kazakhstan and Ukraine.
To date, China’s largest investment has been its participation in the construction of the Yamal LNG and Arctic-2 LNG plants, as well as the Great Wall car plant launched in the Tula region in summer 2019.
However, Moscow believes that China will also start to invest in Russian roads and enterprises. In particular, they set great hopes on the One Belt One Road — the most challenging transportation project in history.
China wants to connect its industrial centres to the markets of Western Europe. Sea routes, railways, roads, pipelines and fibre-optic cables are expected to run across 68 countries, which contain two-thirds of the world’s population. The Chinese authorities intend to complete this corridor to Europe by 2049. In the first ten years, an astronomical sum of $9 trillion may be spent on its construction. This is nine times the cost of the entire Apple company, or 34 Russian state budgets.
Why does China require such a large-scale project?
Firstly, they want to win new markets. Goods can be delivered to Europe by land within two weeks, which is twice as fast as by sea.
Secondly, Beijing is nurturing hopes that the megaproject will contribute to speeding up the Chinese economy, since its growth is slowing. Ten years ago, China’s GDP increased by 10% per year, but in recent years, its GDP rate has been just 6%.
Thirdly, the One Belt One Road is aimed at making China the dominant power in Eurasia. Beijing will conclude free-trade deals with the countries along the new Silk Road, and the duty-free exchange of goods will definitely strengthen China’s influence over those countries’ economies and politics.
Alyaksandr Papko belsat.eu
