Russia has one-fifth of the world’s global oil reserves within its borders, but much of its energy potential is untapped. Ensuring that energy exports remain a viable source of revenue relies on expanding extraction projects into the Russian Far East, thus requiring foreign investment.
By Benjamin Hawkin
Russia is in the unique position of being both one of the world’s strongest energy producers and being overly reliant on this single sector. Russia has one-fifth of the world’s global oil reserves within its borders but is also strictly dependent on the profits that come from it [1]. In 2014 these revenue streams accounted for more than 50% of the Russian federal budget revenue [2]. The Russian Far East, where roughly a third of confirmed natural gas supplies within Russian territory lie is underdeveloped and underpopulated. As a result, much of its energy potential is untapped. Ensuring that energy exports remain a viable source of revenue relies on expanding extraction projects into this region, thus requiring foreign investment. Moscow feels that energy security is imperative to maintaining its wider national security and has stressed this in recent strategy documentation [3]. Therefore, the Russian Federation must diversify its export energy market to include Pacific partners, primarily China, and use foreign investment to unlock untapped reserves in order to meet its strategic security needs.
The People’s Republic of China has had an incredible appetite for energy resources following its vast economic expansion. Despite being one of the world’s strongest oil and gas producers, China will need to import 80 and 50 per cent of its needs respectively for these energy resources by 2030 due to its staggering growth [4]. It has not been able to supply itself on its own. Russia has been more than happy to meet China’s energy supply needs in exchange for investment loans with favourable terms [5]. Since 2000, Russia has seen its share of Chinese oil exports increase by more than tenfold [6]. China, a financial power with a need for vast amounts of energy, has found its jigsaw piece in Russia, an energy power with a need for investment.
The danger from Moscow’s perspective is one of over-reliance on Chinese loans and as a result becoming overly exposed to Beijing’s agenda. This relationship is characterised solely by mutual interests. Leading topical scholar Bobo Lo’s term ‘Russian-Chinese axis of convenience’ defines this most aptly [7]. Cooperation between Russia and China in an energy context is an official priority within the bilateral strategic partnership. However, Russia has proven in the past to be unreliable, for example by stalling during the ESPO pipeline process to maximise its profits. The history of mistrust between the two on previous gas projects could lead to a Chinese objective of severing dependency on Russian resources. In addition, China has also stated its goal of reaching a carbonless economy, this will no doubt impact energy imports from Russia. [8].
Over-reliance on the Chinese energy market and foreign investment in the long-term will make Moscow strategically vulnerable and more coercible to Beijing. The two are not traditional allies, but Russia will become more susceptible to pursuing Sino-centric policies and exhibit support on the international stage if current trends continue. Russia’s pragmatism towards China will be impacted by the oil-for-loans relationship; China’s desire to diversify its import portfolio and develop its own extraction technologies may force Russia to abandon its cautiousness to keep its export bedrock.
Sources:
[1] Parson, Joe. 2016. "The People's Republic Of China-European Union-Russian Energy
Security Triangle". International Social Science Review 92 (1). 1-13.
[2] Røseth, Tom. 2017. "Russia’s Energy Relations With China: Passing The Strategic Threshold?".
Eurasian Geography And Economics 58 (1): 23-55. doi:10.1080/15387216.2017.1304229.
[3] The Russian Federation (Presidential Edict). 2015. "Russian National Security Strategy".
Moscow.
[4] Godzimirski, Jakub M. 2014. "Russia’s External Energy Strategy: Opportunities And Challenges
In The Next Twenty Years". In Russian Energy And Security Up To 2030. London: Routledge. 216-226.
[5] Røseth, Tom. 2017. "Russia’s Energy Relations With China: Passing The Strategic Threshold?".
Eurasian Geography And Economics 58 (1): 23-55. doi:10.1080/15387216.2017.1304229.
Røseth, Tom. 2018. "Moscow’s Response To A Rising China". Problems Of Post-Communism, 1-19.
doi:10.1080/10758216.2018.1438847.
[6] Godzimirski, Jakub M. 2014. "Russia’s External Energy Strategy: Opportunities And Challenges
In The Next Twenty Years". In Russian Energy And Security Up To 2030. London: Routledge. 216-226.
[7] Lo, Bobo. 2008. Axis of Convenience: Moscow, Beijing, and the new geopolitics.
Brookings Institution Press, Washington, D.C. 173-196.
[8] Parson, Joe. 2016. "The People's Republic Of China-European Union-Russian Energy
Security Triangle". International Social Science Review 92 (1). 1-13.