A gas pipeline will not make friends with Russia and China
Are pipelines built to threaten democracies or befriend authoritarians? Judging from the responses to Russia’s two biggest gas export projects, it depends on where you are.
In Europe, the Nord Stream 2 gas pipeline, intended to double Moscow’s direct export capacity to Germany to 110 billion cubic meters per year, found itself caught in a geopolitical rivalry over Eastern Europe . Approval of the project was delayed for about six months due to a build-up of Russian troops near its border with Ukraine.
Governments in the United States and Eastern Europe fear that pipelines could exert a powerful leverage effect. If you cut a country’s energy supply, especially during the harsh winter months, you can bring it to its knees remarkably quickly. The problem for Moscow is that these are not precision weapons. Before the construction of the first Nord Stream pipe ten years ago, almost all Russian gas to Europe passed through Ukraine. This meant that it was difficult to threaten Kiev by turning off the taps without also making enemies of European governments later on. Having separate channels for selling gas to Ukraine and the European Union means Russia can choose which one it wants to threaten on any given day.
Take a look at what’s going on in Asia, however, and the picture turns around. Preliminary discussions on the Power of Siberia 2 gas pipeline to send 55 billion cubic meters of gas to China are progressing rapidly. Presidents Xi Jinping and Vladimir Putin discussed the project earlier this month and a feasibility study will be completed in a few weeks, according to Putin. The tip would help the two countries guard against tensions with the West, the Nikkei Asian Review wrote this month. While Nord Stream 2 is seen as a threat to democratic nations on the other end, Power of Siberia 2 is billed as something more akin to a marriage proposal, bringing two main authoritarian states closer together.
But this is not quite true. Nations, after all, have no permanent friends or enemies – only permanent interests. Russia’s interests are export earnings, and whatever leverage it may have on the nations on its borders. On this front, China and Europe are not that different.
While Europe’s 541 billion m3 of gas consumption is significantly higher than China’s 331 billion m3, the latter figure is expected to reach 526 billion m3 by 2030, as Beijing reduces its dependence on gas. coal-fired energy and develop its national chemical industry. With the two regions currently producing nearly 200 billion m3 at the national level, China is counting on an increase of more than half of its production to prevent it from developing European-style dependence on imported gas.
Seen in this light, the two Power of Siberia pipelines could give Russia a role in China’s gas imports almost as fundamental as it currently has for Europe. At present, China hardly buys piped gas from Russia, with LNG still accounting for a larger share of trade last year as the first line was brought to full capacity. When completed, however, they would transport 88 billion m3 combined, which is equivalent to 44% of an import sector of around 200 billion m3. It’s not that different from Europe’s relationship with Moscow, which supplies around 51% of its imported gas.
This is a reason for Beijing and Moscow to be cautious. Despite all the warm background music between Xi and Putin, China and Russia have rarely seen each other in the eye for a very long time. The terrible personal chemistry between Nikita Khrushchev and Mao Zedong and disputes over Stalin’s legacy contributed to a war along their northeastern border in the late 1960s and a period of frosty relations that never ended. ended only around the fall of the Soviet Union.
Rival spheres of influence in Central Asia – at present, a much larger source of gas for China than Russia itself – remain a constant irritant. The CR929, a Chinese-Russian twin-aisle airliner project rivaling the Airbus SE A350 and Boeing Co. 787, is years behind schedule due to disputes between officials on the two sides.
China may ultimately have the stronger hand. By building Power of Siberia 2, Russia will have a substitute market for the gas it would otherwise ship to Europe. But Beijing also has substitutes – notably green hydrogen, where the country’s low-cost wind and solar power and its vast capacity to manufacture electrolyzers to split water molecules into hydrogen and oxygen can give it a substantial benefit. Other countries, such as Qatar and Australia, will also seek a share of the Chinese gas market.
Russia would very much like to have the kind of influence over China that it currently enjoys over Europe. China will do everything possible to resist this situation.
David Fickling is a Bloomberg Opinion columnist covering commodities, as well as industrial and consumer businesses.
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