China’s ambassador to Russia, Liu Guchang, recently said that there are broad prospects for cooperation on oil and gas between the two countries. Sure there are.
“Important progress has been made in China-Russia energy cooperation, typically in oil and gas sectors, and the modalities of cooperation have become more diversified,” Liu said.
“There are broad prospects for energy cooperation between China and Russia that has been reciprocal, mutual, beneficial, and marked with a win-win solution,” he told some 40 representatives from major Russian and Chinese oil companies, as well as cultural figures.
Shi Ren, a writer for China’s official Hong Kong Zhongguo Tongxun She newspaper, has other thoughts about the level of cooperation the Chinese are receiving at the hands of the Russians, especially when it comes to the 4,700-km East Siberia Pacific Ocean pipeline now under construction.
Touching nerves
In fact, according to Shi, oil has recently “touched the nerves” of the two countries most strongly, especially when it comes to the ESPO line and the 40-km spur the Chinese want from it to their border.
In November, the premiers of China and Russia agreed that both sides would ensure that the construction of the branch pipeline extending to Daqing, China, would be completed and the pipeline put into operation by the end of next year.
“However,” Shi says, “because the international price of crude oil has tended to rise in a sustained manner, the Russia side said later that no big progress will be made in the oil pipeline between the companies of the two countries.”
Shi even refers to one Chinese observer who pointed out that the move made by the Russian side is close to “hoarding and speculation”—a major crime by Chinese standards.
Pacifying the beast
“However,” Shi says, “in order to pacify this energy magnate and to maintain good relations of cooperation in energy, the Chinese side may give the opposite side appropriate subsidies.” In plain English, it is called paying through the nose, and Shi is well aware of the reasons why.
“Russia is the world’s biggest country in the production of natural gas and the second biggest in the production of oil, while China has become the world’s second biggest country in the consumption of energy and the second biggest country in importing oil,” Shi says.
And things are not going to get much better.
In 2006, Russian crude oil accounted for about 11% of China’s total imports of crude oil. According to an agreement signed between the two sides, Russia will provide China with 20% of its imported energy by 2011.
That means Russia will become China’s biggest energy supplier. By then, the Chinese really will have learned a lot.
Indeed, as many of us know already, they will learn what it means to be over a barrel.