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China, Russia Benefit from Energy Cooperation
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By Lu Nanquan

Sino-Russian energy co-operation entered a new phase during Russian President Vladimir Putin's visit to China in March. During his trip, a package of agreements and protocols on energy co-operation were signed. In addition, the China-Russia joint communiqu defined the two countries' energy co-operation as a vital aspect of their strategic co-operative partnership.

There are a number of reasons for this increasingly close co-operation.

First, Russia enjoys abundant energy resources and is the world's leading exporter of energy resources, while China is the world's second-biggest oil consumer and the second-largest petroleum importer.

These factors constitute the basis of Sino-Russian energy co-operation.

Second, the world's energy exporters are trying to diversify the recipients of their supplies. At the same time, energy-importing nations are also seeking to diversify their suppliers. Both sides are seeking greater energy security.

In the case of Russia and China, the two countries are each other's biggest neighbor. These geographic advantages are multiplied by the fact that China has a massive demand for energy.

In addition, Russia's energy exporting strategy is tilting eastwards.

Russia's energy resources, particularly its petroleum and natural gas, give the nation a great deal of diplomatic leverage.

Realizing that a single export destination is not in Russia's long-term interests, the nation has been trying to diversify its export destinations. Looking eastward partially reflects this shift in Russia's energy exporting strategy.

Some Russian researchers, for example, maintain that the nation could free itself from its dependence on a single export destination if its natural gas exports to Asia could account for 20 to 30 percent of its total export and it got tougher in negotiations with European importers.

Apart from this, Asia is one of the most economically dynamic areas in the world today. Strengthening energy co-operation with this region, including China, is of great economic significance for Russia.

Overall, Russia's shifting of its energy exporting focus to Asia is by no means an economic expediency. Instead, it is based on long-term strategic calculations.

Sino-Russian energy co-operation is not limited to oil. It also includes natural gas, electricity and nuclear energy.

For example, a memorandum of understanding was signed during Putin's China visit between the China Petroleum and Natural Gas Group and Russia's Natural Gas Corp Ltd on Russia supplying gas to China. According to the agreement, Russia will start supplying 30 to 40 billion cubic metres of natural gas yearly to China from 2011, via two trans-Siberian pipes.

This Russian gas will cross the border at China's Xinjiang Uygur Autonomous Region, and will eventually be incorporated into the country's grand undertaking of sending natural gas from the country's energy-rich west to the economically prosperous east. Senior Russian officials have also suggested that the two countries could embark on joint ventures on the continental shelves under the Russian jurisdiction to produce liquefied natural gas.

The two countries are also considering co-operation in power supply projects. This co-operation will take place in three stages.

First, electricity will be transmitted from Russia's Far East to China's Heilongjiang Province by 2008, with an annual volume of 3.6 to 4.3 billion kilowatt-hours.

Second, China's Liaoning Province will receive 16.5 to 18 billion kilowatt-hours of Russian electricity annually by 2010.

Third, the whole of Northeast and North China will receive Russian electricity by 2015. By then, China will receive 30 billion kilowatt-hours of electricity from Russia's Far East.

The nuclear power sector is also a venue for Sino-Russian energy co-operation. China plans to build at least 30 nuclear plants over the next 15 years, and Russia is ready to take an active part in this massive undertaking.

As a matter of fact, Russian nuclear power corporations are bidding for the construction of nuclear reactors in China, competing with such global players as US firm Westinghouse.

The laying of oil pipelines is already on the agenda. Once the first-phase construction of Russia's Far East oil pipeline, which broke ground in April, is completed, a branch line to China is likely to be built, which this author believes could send 30 million tons of crude oil to China annually.

Taking into account the twists and turns regarding construction of the oil pipeline over the past few years, the uncertainty felt by some Chinese is quite justified.

While refraining from blind optimism, we have no reason to be pessimistic because the prospects for Sino-Russo energy co-operation are extensive.

The author is a researcher with the Institute for Russia, East Europe and Central Asia Studies under the Chinese Academy of Social Sciences.

(China Daily July 6, 2006)


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