Sino-Russian gas cooperation in OBOR: Infrastructure investment is the key

Ka-ho Yu's picture
Ka-ho Yu, Research Fellow, Center for International Energy Security Studies, Chinese Academy of Social Science
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Since the Sino-Russian gas deal signed in May 2014, Sino-Russian gas cooperation has witnessed many ups and downs. Russia has been striving hard to carve out a niche in Chinese energy market but the process is not that effective. While Russia was prioritising the short-term result, China was chasing the long term target. The future of Sino-Russian energy cooperation is intertwined with the process of One Belt One Road Initiative (OBOR).

As a development strategy and framework with strong geopolitical and geo-economical dimension, OBOR aims at promoting interconnectivity and cooperation in infrastructure, policy, trade, finance and culture among Eurasian countries. The implementation of OBOR is expected to involve huge investments and industrial integration, prioritising infrastructure projects. As such, transnational gas cooperation, especially those with infrastructure construction and industrial access, is an important mean to facilitate OBOR. Sino-Russian gas cooperation could fit in this new initiative well. It is also notable the energy cooperation in OBOR is prioritising infrastructure construction instead of merely gas import.

As stated in the “Vision and Actions on Jointly Building Silk Road Economic Belt and 21st Century Maritime Silk Road”, energy cooperation in OBOR emphasises industrial integration instead of merely resources imports. In other words, its strategic focus has transformed from quantitative (e.g. amount of oil imported) to qualitative (e.g. industrial upgrade). The current energy security challenges China facing do not primarily lie merely in the contradiction between the general supply and demand, but the diversification of source and transportation route as well as the structural contradictions caused by the need of balance between economic growth and sustainable development. Moreover, while China’s economic growth is decelerating, its drivers are shifting toward consumption and efficiency gains. As a result, unlike the past, there is less anxiety among Chinese leadership about securing energy supplies to fuel its rapid economic growth. Instead, there is more concern about seeking new markets overseas for Chinese industries suffered from China’s economic slowdown. Although facilitating the import of energy resources is not a top priority of OBOR, energy cooperation, especially those involve infrastructure projects, is still a promising mean to relieve overcapacity in certain Chinese construction-oriented industrial sectors.

Therefore, the future breakthrough point in Sino-Russian gas cooperation will lay in investment with huge infrastructure. One thing for certain, gas cooperation between Russia and China is expanding. OBOR will be a tool for linking Chinese companies’ investments to a broader Chinese national strategy aimed at forging tighter economic links between China and the rest of Eurasia including Russia.

This article is a follow-up from Sino-Russian energy cooperation: Mutual benefit, trust and fairness are the keys

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