Russia’s energy turn to Asia and COVID impact on energy exports

Jakub M. Godzimirski,
Research Professor,
Norwegian Institute of International Affairs,

For various reasons energy resources play an important role in the strategy of the current Russian regime. First, they are an important source of the state revenue as they over the past decade have generated up to 50% of the Russian state’s budget revenues. Second, these revenues have greatly facilitated achievement of several strategic objectives set by Russian decisionmakers.

One of these is securing the political stability and thus survival of the current regime that was made possible through various social programs funded from the state budget. In addition, these revenues helped Russia to modernize its armed forces which resulted in the return of Russia as a great power other great powers must reckon with.

Finally, energy resources have during the whole Putin’s period remained the main export commodity and thus played an instrumental role in Russia’s economic and political relations with the outside world. Most of the export revenues have been generated by export of Russian commodities to Europe. This made Russia dependent on access to this energy market that was located geographically relatively close and was connected to Russia through a costly and rigid infrastructure.

However, because of Russia’s role in the Ukraine crisis in 2014 political relations between Russia and the West suffered a heavy blow. The question of EU dependence on supplies of energy from Russia has been framed as a serious security challenge. But also in Russia decisions were made to make Russia less dependent on access to the EU energy marked as a way of reducing Russia’s exposure to possible Western pressure. Russia has therefore undertaken what is sometimes referred to as a strategic turn to the East, to Asia that was to play a far greater part in Russia’s trade, also in energy trade. Trade in energy was also to become a backbone of economic and strategic cooperation with China with its almost insatiable appetite for energy. This was important for both political and economic reasons because it was expected that demand for energy in Asia will be growing while the demand for fossil fuels was stagnating in the EU and the EU policy of mitigation of climate change could in the coming decades result in a ban on use and import of fossil fuels.

What are thus the results of this Russian energy turn to Asia? Has Russia manged to redirect flows of its energy from the European marked to the Asian one? The results are at least mixed.  In 2019, Russia and the EU still depended on each other in terms of energy and the situation did not change dramatically in 2020 that was a very special year due to the impact of the Covid 19 on economic activity and thus demand for energy. In 2019 the share of Europe in Russian oil exports was 53.5%, as against 27% to China. Further, Europe received 64.5% of the export of Russian petroleum products, whereas 14.9% went to Asia and the Pacific (China a mere 1.9%). Also in 2019, 86.5% of the export of Russian piped gas went to Europe; even with the LNG that was developed to redirect supplies of Russian gas to Asia, Europe had a 52% share and Asia 45.4%. Only in Russian exports of coal did Asia have a higher share than Europe – 50% and 41% respectively

In 2020 Russian energy production and exports were markedly lower than in 2019. Production of gas reached 692.33 bcm, 6.2% lower than in 2019. Production of oil was 512 mt, 8.6% lower than in 2019. Central Bank of Russia reported that export of Russian oil was in 2020 more than 11% lower in terms of volume and more than 40% in value. Export of petroleum products was 1% lower in volume, but more than 32% in value. Also export of natural gas – piped and LNG – was hit, with ca 1% lower volume and more than 32% fall in value for piped gas, and 4.5% higher volume but 15% lower value for LNG. By examining the shares of Asia and Europe in Russian export of oil, petroleum products and natural gas – both piped and LNG – in 2020 we will also be able to assess the impact of COVID 19 on Russian strategy of making Asia more important target of its energy export.  According to BP Russia exported 138.2 mt of oil to Europe and 101.9 mt to Asia/Pacific region. Export to Europe represented 53.2% while export to Asia/Pacific 39.2 % of Russian export of oil in 2020. Europe received also 53.8% of Russia’s export of petroleum products, while the share of Asia/Pacific region was 17.6%. The share of Asia/Pacific region in export of Russian piped gas that according to BP reached 197.7 bcm  increased substantially compared with 2019 but reached only 2% share in total export of piped gas while Europe remained the main export marked for piped gas with almost 85% share. LNG export from Russia reached in 2020 40.4 bcm and Asia/Pacific region’s share increased to 55%, but Europe remained an important market with 42% share. These data show that the energy turn to Asia has been only partly successful.

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