Xi Jinping’s Chinese dream and Vladimir Putin’s energy superpower: Changes and constants in China-Russia energy relations

Anna Kuteleva,
PhD, Research Fellow,
School of International Regional Studies, National Research University Higher School of Economics,

Chinese officials assert that China’s proactive role in global energy politics will bring benefits to all other actors. They describe China’s energy consumption as responsible and modest relative to the Global North and showcase its recent achievements in “green” and “clean” energy development. Addressing the 75th session of the UN General Assembly in early 2021, Xi Jinping announced that China plans to have CO2 emissions peak by 2030 and aims to achieve carbon neutrality by 2060. This pledge demonstrates China’s commitment to contribute to climate change mitigation but does not solve its most pressing energy insecurities.

Oil is still the only possible primary fuel that can satisfy the soaring demand of Chinese transportation and industry. China’s oil demand remained strong even in 2020 when the coronavirus pandemic hammered global appetites. However, China has already exhausted almost all radical options for the development of domestic oil production capacity and, according to most estimates, in the near to medium-term China’s oil imports will increase. Against this backdrop, translating the records and current accomplishments into the future promises of a comprehensive energy transition, China’s leadership nevertheless continues to rigorously maintain the principle of “China first” and invests in improving its ability to control the dependence on external sources of oil.

The state’s financing and diplomatic backing have opened many doors for China’s NOCs in the 2010s and help them today to bring many barrels of overseas produced oil home. CNOOC, Sinopec, and CNPC operate in over 30 countries and have equity production in at least 20 of these countries. Supporting NOCs and expanding the scope of energy diplomacy, China remains largely concerned with the availability of oil and does not plan to revolutionize its approach to supply security. When it comes to oil, China still does not rush to trade its self-reliance for interdependency and avoids strategic alliances with oil exporters.

Petro-states who have a habit of using energy exports as geopolitical leverage have troubles with China. The case in point is the unsteady development of the so-called China-Russia “energy dialogue.” Despite the growing demand for oil on China’s part, Russia hesitated to enter long-term agreements with it until the end of the 2000s. Back then, many observers predicted that a convergence of outlook between Russia and China in regards to their preference for the state controlling the key sectors of the economy will become a strong foundation for the mutually beneficial energy cooperation. However, the direct pipeline to China was not completed until 2011 and relatively steady energy cooperation between Russian and China started to emerge only after 2013. At the end of 2014, Transneft added three more oil pumping stations to the Eastern Siberia Pacific Ocean (ESPO) pipeline system, increasing the oil pumping capacity of the stations that were built in 2011. A year later, the initial pipeline was joined by a parallel one. Once the capacity of China’s spur of the ESPO pipeline was expanded, China received more than 50 Mtoe from Russia, which constituted 14% of total China’s imports and 18% of Russia’s total exports. In 2016, this allowed Russia to compete with Saudi Arabia for the status of China’s largest supplier of oil, whereas China surpassed Germany as the top buyer of Russian oil.

Russian representatives hoped the ESPO pipeline will “fasten the Chinese to Russia,” yet this did not happen. Instead, China balances Russia and Saudi Arabia. Oil price collapses triggered by the Russian-Saudi rivalry deliver significant benefits for China’s economy. As the world’s second-largest holder of crude storage capacity, China is well-positioned to play the “carry game” – that is to buy and store cheap oil when the prices collapse to resell it at a profit when the market recovers. China also does not rush to accept the oil-linked gas pricing mechanism offered by Russia and drives a hard bargain on contracts for supplies from the Power of Siberia pipeline.

Overall, while the Soviet Union was China’s “big brother,” Vladimir Putin’s Russia is not a member of China’s family but merely a business partner. Today, China can buy as much Russian oil as its economic development requires and recognizes that Russia needs China’s money much as China needs Russia’s energy resources. Consequently, for the Chinese side, a partnership with Russia is a matter of convenience and a rational choice determined by its current economic interests. Xi Jinping’s “Chinese dream” does not include a geopolitical coalition with Putin’s “energy superpower.” Russia is losing (or already has lost) its competitive advantages in relations with China because in the 2020s oil supplies can ensure China’s friendship but cannot turn it into a geopolitical ally.

This contribution is based on the author’s book China’s Energy Security and Relations With Petrostates: Oil as an Idea (Routledge, 2021).

Email: akuteleva@hse.ru

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