Russia and China are close to another natural gas deal that could reshape the world's energy map
Right as the West is tightening the screws on Russia's energy sector, Vladimir Putin is accelerating his own pivot to the east, moving closer to another giant natural gas deal with China.
If consummated this fall, the multibillion-dollar deal would at least partially alleviate Russia's fears about finding future markets for its gas exports and China's worries over finding future energy supplies, especially natural gas, for its growing economy and population. By potentially boosting Russia's leverage with respect to Europe while dealing a blow to other gas exporters' hopes of leaping into the Chinese market, the deal's knock-on effects could be felt from Brussels to British Columbia.
Russian officials including Putin started talking up the prospects of the western gas route, also known as the Altai route, even before the ink was dry on the other huge gas deal with China. And for an obvious reason: Linking gas fields in western Siberia, which today supply Europe, with China would give Moscow the ability to shift energy supplies west or east as it sees fit.
If consummated this fall, the multibillion-dollar deal would at least partially alleviate Russia's fears about finding future markets for its gas exports and China's worries over finding future energy supplies, especially natural gas, for its growing economy and population. By potentially boosting Russia's leverage with respect to Europe while dealing a blow to other gas exporters' hopes of leaping into the Chinese market, the deal's knock-on effects could be felt from Brussels to British Columbia.
Russian officials including Putin started talking up the prospects of the western gas route, also known as the Altai route, even before the ink was dry on the other huge gas deal with China. And for an obvious reason: Linking gas fields in western Siberia, which today supply Europe, with China would give Moscow the ability to shift energy supplies west or east as it sees fit.
"This will give us big advantages in rechanneling gas flows, depending on the world market situation," Putin said earlier this month at a groundbreaking ceremony in eastern Siberia.
The United States and the European Union have steadily increased the pressure on big Russian energy firms with the latest round of sanctions unveiled earlier in September. Those measures would restrict Russia's ability to tap oil in challenging environments, such as deepwater offshore, the Arctic, and in shale. Congress is currently preparing even stiffer sanctions on Russia that would increase the pressure on its energy sector; legislation winding its way through the Senate this week would take particular aim at Gazprom if gas supplies to Europe are interrupted, for example. The Senate Foreign Relations Committee unanimously passed the bill Thursday.
"The Altai deal will be Putin's calculated response towards U.S. and EU sanctions against Russia, and the biggest beneficiary will be China," said Keun-Wook Paik, an expert on Sino-Russian energy relations.
"Putin looks determined to show that Russia has a very powerful vehicle that can respond to Washington and Brussels's sanctions policy against Russia in the wake of the Ukraine crisis."
The United States and the European Union have steadily increased the pressure on big Russian energy firms with the latest round of sanctions unveiled earlier in September. Those measures would restrict Russia's ability to tap oil in challenging environments, such as deepwater offshore, the Arctic, and in shale. Congress is currently preparing even stiffer sanctions on Russia that would increase the pressure on its energy sector; legislation winding its way through the Senate this week would take particular aim at Gazprom if gas supplies to Europe are interrupted, for example. The Senate Foreign Relations Committee unanimously passed the bill Thursday.
"The Altai deal will be Putin's calculated response towards U.S. and EU sanctions against Russia, and the biggest beneficiary will be China," said Keun-Wook Paik, an expert on Sino-Russian energy relations.
"Putin looks determined to show that Russia has a very powerful vehicle that can respond to Washington and Brussels's sanctions policy against Russia in the wake of the Ukraine crisis."
What's more, the Ukraine crisis seems to have focused Europe on the need to wean off excessive reliance on Russian gas, after a pair of gas-supply crises in the last decade failed to really rouse policymakers. Countries across the continent are seeking alternative sources of gas and, next month, the European Commission will present the results of the stress test it performed to check Europe's resilience to Russian energy blackmail.
That's all potentially bad news for Gazprom, which exports most of its gas to Europe and which is now expecting its lowest-ever gas production this year due to the aftermath of the Ukraine mess.
But it takes two to tango. After years of politely brushing aside Russian advances, Beijing may be more willing to dance. And that's because as China starts to rein in its use of heavily polluting coal, it needs more natural gas. With the world's most plentiful shale gas resources on paper, China hoped that domestic production would go some way toward meeting its energy needs.
To make up the shortfall, China can either turn to imported liquefied natural gas, or LNG, which is expensive in Asia, or piped gas from Central Asia and Russia. Perhaps coincidentally, the initial volumes to be exported on the Altai route from Russia match the shortfall in Chinese domestic shale gas production.
"In a sense, China will serve as a collision space for Russia's own pivot-to-Asia policy and the U.S. and Canadian pivot."
That's all potentially bad news for Gazprom, which exports most of its gas to Europe and which is now expecting its lowest-ever gas production this year due to the aftermath of the Ukraine mess.
But it takes two to tango. After years of politely brushing aside Russian advances, Beijing may be more willing to dance. And that's because as China starts to rein in its use of heavily polluting coal, it needs more natural gas. With the world's most plentiful shale gas resources on paper, China hoped that domestic production would go some way toward meeting its energy needs.
To make up the shortfall, China can either turn to imported liquefied natural gas, or LNG, which is expensive in Asia, or piped gas from Central Asia and Russia. Perhaps coincidentally, the initial volumes to be exported on the Altai route from Russia match the shortfall in Chinese domestic shale gas production.
"In a sense, China will serve as a collision space for Russia's own pivot-to-Asia policy and the U.S. and Canadian pivot."
"Putin looks determined to show that Russia has a very powerful vehicle that can respond to Washington and Brussels's sanctions policy against Russia in the wake of the Ukraine crisis."
