Chinese energy horoscope

By Vestnik Kavkaza

German Finance Minister Sigmar Gabriel has urged the Chinese government to contribute to a settlement of the Ukrainian conflict: “We address the Chinese to remember about their growing responsibility on the international arena and be involved in such a conflict as that taking place in Europe between Ukraine and Russia.” According to Gabriel, China and Russia emphasize improvement of their bilateral relations, and Beijing should use the chance “to explain Russia that it is necessary to respect international law and foreign borders.” Earlier, the USA tried to put pressure on China and make it join the sanctions against Russia, but the Chinese government didn’t do this.

Apparently, Beijing won’t follow the recommendations of the German minister either, as China is not interested in spoiling relations with Moscow due to the growing demand for hydrocarbons.

“China is interested in receiving energy,” Sergei Pikin, the head of the Fund for Energy Development, says. “The point is not that Russia is the major producer of energy, but that from the point of view logistics and transport availability it has the shortest path for export of energy. As the distance between Russia and China is minimal, we could afford the lowest prime cost, from the point of view of traffic.”

According to Pikin, Arctic projects could be a promising direction of Russian-Chinese cooperation: “Russia has started its first project on the Arctic shield. The first oil is being produced, it is a new sort. The direction could be potentially promising for the next few decades. If we are discussing the exploration of the territories around China, in the 2020-2030s and so on, we could develop the Arctic direction. Development of joint technologies, exploration of the Arctic shield will be interesting for Russia and China not only due to production, but also due to possible technological breakthroughs.”

“For China, Russian energy resources are primarily interesting for the opportunity to receive direct land supplies without transit risks and risks connected with sea transportation,” Alexei Belogoryev, the deputy director of the Institute for Energetic Strategy, thinks. “Russia and Central Asian countries could act as an actual backland of China. It is very important, regarding growing tension in the world.”

Meanwhile, according to Belogoryev, the energy resources which Russia offers China are quite expensive in comparison with traditional producing areas in the Yamalo-Nenets Autonomous District: “On the other hand, China is ramping up consumption rapidly. When demand grows at such a high pace, prices will grow inevitably. We can see it in LNG import prices in China. They have almost reached the Japanese level. Gas import prices are growing in China reasonably. This improves Gazprom’s positions. However, I understand that the Chinese side is trying to maintain maximum volumes for minimum prices, as prices significantly restrict further economic growth in China. We can compare the situation with the USA, where due to low gas and electricity power prices, the country was one of first states to have overcome the current economic crisis.”

Yevgeny Konygin, the chairman of the sub-committee for energy effectiveness and renewable power of the RSPP, adds that China has achieved phenomenal success in the sphere of renewable power sources: “Technological systems connected with generation of power for their own needs are highly developed. Russia presents a great potential of supplies and cooperation in the sphere of technological cooperation for China. As for hydrocarbons, according to the new energy strategy Russia suggests boosting energy effectiveness, i.e. the most effective rational usage of all available power resources, notwithstanding their origin. There is a general tendency in Russia for accumulation of capacities for our own power production in enterprises, for providing local energy systems with relevant technologies. Considering the level of formation of a price for certain technologies in China, China has a great potential to be an active participant of the exploration.”