China and Russia: tighter energy ties, while Europe gets plucked

Around the same time that Russian President Vladimir Putin had his first in-person meeting with his Chinese counterpart, Xi Jinping, in nearly two years – at the opening of the Beijing Winter Olympics ceremony – an a series of huge new cooperation deals in the oil and gas sectors and beyond have been announced by news agencies on both sides.

The two countries have worked in an increasingly coordinated manner in multiple operational spaces in recent years, all with the central goal of weakening the dominant global power position of the United States, and then supplanting it in this role. Nowhere has this coordinated strategy been more obvious in terms of oil and gas business than in the Middle East. After the unilateral US withdrawal from the Joint Comprehensive Plan of Action (JCPOA ) with Iran in May 2018, the withdrawal from Afghanistan on September 11, 2021, and then the "end-of-combat mission" in Iraq in December 2021 , the Russia-China axis believes it can do this easily. Middle Eastern countries have chosen to excuse the way China deals with Muslim cultures internally and still don't realize it's a zero-sum game: in the end, they won't get more from the Eastern bloc than they could. have from the western one.

Currently, the bulk of bilateral investments are taking place in the Middle East. China has recently focused on signing multiple deals with Iraq, some for on-the-ground developments that have grabbed the headlines, but many others use the more covert model of individual "contract only" awards to Chinese companies of which few people have never heard of it, but all fully state-backed and state-funded (every single company in China operates as part of the state apparatus). A model that was once also followed by some European countries, such as Italy, but now they are completely out of the game.

Beijing can afford to focus on Iraq now, as it already views Iran – through its all-encompassing 25-year deal with Tehran – as "a de facto satellite state," as even informally confirmed by Persian government figures. With the aim of making use of the political ambiguity increasingly displayed by several states in the Middle East that previously could have been unequivocally referred to as allies of the United States, China is organizing agreements in which these countries are tightly bound through debt, including with “One Belt, one road” investments. These ties are so close that even if there were a political change in Tehran tomorrow, it would not be able to abandon the agreements with China. Although Europeans would potentially pay for oil better.

Last week, Moscow's state-owned oil giant Rosneft signed a 10-year $ 80 billion deal to supply China National Petroleum Corporation (CNPC) with 100 million tons of oil over the period (just over 200,000 barrels per day). shipped from Kazakhstan to refining plants in northwest China. This will come along with other exports of Russian crude oil to China, and in 2021 shipments of Russian crude oil via pipelines to China amounted to 40 million tons (just over 800,000 barrels per day), according to Russian pipeline operator Transneft. None of this will affect the continuous flow of Russia's main crude oil export route to China: the 80 million tons per year (approximately 1.6 million and 1.6 million barrels per day) of the Eastern Siberia pipeline. -Pacific Ocean which transports oil directly to China, as well as through the port of Kozmino.

This increase in the volumes and mechanisms of delivering crude oil to China is part of a far-reaching strategy to circumvent the effects of international sanctions against Russia as much as possible. Another element of this strategy is Rosneft's rapid development of the North Sea Route (NSR), which allows relatively unhindered deliveries to China. Rosneft is also promoting the development of the Vostok Oil project in the far north of Russia which includes the Vankor cluster, the Zapadno-Irkinsky block, the Payakhskaya field group and the East Taimyr cluster. Rosneft CEO and Putin's close friend and advisor, Igor Sechin, also promised that the Vostok Oil project and the construction of the NSR corollary would involve the creation of a "new oil and gas province" on the Siberian peninsula of Taymyr, with the complete project representing a total investment of RUB 10,000 billion (US $ 135 billion), including two airports and 15 "industrial cities". sent from the Arctic along the NSR only between now and 2024. Money committed to ensure energy supplies to Beijing.

In the gas sector, the main announcement last week was that the Russian state-owned gas giant, Gazprom, has signed a 10 billion cubic meters per year (bcm / year) agreement to supply gas to the CNPC. adding to another supply contract between the two companies signed in 2014 – a thirty-year agreement for 38 billion cubic meters per year to go from Russia to China. This, in turn, is part, but increases, of the “Power of Siberia” pipeline project – managed on the Russian side by Gazprom and on the Chinese side by CNPC – launched in December 2019. According to the company's comments, Gazprom is also developing “Power of Siberia 2”, through Mongolia, which will increase the supply of gas to China by an additional 50 billion cubic meters per year. These developments follow the 50.5% yoy (yoy) increase in 2021 in gas exports from Russia to China, with the volume of pipeline deliveries during that period increasing 154.2% yoy. annual, at 7.54 million tons, according to January data from the Chinese General Administration of Customs. All this gas used to arrive in Europe. Now China can even afford to liquefy this gas and sell it back to us at higher prices. We have become the world's plucking chicken.

On the one hand, these investments allow Russia to continue producing even in the event of a breakdown of the SWIFT system, an extreme ratio presented by the US to exclude Moscow from the global financial system. At the same time, China is assuring itself of a long-term energy stability that Europeans and Westerners are no longer able to secure, dazzled by the “Green” mirage and depleted by wrong energy policies. It is a competition against, above all, other oriental competitors, such as India, Japan and South East Asia. We are completely cut off.

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The article China and Russia: tighter and tighter energy ties, while Europe gets plucked comes from ScenariEconomici.it .

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This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/cina-e-russia-vincoli-energetici-sempre-piu-stretti-mentre-leuropa-si-fa-spennare/ on Tue, 15 Feb 2022 14:00:39 +0000.