All energy alliances between China and Russia
China's energy policy will lead it to forge an even closer link with Russia: here's why. Antonino Neri's interview with Gianni Bessi, essayist and energy expert
Second episode of the discussion with the councilor of the Emilia-Romagna Region Gianni Bessi, analyst, essayist and energy expert – recently contributed to the volume edited by the Luigi Einaudi Foundation and the European Liberal Forum: Business future under Eu green taxonomy – on political scenarios at the center of the global agenda, and of the electoral campaign for the elections of 25 September, linked to the transition to a green economy. The first episode was released on August 3 .
Not a day goes by without talking or writing about China, portraying the celestial empire either as absolute evil or as the most efficient place in the world. What do you think?
«I agree with you, there are contradictory approaches on the subject. If you speak well, you are accused of being pro-Chinese. If you talk badly about it, you become an uncritical defender of the West. This is not good. We must always look at the facts and these confirm that China is one of the main protagonists in today's and future geopolitical scenario. This is why it is important to be careful about how it will move, as the old saying goes, “when China changes, the world changes”, on the hot fronts of the economy and international conflicts, obviously starting with the Ukrainian one.
Let's start with the economy.
“In economics, the recent decision to implement a 'zero covid' policy is affecting the country's economic growth, which according to the International Monetary Fund will be 3.3 percent at the end of the year. This dynamic has international repercussions. After all, China's role as an actor of globalization as we knew it has changed for some time, that is, since the price and wage differential with the West allowed it to supply goods at bargain prices. A condition from which, in the last 10 years, the eurozone has benefited above all: Germany in particular but also Italy. If you allow me a little forcing, perhaps we imagined being able to live and thrive on the backs of a kind of colony, almost as the British Empire did with India ».
And expanding the scenario to the future, what awaits us?
"Good question. I'm not a horoscope enthusiast, not even the Chinese one … Apart from the jokes, let's still look at the facts. To understand the strategies of the 'celestial empire', the key event, as it is every five years, will be the national congress of the Chinese Communist Party: this year is the 20th and is scheduled for November. Until a few years ago the party defined the triumphal path of the great eastern country towards the top of the world economy: 'the peaceful rise of China' it was called. A path that perhaps, given also the international dynamics and the more or less evident endorsements to Russia, is no longer so peaceful ».
Should we expect specific issues or positions?
“More than fear, I would expect a definition of China's international role. When the doors of the congress open and the delegates enter, in reality, this time more than ever the doors of the world will open. And inevitably the decisions of Chinese 'state capitalism' will influence the traditional and Western one even more than in the past ».
What is the most interesting front, the one on which to focus attention?
"On this point I had an interesting discussion with Giulio Santagata, economist and former Minister of the Prodi government, who argues that it is necessary to understand whether the millennial Dragon is willing to continue to 'import inflation', allowing Western economies to have a to increase demand, then the global system as it is could hold, otherwise we will have to divide it into sub-areas. Well for me he is right. If there is an evident lesson that comes to us from the Russia-Ukraine crisis, it is that breaking the dependencies or, better still, the interdependencies of globalization has significant costs ”.
Can you give us an example?
"Energy first, to use an English language".
And here you play at home, Bessi … Go ahead and "freewheel".
"There are clues that can make us understand which paths China will choose to take, in its energy policy, starting with a closer link with Russia, already sanctioned by an agreement to increase gas and oil supplies".
Favorable agreements for China, let's imagine …
"And also a lot: Xi has recently managed to get a very favorable price on long-term contracts, thanks also to Gazprom's need to 'place' the product and, not least, the use that the Russian government is making of it as weapon of blackmail towards Europe in the context of the conflict with Ukraine. In February, a first increase, equal to 19 per cent, was announced in the share of Russian natural gas that will go to China through the Power of Siberia gas pipeline: thanks to a thirty-year contract, the goal is to reach 38 billion cubic meters to 2025 (in 2021 there were 16.5 billion). So far, in the first half of 2022 the figure of 7.5 billion cubic meters has been reached (source: CNBC), which represents an increase of 63.4 percent compared to the previous year ".
However, infrastructures capable of guaranteeing flows will be needed.
«In 2024 the Power of Siberia 2 will be operational, the pipeline capable of transporting 50 billion cubic meters of gas per year. While we are already talking about the design of a third 'string' ».
Will Beijing take the place of Europe in Moscow's 'client book'?
«China's economic power consumes 378.7 billion cubic meters of gas per year (as of 2021, source Statista.com) and its 'hunger' for energy is constantly growing. The volumes are monstrous and therefore the margins to convey the over 150 billion cubic meters / year 'European' are there: however, it takes time to build the infrastructures and above all the transport technologies. Precisely the latter are perhaps the most strategic and high added value part for the Dragon: if it will be able to replace itself as a supplier of technologies in the natural gas supply chain, it would strengthen its role as a world energy power ».
There is more?
"Yup. In practice, China controls a huge share of Russian energy products and this will serve it to cover a per capita consumption that is estimated, in 2040, to be higher than that of the EU. This puts it in a position to 'control' the world market: just to give an example, linked to oil, China has an excess of 30 percent in its refining capacity (Forbes, 7 July 2022). If it wanted, it would have the conditions to become a major exporter of petroleum products to the West, increasing its economic importance by another notch, if there is a need for it. And here the role of technology is proposed again and not only that linked to production ».
What could be the consequences of this possible evolution?
«Today China is the largest polluter in the world, despite the plan to achieve a climate-sustainable society by 2035, being responsible for 29 percent of CO2 emissions. Furthermore, energy consumption is highly inefficient, both in the industrial sector and in domestic heating, which determines a requirement that is four times higher than that of OECD countries. To this must be added its still great dependence on coal and the consequent increase in imports of polluting energy sources. It is also true that it has the largest shale gas fields in the world, about 34 trillion cubic meters, but it would take an enormous amount of water to extract it. And here too, in addition to the environmental theme, there is that of technological solutions to be found. The red mandarins are aware that the challenge is not played on environmentalist slogans but on the fact that economic growth is accompanied by the guarantee of environmental sustainability that can only come from technological innovation. This is the challenge that Xi could launch in November … "
A challenge that is also towards the West?
"Something more! With innovation in the energy field, the new “factory of the world” is already moving in this direction, making our dependence on the great eastern country more stringent than ever for the energy transition path. The new IEA report certifies that global solar photovoltaic production capacity has increasingly shifted from Europe, Japan and the United States to China over the past decade. It has invested over $ 50 billion in new photovoltaic supply capacity – ten times more than Europe – and has created over 300,000 manufacturing jobs along the photovoltaic value chain since 2011. Today, China's share in all stages of solar panel production (such as polysilicon, ingots, wafers, cells and modules) exceeds 80%. This is more than double China's share of world PV demand. In addition, the country is home to the world's top 10 suppliers of equipment for the production of solar photovoltaic systems.
So if it is true that "when China changes, the world changes" Western eyes and ears will have to be attentive to what Xi Jinping will say at the party congress. But is that all we can do? Stand and wait?
"No! Absolutely. I say this as a convinced pro-European and as a supporter of Italy in NATO. Given the tensions over Taiwan and the announcement of the delisting of Chinese companies worth over $ 300 billion on Wall Street, we need to move. Romano Prodi is right, recalling in his recent editorial in Il Messaggero the admonition of Henry Kissinger: “… when there are three dominant nuclear powers, namely the USA, China and Russia, it is not very intelligent to push the other two to join forces. All the more so in this case, given the rivalries and differences of interests existing between China and Russia ”. The EU should be more active in convincing the US to open a dialogue with China again… it is not too late yet! ».
(The interview was published on Energia Oltre )
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/cina-russia-energia-gianni-bessi/ on Sat, 20 Aug 2022 06:14:45 +0000.