The Power of Siberia (PoS) pipeline and China-Russia relations

Li-Chen Sim reports on an important new business and economic linkage between China and Russia (Will the New Power of Siberia Gas Pipeline Create a Windfall for Russia? Responsible Statecraft 02/04/2020):

Newly inaugurated on December 2, 2019, the Power of Siberia pipeline will lock-in China’s purchase from Russia of almost one trillion cubic meters of gas over the next 30 years. For sanctions-hit Russia, this will generate over $400 billion in gas revenue in total, up from less than $360 million in 2018, and broaden the scope of its cooperation with China.

It's called the Power of Siberia (PoS) pipeline.

The pipeline is a project of the Russian oil company Gazprom. in which the Russian state holds a majority ownership.

She describes this important project in the context of China's emerging status as the world's leading economic power:

Despite the close personal ties between Presidents Vladimir Putin and Xi Jinping, relations between the two countries are highly asymmetrical. China leads Russia by a wide margin in economic terms. Comparatively, the prevailing narrative is of a Russia in long-term decline. In this regard, PoS may reduce the asymmetry by increasing China’s dependence on Russian gas from almost zero to one-sixth of China’s import requirements and 9.5 percent of its total gas consumption.

At these levels, however, China is hardly beholden to Russia since China has a well-diversified base of gas suppliers and supply routes. The advantage of PoS in mitigating the vulnerability of seaborne LNG cargoes is blunted by competing overland gas pipelines from Central Asia and to a smaller extent, Myanmar. Furthermore, the dedicated pipeline to China implies that Russia has, ironically, increased its dependence on Chinese gas demand. [my emphasis]

For Russia, it means diversification of its dependence on Europe for natural gas sales, which has been complicated by Western sactions on Russia over Ukraine and Russia's annexation of Crimea, as Euonews reports (Luke Hurst, Russia opens Power of Siberia gas pipeline to China 12/03/2019):

China is now Russia’s top export market, with the pipeline project expected to last for three decades, generating $400 billion for the Russian economy.

The move means Russia’s gas exports now stand on two legs — one being Europe, the other Asia — according to Francis Perrin, Senior Fellow at the French Institute for International and Strategic Affairs (IRIS).

Gazprom, the Russian state-controlled energy company, intends to “remain the leading gas supplier to Europe for decades to come,” said Perrin, who specialises in energy issues.

Ariel Cohen explains of the PoS project (The Strategic Upside Behind Russia’s $55 Billion ‘Power Of Siberia’ Pipeline To China Forbes 12/06/2019):

Pressure from Western sanctions – brought on by Russia’s illegal 2014 annexation of Crimea – is accelerating the Kremlin’s pivot away from the European Union towards the energy hungry East.

The 1,800 mile pipeline is a hedge against a potentially shrinking market in Europe, where souring diplomatic relations and rapid penetration of renewables threatens the appetite for Russia’s oil and natural gas in the long-run.

He also puts the project in the context of the evolving relationship of Russia to the rising power of China:

The two leaders [Vladimir Putin and Chinese President Xi Jinping] are galvanized by what they consider an unhinged United States, and a belief that together they can create an alternative to the Western-led global order. The U.S. – China trade war, Western condemnation of China’s actions in Hong Kong, and continuing sanctions against Russia are reason enough for Putin and Xi to start their own axis.

Yet all is not rosy in this blossoming romance. China, whose economy is eight times larger than Russia’s, and is increasingly technologically more advanced, is the senior partner in the tandem. Russia is approaching its subordinate role with mixed feelings, on one hand realizing the power disparity, but on the other hopeful that it can benefit from closer ties to the world’s most dynamic economy. [my emphasis]

Aljazeera English has this report on the PoS project (The power of Siberia': Russia-China gas pipeline to launch 12/02/2019):

Aljazeera also has this article by Mikhail Krutikhin of Russian oil consultant RusEnergy on PoS, Power of Siberia or power of China? 12/19/2019. Krutikhin portrays the PoS as a disappointment for Russia:

All in all, the Power of Siberia is a big image-building stunt for Russia, but not a profitable commercial project, and it translates into a net loss for state-controlled Gazprom.

It also entrenches further Russia's role as a mere supplier of energy and raw materials to China and solidifies its dependence on Chinese consumer goods.

Prior to 1993, machinery and equipment accounted for sizable share of Russian exports to China, but today their share is 5 percent . On the other hand, 48 percent of Chinese exports to Russia are electronic appliances, machinery and tech equipment. [my emphasis]