Russia’s colossal economic shift toward Asia in energy, finance, and infrastructure deepened at this year’s APEC summit in Beijing with 17 major bi-lateral business deals with China. The strategic alliance could crowd out other global players.
The deals signed by the world’s second and eighth largest economies reflect a 'synergy', as natural resource rich Russia has a lot to offer a country with one of the world’s fastest growing populations and economies, Martin Jacques, columnist and author of When China Rules the World, told RT.
“Russia is very rich in natural resources and China is very poor so there is a natural synergy in their economic relationship. Russia has something to offer China which China needs,” he said.
Both Russia and China are also uncomfortable with the current US-dominated world order, although not in quite the same way, says Jacques.
“Russia’s interests, needs, and status is not respected and I think that is essentially the problem. China acknowledges the importance of the international order, definitely wants to be part of it, but at the same time it doesn’t feel it has got the same stake in that system as for example the US,” he said.
The headline stealing accord was, of course, the deal between Russia’s Gazprom and China National Petroleum Corp. When completed the western pipeline will deliver up to 30 billion cubic meters of gas in addition to the 38 billion annually agreed in May.
Opening a second pipeline to China on top of the $400 billion agreement struck in May will make China the largest consumer of Russian gas.
READ MORE: Putin, Xi Jinping sign mega gas deal on second gas supply route
According to energy consultants Tri-Zen International, this is bad news for other energy exporters, who already face stiff competition.
“It’s just bad news generally,” for LNG around the world, said Peter Howard, President of the Canadian Energy Research Institute to Bloomberg News.
“It’s going to get really crowded,” he said.
The western route is better for Russia because it is near the country’s largest oil fields and close to the Chinese border. The contract is expected to be signed early next year according to Gazprom CEO Aleksey Miller.
The other major energy deal was Rosneft subsidiary Vankorneft’s offer to China National Oil and Gas Exploration and Development to control a 10 percent stake in its second-largest oil field, Vankor. It is estimated to have reserves of 520 million metric tons of oil and 182 billion cubic meters of natural gas, and covers 417 square km.
Moscow and Beijing also amended prepayment crude oil deliveries from 2015-2017.
Power deals
China continues to pick up large stakes in Russian power utilities, as it looks for sources to power its growing economy.
Russian hydroelectricity generator RusHydro signed several agreements worth $4.9 billion (230 billion rubles) with Chinese power companies. RusHydro will partner with the Sanxia “Three Gorges” company to finance, construct, and operate, hydroelectric power plants in Russia’s Far East in order to export electricity to China.
The neighbors will jointly (Russia with 51 percent, China 49 percent) finance and construct a 2000 megawatt hydroelectric power plant and three smaller ones on the Amur River basin. The stations can also be used to control floods, which devastated Russia’s Far East and parts of Northern China in the summer of 2013.
Another separate deal was struck with the Power Construction Corporation of China (PowerChina) for the construction of a storage pump plant on the Shapsha River in the Leningrad Region some 300 km from St. Petersburg. The project will cost $3 billion and it is expected to be 70-75 percent funded by Chinese and Russian companies.
Russia’s power generation company ОАО TGK 2 inked an agreement with the Huadian Power International Corporation Limited (HPIC) for energy projects in Russia’s northern Archangelsk Region on the White Sea The project will create jobs, boost tax revenue and improve social and economic conditions in the region. Russia plans to raise funds through Chinese banks.
This isn’t China’s first incursion into a Russian power company. In 2011 HPIC began a joint venture with TGK 2 to build a power plant in Russia’s Yaroslavl region.
Finance Deals
Russia’s biggest lender Sberbank and China’s state-owned Export-Import Bank of China signed accords, including deals on insurance, and a framework agreement on credit lines. Another Russian banking major, VTB, signed a cooperation agreement with Huawei Technologies, a Chinese technology company
Russia’ foreign development bank Vnesheconombank (VEB) and China Development Bank (CDB) also signed a memorandum of understanding with VEB Asia and Russia’s Agency for Housing Mortgage Lending.