Editorial: Moscow looks east

May 24 2014, 21:44 IST
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SummaryRussia-China gas deal has important implications

Russia’s $400 billion deal to supply China with 38 bcm of natural gas per year for three decades took more than 10 years to clinch. Negotiations were finally concluded at about 4 am on Wednesday, and only because Russian President Vladimir Putin was determined not to end his China visit without the deal. Although the exact price has been kept secret, it is reasonably speculated that Putin had to give Beijing a significant discount. Not only did China drive a hard bargain over a decade-plus of negotiations—refusing to purchase Russian gas at prices paid by West European states—but Beijing also had the luxury of time on its side, unlike Moscow. For Putin, the deal is not just a face-saver or red rag to flash before the West, which has been hesitating on the threshold of further sanctions against Moscow’s misadventures in Ukraine. It is also his first big move in reorienting the geopolitics of the globe. A new Moscow-Beijing strategic axis built on the business of gas now looks a stronger possibility.

What is being touted as the Russian pivot to Asia will enable Moscow to sell its oil and gas to Asia, diversifying its market and revenues beyond Europe, even if Gazprom cannot add to its profits. The deal is political above all, and offers China no more than a tenth of the energy supply it needs, but allows Beijing to partly reduce its dependence on coal-fired growth. It is also unwise to overestimate the impact of the China deal on Moscow’s ability to sidestep Western sanctions, since the existing Power of Siberia pipeline that runs to the Chinese border cannot pump gas to Chinese factories before 2018, to say nothing of the new pipelines that need to be laid and the billions of dollars of investment that would need. Development of the virgin gas fields in Russia’s far east alone will need $50 billion in Russian and $20 billion in Chinese investment.

But it has implications for similar future deals with Japan, South Korea and also India. New Delhi would do well to pay as much attention to the just-signed deal and its implementation as Seoul and Tokyo are paying. It raises hopes for the $30 billion “Silk Road” pipeline Moscow and Delhi have been talking about, linking Russia’s Altai Mountains region to northern India through China’s Xinjiang province. After India’s withdrawal from the “Peace Pipeline”, involving Iran and

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