The Hindu : International : Russia, China sign three pacts on energy cooperation

Online edition of India's National Newspaper
Wednesday, Mar 22, 2006

International

International

Russia, China sign three pacts on energy cooperation

Pallavi Aiyar

Beijing's efforts to secure a firm deal on oil pipeline fail to make progress

STEPPING ON THE GAS: Russian President Vladimir Putin (left) with his Chinese counterpart Hu Jintao during an agreement signing ceremony in Beijing on Tuesday. — PHOTO: AP

Beijing: China and Russia signed three deals on oil and natural gas cooperation on the first day of Russian President Vladimir Putin's two-day visit to China.

According to Xinhua news agency, the three documents include an "in principle" agreement between the China National Petroleum Corp. (CNPC) and the Russian oil company Rosneft; a memorandum of understanding between CNPC and Russia's natural gas company Gazprom for natural gas supply to China; and a summary of negotiations between CNPC and Transneft, Russia's state-owned oil pipeline monopoly. While few details were available, there appeared to be no major breakthrough for China in its efforts to secure a firm deal on a pipeline to import oil from Russia.

Mr. Putin's China visit comes at a time when the two giant neighbours are enjoying increasingly warm ties. This enhanced relationship is evident in their participation in the Shanghai Cooperation Organisation, the strengthening of military and economic ties and substantial energy commitments.

Source of oil

China has long looked to Russia, the world's second largest oil exporter after Saudi Arabia, as a potential stable source of oil and gas. In fact, Russia will deliver 15 million tonnes of crude — an increase of 25 per cent — to China by rail this year.

However, what China really wants is progress on the much delayed oil pipeline that Russia has said it will build from Siberia to the Pacific Rim. Beijing has been lobbying for a branch of this pipeline to go directly to the Chinese border. Negotiations have been on for several years, but talks have yet to yield results.

Ahead of Mr. Putin's visit, China's top energy planner Zhang Guobao showed signs of impatience at the slow pace of progress, calling it "regrettable" and criticising the Russian Government's unwillingness to support Chinese efforts to invest in Russia's energy sector.

While some analysts expected forward movement on this crucial issue during Mr. Putin's visit, there were no indications at the end of the first day that any progress had been made.

Mr. Putin is accompanied on his China trip by Russia's top energy officials, including the chief executive of Gazprom, Alexei Miller.

Mr. Miller told reporters that two pipelines from Russia would eventually supply China with 60-80 billion cubic metres of gas a year. Currently, eight per cent of China's energy needs are met by Russia, compared to 45 per cent from West Asia. Beijing hopes to boost Russia's share to around 15 per cent within the next few years.

A sticky issue

In spite of the sticky pipeline issue, Mr. Putin's visit brings into focus just how far Sino-Russian ties have come along.

For decades, ties between the neighbours were characterised by hostility as the two nations competed for supremacy of the Communist world. Relations began warming up in the late 1980s. In October 2004, the two countries made a final and comprehensive settlement of their border dispute.

Last August, the Russia-China relationship reached a symbolic high point when the countries conducted their first-ever bilateral war games, consisting of land, air and sea manoeuvres.

Russia is, in fact, one of China's chief arms suppliers.

The improved ties have been very much in keeping with Beijing's increasing focus on economic diplomacy and pragmatism. Trade and investment rather than ideology and political dogma have become the driving forces of policy in China.

Sino-Russian trade has recently been soaring. It reached $30 billion last year, a 37 per cent increase from 2004 and leaders of both countries have pledged to double that level by 2010.

While in China, Mr. Putin will also attend a bilateral economic and trade summit in Beijing.

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