Gas-fired boost for strategic partnership

On Dec 2, the top leaders of China and Russia witnessed via video the launch of the eastern branch of the China-Russia natural gas pipeline, which was constructed over the past five years.

The launch of the natural gas pipeline has far-reaching significance to China-Russia bilateral relationship.

First, enhanced strategic mutual trust. The abrupt policy reversals of the United States have sped up the China-Russia gas project, consolidated the strategic partnership between the two countries and elevated their energy strategy coordination to a higher level. China's consistent stance has made Russia realize that China is its reliable friend. Energy strategic cooperation will upgrade the overall relationship. And as a project beneficial to people's well-being, the gas pipeline will consolidate the foundation for lasting friendship between the two peoples.

Second, the gas pipeline is of vital importance to the economy of both China and Russia. For a long time, Russia had a big trade deficit with China because it does not have enough exports. The low-level bilateral trade has been a weak point in bilateral relations. The operation of the gas pipeline can help Russia cut its trade deficit with China and ease the pressure of the West's financial sanctions. According to the goal set by leaders of the two countries, the pipeline could help meet the target of $200 billion in bilateral trade by 2024. By transmitting 1 trillion cubic meters of natural gas in the next 30 years, the abundant high quality resources of Russia and the vast market of China will achieve greater complementarity.

Third, safeguarding energy security. As a major energy importer and a major exporter, China and Russia both face huge pressure from the US. The eastern line can help ease this pressure. In the winter of 2017, northern China was struck by a severe shortage of natural gas, exposing the problem of having a single source of gas. Gas from Russia could help China mitigate the risks from other import sources and ease the pressure of future energy negotiations. As for Russia, 80 percent of its gas is exported to Europe, but only 30 percent of Europe's gas comes from Russia, which means Russia is in an unequal position in the gas trade. The eastern line can give Russia more leverage in its gas trade with Europe.

The pipeline should have been completed earlier, as Gazprom and PetroChina signed a 30-year gas supply contract on the eastern line in May 2014, after 20 years of negotiations.

China, as a strategically reliable and economically strong partner, became a viable option when the United States instigated a "color revolution" in Ukraine, and then joined hands with the European Union in sanctioning Russia for Crimea incident. This increased the geopolitical importance of the gas resources for Russia, and the question was no longer about only the price and route. Russia had hoped to open a line to Altay, so it could switch swiftly between Asia and Europe. But China insisted on an eastern line, because the Central Asia line and the west-east natural gas transmission line are already working in western China.

The huge investment and great construction challenges called for strong strategic mutual trust, and the launch of this milestone project signifies that China-Russia strategic mutual trust has reached a new level.

The operation of the China-Russia pipeline is also of great significance for the region and beyond.

First, although the mutually beneficial energy trade between Russia and Europe has long remained stable, Europe is not able to make its own decisions and has always kept an eye on Russia. The old line has now nearly stopped operating due to the Ukraine crisis, and the Nord Stream 2 is being chased by the US administration. Both Russia and the EU have been badly hurt. The China-Russia line could help Russia gain more leverage in dealing with the EU and the US and provide an insurance to its energy industry.

Second, the eastern line was put into operation at a critical time when Russia is being pressured by the US and NATO. The line means reduced Chinese imports from the Middle East, and thus gives China more initiative in this region. As a result, the strategic structure in the Middle East has been changed and the US can no longer have its own way in the region.

Third, with eased energy pressure, China and Russia can better support each other and improve the geopolitics in northeastern Asia. Using the stalemate on the Korean Peninsula issue as an excuse, the US is forcing Japan and the Republic of Korea to put security pressure on China. However, the eastern line to China could, in contrast, put pressure on Japan and the ROK, which are both net importers of energy. In the short term, the two countries may ride on the coattails of the US; but since gas from Russia is 30 percent cheaper than that from the US, the two will inevitably bargain with the US, thus resulting in a fractured alliance. So in the long run, energy cooperation could help resolve the security impasse in northeast Asia.

If Nord Stream 2 can start operations by the end of next year, Russia will have an unblocked pipeline through the Eurasian continent and can throw the US off its game. Russia strongly backs the EU currency settlement system, so if Russian oil and gas list in the Shanghai Oil Futures and squeeze petro-dollars in the energy sector, it will further promote de-dollarization. China-Russia energy cooperation makes the US angry, the EU frustrated, and Japan and the ROK jealous.

The author is a researcher at the National Academy of Development and Strategy and a professor of School of International Studies at Renmin University of China.