The energy nexus in China–Russia strategic partnership

The energy nexus in China–Russia strategic partnership In this article, we examine the energy nexus in China–Russia strategic relations. We find that, over the past few years, the two countries have taken concrete steps to reinforce partnership in other strategic issue areas. Energy, in this respect, has been utilized as an effective policy instrument to deal with immediate challenges such as the Ukrainian crisis and the South China Sea disputes. We argue that cooperation in energy helps the two countries adopt common positions toward non-energy related issues and facilitate long-term deeper interaction. We thus maintain that energy will occupy an increasingly central position as China and Russia continue to seek to align their strategies more comprehensively against the backdrop of the evolving geopolitical environment by working to overcome existing disagreements and exploring new areas of cooperation. 1 Introduction Ever since the economic opening up in the late 1970s, China’s demand for energy has grown considerably along with increased industrial, civilian, and military consumption, which eventually made the country the largest consumer and importer of energy in the world. Despite its geographical proximity to Russia, a major supplier of oil and natural gas, China, for quite long time, remained reluctant to set up viable energy ties with the northern neighbor. Over the past decade, however, the picture has changed dramatically. With the signing of the Treaty of Good Neighborliness and Friendly Cooperation in 2001, in which the two sides pledged to upgrade their partnership, the overall China–Russia relations began to improve. Ever since, cooperation in energy (particularly in crude oil and, potentially, in natural gas) has grown significantly, involving not only trade in energy resources but also energy-related investment, equity ownership, infrastructure development, and technology exchange. Eventually, in December 2015, Russia became China’s largest crude oil supplier, overtaking Saudi Arabia.1 Also, in 2014, the two countries signed a major gas deal worth 400 billion USD for a period of 30 years, which will boost Russia’s presence as China’s leading natural gas import destination, as well. Thus, considerable progress has been made so far in China–Russia energy relationship although certain disagreements and policy divergence still exist. Aside from its function as a key instrument in strengthening Sino-Russian economic relations, energy has also began to occupy a more central place in the two countries’ strategic interaction, constituting a significant base for pragmatic cooperation. Over the past few years, the two countries have taken concrete steps to reinforce partnership in other strategic issue areas. Energy, in this respect, has been utilized as an effective policy instrument to deal with immediate challenges such as the Ukrainian crisis and the South China Sea disputes. Drawing on this observation, in this article, we attempt to examine the energy nexus in China–Russia strategic relations, arguing that cooperation in energy helps the two countries adopt common positions toward non-energy related issues and facilitate long-term deeper interaction. We, thus, maintain that energy will occupy an increasingly central position as China and Russia seek to align their strategies more comprehensively against the backdrop of the evolving geopolitical environment by working to overcome existing disagreements and exploring new areas of cooperation. However, we also note that energy is only one of the indicators that help understand and evaluate the China–Russia relationship as there are other dimensions to bilateral interaction that are cooperative or competitive in nature. In the ensuing pages of this article, we first offer a brief historical investigation of China–Russia energy relations. Then we go on to analyze what we call the China–Russia energy nexus, bringing up, in this vein, two major contemporary cases. First, we examine how the two countries have utilized energy politics to address the Ukrainian crisis and, more specifically, economic sanctions placed on Russia by the United States and the European Union (EU) in response to Russia’s annexation of Crimea. We find that China has assisted economic sanctions-hit Russia by providing the most needed funds in the form of growing energy imports from and energy-related investments in the country. We then turn to China and investigate how Moscow assists Beijing through its energy diplomacy in East Asia. On this, we pay particular attention to the ongoing disputes in the South China Sea (SCS) over the issues of maritime territorial ownership, entitlements, and delimitation. We find that Moscow has assisted Beijing by presenting itself as a supporter of China’s position and a reliable energy supplier, thereby easing China’s historical Malacca Dilemma and providing the country with a greater room for maneuver in the SCS conflict. In the last section, we debate the prospects for China–Russia partnership with energy acting as a major propeller for more comprehensive strategic engagement. 2 The energy nexus in China–Russia relations China–Russia oil trade has grown considerably under favorable geographic and economic conditions.2 Geographically, Russia has major oil and natural gas fields in Eastern Siberia, which borders China’s industrialized northeast, and in Western Siberia, which borders China’s upstream Tarim Basin in the northwest. Economically, Russia’s resource-based economy is complementary to China’s manufacturing-driven economy. In 2015, the fuel and energy sector contributed to 27% of Russia’s GDP, accounting for around 63% of total export earnings while oil and natural gas took up 43% of federal revenues.3 In 2013, oil and gas sectors represented over 40% of investment and 75% of merchandise exports.4 China, on the other hand, has a dominant position in global manufacturing (22% share in 2012) and is home to an ever-growing civilian energy consumption base.5 It is the largest consumer of energy in the world, and according to estimations, national consumption will continue to increase for the foreseeable future even though energy intensity decreases. However, although China became a net crude oil importer from the mid-1990s and its consumption has increased exponentially ever since, Russia fared relatively poorly until recently. In 2000, its share in China’s total oil import was around 2%.6 In 2005, Russia was still not among China’s top ten sources of crude oil, while in 2010, it accounted for only about 6% share as the fifth largest supplier. In 2011, Russia began to supply oil through the Skovorodino branch of the East Siberia–Pacific Ocean (ESPO) pipeline in the Amur region near the border with China, and in the next five years crude exports more than doubled.7 In May 2015, Russia took the top spot as China’s largest provider of oil.8 A number of large energy deals signed between the two countries over the years. In June 2013, Russia’s Rosneft and China’s CNPC agreed on a 25-year oil deal worth 270 billion USD. In the same year, Rosneft signed another 85 billion USD deal with China’s Sinopec to deliver 100 million tons of crude oil for ten years. In addition to purchase deals, Chinese companies have started to buy equity stakes in oil and gas fields in Russia. Among the major deals has been CNPC’s agreement with Rosneft to jointly develop oil and gas fields in East Siberia9 and the agreement between Rosneft and Sinopec on the proposed joint development of Russkoye and Yurubcheno-Tokhomskoye fields.10 The increase in equity agreements indicates qualitatively improving relationship and strategic trust given that, under President Putin, Russia has nationalized the energy industry and closed it almost entirely to foreign investment. Currently, natural gas accounts for only about 5% of China’s total energy mix.11 However, the country’s consumption increased at a rate of 16% during 2003–13. China’s shift from coal to clean burning resources in order to cut carbon emissions suggests that the demand will further grow and surpass the world average in the medium to long-term.12 Russia, on the other hand, holds world’s largest natural gas reserves and is currently the second biggest producer13 Despite the apparent compatibility between the two countries, Russia has yet to occupy a meaningful space in China’s natural gas import. Currently, China receives Russian LNG shipments via sea routes but the amount remains insignificant. However, the 2014 gas deal is expected to change China’s natural gas landscape with Russia achieving a prominent position.14 Under the 2014 deal, starting from 2018, Russia will supply natural gas to China from East Siberian fields for 30 years, meeting one-fifth of China’s total demand.15 The eastern and western branches of the Power of Siberia pipeline will carry the gas to Russia’s Pacific coasts, connecting with China’s border at several points. These oil and gas deals are important from several perspectives, including geopolitics and geoeconomics. Geopolitically, the deals symbolize a new stage in China–Russia coordinated diplomacy in the face of major global challenges. Geoeconomically, they demonstrate the two sides’ willingness to take advantage of geographic proximity and resource-market compatibility to provide mutual strategic support. 2.1 The energy nexus: geopolitics and geoeconomics As mentioned above, the China–Russia energy relationship has begun to improve over the past few years in response to a number of geopolitical and geoeconomic challenges. Geopolitically, both China and Russia have been facing major developments in their near peripheries. In the SCS, territorial disputes over uninhabited rocks and reefs get increasingly complicated and multilateralized with growing activities by the regional disputants and external actors such as the United States, Japan, and India, which poses a major challenge to China. In addition, under the ‘rebalance toward Asia’ strategy, Washington has reinforced its security alliance network and military footprint in the Asia-Pacific. China, in the meantime, seeks to increase its defense capabilities through military development and build up, and promote the One Belt One Road (OBOR) initiative to transform itself from a territorial into a comprehensive land and maritime power. Accordingly, politics in the region has become more contentious and inflammable with increased military posturing of the regional stakeholders and growing presence of extra-regional actors. Russia, on the other hand, has been involved in a deep conflict with the United States and its European allies over the situation in Ukraine, reminiscent of the accident-prone Cold War era. Especially after the annexation of Crimea into Russia, the collective Western response has included a wide range of punitive economic measures. Indirectly, Moscow has seen energy prices kept artificially low, which jeopardizes the country’s revenue-from-energy dependent national budget.16 Directly, Moscow has been subject to punitive measures by the United States, the EU and some other countries, which have cut trade ties, sanctioned Russian politicians and businesspersons, and excluded Moscow from the Western-controlled global financial regimes and platforms. Consequently, China and Russia have begun to view developing deeper energy cooperation to respond to the urgent geopolitical challenges as a viable strategy. Besides geopolitics, the two countries’ desire to diversify export and import sources of energy contributes to the development of closer ties. Indeed, Europe’s import dependency on Russian energy represents only one aspect of the ‘dynamic asymmetric interdependence’ between Russia and Europe since, from a supply side perspective, Russia is greatly dependent on the European markets for its exports.17 Besides, Western companies are heavily involved in Russia’s exploration activities, especially in the growing Sakhalin Island region. This export (and to a lesser degree, investment) dependence has been intensified further in recent years due to low commodity prices and the large share of revenues from energy export in Russia’s national budget. The European Union maintains a dominant position in Russia’s foreign trade, holding over 50% share with energy as the biggest item. In 2014, for instance, about 90% of Russia’s natural gas and 70% of its crude oil was exported to European markets.18 Therefore, much as European dependence on Russian energy is a strategic asset for Moscow, its own export dependence on the European markets is a liability.19 China, in this vein, offers Russia a long-term market for export diversification, especially with respect to natural gas.20 World’s largest energy consumer since 2011, China is heavily reliant on the Middle East for its oil and, to a lesser degree, natural gas, with the hydrocarbon-rich region accounting for two-thirds of the country’s total imports in oil and 40% of its total imports in natural gas (2014).21 The growing importance of the region in China’s energy mix is likely to further grow unless new sources of energy are found. For instance, China’s imports of crude oil from the Middle East rose from 2 million b/d in 2012 to 7.8 million b/d in December 2015.22 Obviously, the volatile political situation in the region creates serious reliability issues for China’s energy market. Furthermore, the fact that the imported resources are transported via maritime routes (80% of China’s crude oil import traverses through the Malacca Strait) raises trade route safety issues, which would be further aggravated in the event of a conflict in the SCS. Accordingly, facilitated by extant geoeconomical conditions, Russia and China’s export and import diversification strategies are rendered compatible and complementary. Financially, too, energy cooperation corresponds to the two sides’ long-term goal of decoupling from the USD-dominated international trade in favor of trade in domestic currencies, which involves commodities such as crude oil and natural gas.23 Also, since the sale of energy resources composes a large portion of Russia’s revenue from exports, Moscow looks for new markets to offset the economic loss from the falling oil prices and financial sanctions. With its increasing use of energy, China (as well as other developing countries in the Asia-Pacific) is a natural destination for Russia to make up for the revenues lost due to tense relations with the West. Additionally, China’s financial strength allows for major energy deals that involve large-scale investment in logistics, construction, and maintenance work. For instance, in 2016, the Export-Import Bank of China and the China Development Bank agreed to provide a $12 billion loan to Russian Yamal LNG, 30% of which is controlled by CNPC (20%) and the Silk Road Fund (9.9%), for covering external financing needs.24 The established Chinese and Russian technological capabilities, albeit not at the level of the developed West, facilitate cooperation on projects’ speedy execution within the agreed timeframe.25 This, in turn, contributes to the financial viability of the deals. Technologically, China and Russia are able to undertake difficult projects such as the ‘Power of Siberia’ pipeline, which poses considerable technical and engineering hardships due to harsh terrain and climatic conditions.26 Hence, in addition to cooperation on joint projects, China and Russia share technology in areas (that are directly and indirectly related to energy) they lack capability. For example, in June 2016 both countries agreed to develop jointly a civilian advanced heavy-lift (AHL) helicopter.27 Technological cooperation is critical for Russia at a time the US and European companies reduce technology transfers as part of the sanctions. As quoted in a report by US–China Economic and Security Review Commission, ‘Russia will increase purchases of shale oil extraction equipment from China if US and European firms continue to scale back technology transfers as part of ongoing sanctions against Russia.’28 Others, however, have argued that China would hardly be able to substitute the West as a technology provider for Russia.29 Nevertheless, if Russia lifts the restrictions on foreign investment in Russian energy companies, the combined Chinese–Russian technological and logistical capacity might encourage further cooperation. As a matter of fact, over the years, such cooperation has increased in scale and scope, involving wide range of areas such as loans and acquisitions, nuclear energy projects, and Arctic off shore and shale explorations.30 2.2 Existing challenges Whereas, geopolitical and goeconomic factors encourage China–Russia strategic cooperation, a number of counter-factors affect energy relations negatively. First, currently, an important roadblock is economic considerations, especially issues related to price formation, loans, equity ownership, volumes, and location of the supply sources. The 2014 natural gas deal is a good example. Disagreements over pricing and pipeline routes dragged negotiations over the construction of the pipeline for more than two decades.31 With respect to disagreement over pricing, whereas Russia declined to sell the gas at a lower rate than paid by the Europeans, China did not want to pay more than it paid for the gas it received from the Central Asia. Similarly, on the question of the initial source of supply, Moscow insisted on utilizing existing lines to deliver gas at the northwest of China–Russia border in which China already received gas from Turkmenistan, Kazakhstan, and Uzbekistan. Beijing, on the other hand, requested delivery at the northeast to supply gas directly to the industrial regions with high energy demand. The impasse was partially overcome in 2014 after the two countries reached a deal over pricing and the delivery of the gas through the Power of Siberia pipeline (currently under construction) at the Russia–China border in the northeast.32 Even though the overall relations between China and Russia are described as being ‘on the rise and undergoing the best period in their centuries-long history’, on the energy front, a number of recent projects face prolonged negotiations.33 Discussions on the Power of Siberia-2, planned to be finalized in January 2016, were delayed due to disagreements between the two sides over the construction and management of the pipeline as well as questions related to joint production and gas sales.34 Also, unfavorable external factors such as the fall in global energy prices, slowing domestic consumption in China, and the growing cost of pipeline construction, especially costs related to the West Siberian branch, held up a final agreement. Accordingly, it has been reported that the deadline to start sending Russian gas into Chinese territory might be further postponed.35 It has also been argued that Russia has been in a less advantageous position partly due to the tense relations with the West and low oil and gas prices, while China is strategically less constrained as it can wait for better conditions in the market or at the negotiation table.36 In particular, the ‘Power of Siberia’ pipeline, seen as one of the Kremlin’s achievements against the Western sanctions, may bring economic losses for Gazprom if oil prices remain low.37 Hence, it is obvious that diverse external environment creates differing conditions, which result in unequal benefits for each side; hence, the two countries appear to have uneven interdependence. It is seen that, whereas diversification of import and export sources strategy pushes the two states toward broader energy interaction, concerns related to over-dependence and a potential shift in the balance of power cause hesitation. In fact, observers have noted that the China–Russia partnership is in fact an ‘axis of convenience’ rather than a common front driven by ‘a deeper likemindedness’.38 If the perception of an asymmetric relationship is reinforced, as the argument goes, it may lead to further hesitation in cooperation in various strategic areas, including energy. Indeed, the presence of such concerns may explain the belated natural gas agreement, which was signed long after China set up viable energy ties with Central Asian resource rich countries. As argued by some analysts, Russia views China’s extensive energy connections in Central Asia as a challenge both to its status as a dominant resource provider and as a historically influential actor in the region.39 As a way of countering this challenge, it seeks to occupy a larger space in China’s energy market and maintain its bargaining power on pricing, pipeline routes selection and other issues while avoiding investment concessions to Chinese energy companies. It has also been held that Russia is concerned about the widening power parity in China’s favor, which allows Beijing to increase its influence in Central Asia and Eastern Europe under various One Belt One Road projects, potentially disturbing the balance of power in the two regions in favor of China. Thus, even if it would be inconceivable to anticipate the already established China–Russia ties that involve institutionalized cooperation on various economic and security realms to weaken beyond repair, these concerns stand as potential obstacles that might slow down the progress in bilateral relations and thus reduce the utility of energy as an effective policy instrument, as was the case until the late 2000s. Overall, the challenges to China–Russia energy nexus are numerous and the two sides are required to continuously address them, as was the case with the disagreement over the pricing of natural gas that led to extended negotiations until an agreement was reached in 2014. It can be maintained that external conditions that lead to changes in the way the two countries perceive each other have played considerable role in the present cooperation and collaboration. In this regard, especially the worsening relations between Russia and the West encouraged Moscow to turn to China as a strategic leverage. This re-calibration explains both the lack of progress in energy diplomacy over the past several decades and the speedy progress over the past several years. Hence, so far, under the new conditions, China and Russia have shown greater interest in teaming up ‘on an issue-by-issue basis’ while the two have refrained from defining their relations within the framework of a formal alliance.40 3 The China–Russia energy nexus: cooperation on non-energy related fronts In the post-Cold War era, China–Russia strategic cooperation has developed under the influence of certain internal and external factors. Therefore, it would be inadequate to attempt to explain the evolving relationship by drawing exclusively on one or the other aspect. Internal factors involve the two countries’ calculations of survival and development in isolation from external geopolitical concerns. Both China and Russia experienced struggle among competing foreign policy paradigms seeking to influence the strategic orientation of the state. In both countries, in general terms, those who advocated regional integration and those who favored deeper economic-political cooperation with the West offered opposite foreign policy roadmaps.41 Eventually, the forces that called for region-oriented foreign diplomacy gained upper hand. In China, the opening up in the late 1970s remained limited to economics whereas in Russia, following intense struggle during the 1990s, pro-western inclinations in foreign policy were curbed. In this, non-satisfaction toward the modern international system played a decisive role. Thus, informed by domestic dynamics and global conditions, China and Russia contextualized their international relations along regionalist, anti-globalist and anti-unilateralist lines. Especially over the past decade, China and Russia have faced numerous geopolitical challenges on multiple fronts. North Korean nuclear proliferation, the ongoing negotiations between Washington and Seoul on establishing missile defense system in South Korea and the territorial disputes in the SCS are among the pressing issues that Beijing faces now. In the meantime, the US has continued to build security alliances and partnerships along Russia’s western and southwestern borders. It has also initiated sanctions on Russian economy in the aftermath of the annexation of Crimea and is in the process of establishing anti-ballistic missile systems in several Eastern European countries. The Ukrainian situation, economic hardships due to falling energy prices and the sanctions, and NATO’s growing geographic proximity are among the immediate challenges Moscow faces. The unfavorable geostrategic picture has led China and Russia to seek cooperation on a broader range of issue areas and the synergy created through energy cooperation has served as one of the fundaments to reinforce bilateral relations. In another word, existing energy ties and prospects for further improvement have helped strengthen the geostrategic alignment by giving it a more solid material basis. Thus, although conjectural developments led to certain policy discrepancies in China–Russia relations in the post-Cold War era, the two countries’ strategies have remained structurally aligned across conceptual lines.42 A strong material linkage between China and Russia supports ideational alignment and its reflections on the ground in the form of policies. By providing a flexible policy tool, cooperation on energy has encouraged the two sides to seek further alignment in terms of their policy response to urgent global issues such as the Ukrainian crisis and the SCS conflict. In a sense, material ties have helped rationalize policy convergence, which, in turn, has reinforced ideational commonalities even though the scope and scale of these commonalities have remained constrained by a number of strategic divergences and policy disagreements. In the ensuing pages, we examine two issues of great geopolitical significance in which China and Russia have been cooperating on, and directly or indirectly, assisting each other, utilizing, among others, energy-related diplomacy tools. To this end, we look at the Ukrainian crisis and the SCS territorial disputes. In both cases, we analyze how the two countries make use of energy diplomacy to support each other. We argue that energy provides a flexible and multi-pronged policy instrument to further rationalize and reinforce strategic cooperation. Since energy relationship involves at once various aspects of foreign diplomacy from geopolitics to geoeconomics, it gives the two countries a versatile instrument to achieve desired strategic outcomes. Thus, in both Ukrainian and SCS cases, China and Russia have utilized energy to respond to the perceived challenges and influence them to their advantage. 3.1 The Ukrainian crisis During the initial months of the Ukrainian crisis in the late 2013 in which mass protests were staged in the Maidan Square in Kiev, China called for political solution to the crisis in which all legitimate parties’ concerns would be taken into consideration. Even after the culmination of the crisis with the ouster of the pro-Moscow president Viktor Yanukovych and the referendum that resulted in the participation of the former Crimean autonomous republic into Russia, Beijing held strict neutrality. In general, it pursued a low profile strategy well after the internal situation in Ukraine worsened. China’s position has been noticed by Ukraine. As stated by Oleg Demin, Ukraine’s Ambassador to China, ‘China has a stake in seeing Ukraine in Europe because once Ukraine is there it will serve China as a gateway to Europe’.43 After the Deep and Comprehensive Free Trade Agreement (DCFTA) signed by the EU and Ukraine in January 2016, China’s economic interest toward the Eastern European country has significantly increased. China sees that Kiev’s association with Europe provides great trade and investment opportunities due to Ukraine’s geographic location and manufacturing potential.44 In January 2016, Beijing officially expressed its support toward the new branch of the Silk Road, which would bypass Russia.45 Thus, China has maintained its neutral position and pursued to develop close economic ties with all related actors, including Ukraine. That said, geopolitically, while attempting to leave room for future contingencies, Beijing has remained rather sensitive toward Moscow’s concerns, seeking to balance among various regional and global interests and expectations. Especially after the launch of punitive economic sanctions on Russian trade and financial institutions by the United States and the EU, China adopted a more pro-Russia diplomacy. Even though it was unsatisfied with the way the crisis in Ukraine eventually led to the secession of Crimea and to a separatist civil war, Beijing continued to observe critically the root causes of the crisis and remained determined not to get involved in it.46 During the urgent meeting on Ukraine at the UNSC, reiterating Beijing’s position on respecting sovereignty and the territorial integrity of Ukraine, China’s ambassador drew attention to the underlying ‘reasons for why the situation in Ukraine is what it is today’, signaling Beijing’s sympathy with Moscow which it perceived as being forced to intervene in the face of critical developments across its borders.47 On 15 March 2014, China abstained from a Security Council vote on the draft resolution, which would have urged the member states not to recognize the referendum held in Crimea.48 Majority of the scholarship in China, too, came to perceive the tense situation in Ukraine as being instigated by the US and the EU, which aimed to reduce Russia’s influence in its near periphery and push forcefully for NATO’s enlargement to militarily encircle the country. For example, Jinglun Zhao maintained that, although initially there were Ukrainians asking genuinely for change in the country’s management, later foreign-influenced radical factions took over the protests, which led to the subsequent collapse of the ruling government. Eventually, Zhao contended, the Ukrainian situation evolved into a proxy war among major powers.49 Hence, incrementally, Beijing’s larger strategic calculations replaced the initial concerns regarding interventionism. China’s formal support became more vocal as sanctions on Russia intensified. Beijing urged Western powers to consider Moscow’s strategic interests and concerns, and seek a compromised solution.50 Other than expressing its official position through various platforms, in light of the worsening economic situation in Russia, Beijing pledged to offer concrete support, including financial assistance, if Moscow needed it.51 However, some scholars notice that Chinese help to Russia in reality has been limited due to the Western sanctions, which render the Russian market risky and unattractive.52 Nevertheless, energy investment and trade by the state owned enterprises became an important dimension of China’s political and economic support to Russia. The energy trade included large ticket deals and equity share agreements (e.g. the acquisition of oil and gas companies such as Yamal LNG, Vankorneft and Rosneft, and equity share deals) and provision of loans by Chinese banks to Russian energy companies that were barred from raising loans in Western markets.53 A key indication of support, without a doubt, has been the dramatic increase in China’s oil imports from Russia, which, elevating the country to the top position as a crude oil provider has helped to relieve the negative implications of sanctions for Russian economy. In the first quarter of 2016, Russian exports in oil reached a record high with a 52.4% increase over the same period in previous year.54 Similarly, in March 2016, China surpassed Germany as Russia’s top oil customer.55 Another important indicator of support has been the successful conclusion of the long-dragged natural gas negotiations. In the same month, President Obama signed an executive order, which authorized sanctions on Russian individuals and entities for violating Ukrainian sovereignty, and only a few days before Russia annexed Crimea, China and Russia signed the $400 billion natural gas agreement.56 Kept at the negotiation table for more than 20 years, the agreement’s timing, announced in the wake of a visit paid by the US Treasury Secretary to Beijing in which he ‘appealed to China… to avoid actions that might limit the impact of recent Western sanctions against Russia’, was not apparently coincidental.57 The deal, which opened China’s vast energy market to Russian natural gas exports for the first time, was an explicit reaction to the Western sanctions against Russian economy. Thus, aside from the symbolic meaning of the agreement that signified the expanse of China–Russia cooperation, the political and economic implications also appeared to be large especially when thought within the context of the Ukrainian crisis and Europe’s quest for alternative sources of natural gas to reduce dependence on Russia. Deepening energy relations have enabled Russia both to construct new policy responses to help allay negative implications of sanctions on the economy as well as to solidify China–Russia relations around energy politics. However, although the strategy offered a quick remedy for Russia to maintain its policy with respect to Ukraine, in the long run, it could be economically less effective due to a potential over-dependency on China and fluctuations in oil and gas prices. Nevertheless, energy deals with Russia and the strict observation of non-interference policy have allowed Beijing to avoid taking a strong political position with respect to the Ukrainian crisis but, instead, stand as an impartial economic actor that is able to maintain practical dialogue with all sides. Hence, within the context of China–Russia strategic partnership, energy has proven to offer a critical nexus to reinforce bilateral relations and provide economic tools to handle geopolitical challenges. 3.2 South China sea disputes The disputes in the SCS involve the question of ownership of the sea features spread in four major island groups and delimitation of territorial waters claimed individually or as a whole by China, Taiwan, Vietnam, the Philippines, Indonesia, Malaysia, and Brunei. Thus, a major characteristic of the disagreement is the non-identical nature of the individual overlapping claims. This along with other reasons, on the one hand, prevents bloc politics in the region and renders the dispute protracted, and, on the other, keeps it from developing into war.58 However, strategic significance of the disputed waters attracts external actors such as the United States, Japan, India, and Australia, which complicate the situation and increase the stakes for each player, including China. The SCS conflict is a primary challenge for China considering the presence of powerful extra-regional actors, especially the United States, which enjoys a well-positioned naval dominance in the region. China’s concerns are reinforced as its perception of the United States as an impartial mediator wanes due to deep policy disagreements over issues such as the island build-up and development activities in the region, US naval incursions in the areas claimed by China as territorial waters and Washington’s attempts to strengthen military ties with the states related directly or indirectly to the disputes. Thus, recognition of its position in the SCS is significant for Beijing and Moscow’s diplomatic support matters greatly, in this regard. Russia’s political and economic engagement in Southeast Asia developed through bilateral ties with a larger focus on traditional industries, such as defense and energy. However, Russian participation in regional institutional frameworks remained limited. On the particular issue of territorial disputes in the SCS, Moscow has maintained a policy of non-interference. Whereas, some analysts view Russia’s limited engagement in the region, especially its arms trade with Vietnam, as undermining China’s policy, thus unfriendly, others take Russia’s impartial approach on the key issues of contention in SCS as a silent approval of China’s strategy in the region.59 Recently, however, Moscow has verbally expressed its objection toward the internationalization of the conflict in the SCS, a position that corresponds with China’s basic SCS policy.60 For example, at the 11th Asia-Europe Meeting (ASEM) held in Mongolia in July 2016, Russian Prime Minister Dmitry Medvedev underlined Moscow’s opposition to ‘the internationalization of the South China Sea disputes or any interference by the forces outside the region’, lending support to ‘China's principles on resolving the disputes’.61 President Putin, too, reiterated Russia’s stance on non-interference in the SCS disputes and backed China’s position on non-acceptance of the PCA ruling.62 In addition to political rhetoric, in September 2016, Russia held a week-long joint naval exercise with China in the SCS, which was perceived as a significant statement in support of Beijing.63 Several factors can be cited to explain this ‘benevolent neutrality’ and growing China–Russia strategic alignment in the SCS. First, United States’ deepening security ties with Russia’s traditional security partners such as Vietnam force Moscow to take stronger posture in the region on the side of China with less concern about losing other minor allies.64 Second, seeing the ever growing multilateralization of the territorial disputes in the SCS with the United States being the leading external actor, Russia sides with China to counterbalance the United States in the European theater. Finally, deepening presence of the US military in Southeast Asia will likely result in a decline in Russia’s weapons trade with the region. For instance, recent announcement by the Obama administration about lifting the decades-old arms embargo on Vietnam is a strong message to Russia since Vietnam is one of the major customers of Russian arms.65 Therefore, trade in energy with China (which is also a significant importer of Russian defense platforms) becomes even more critical. Supporting China strategically in the SCS ensures stronger trade and security ties. The role of energy in China–Russia relationship within the context of SCS dispute may also be analyzed from the perspective of China’s Malacca Dilemma even though Beijing’s primary concern in the SCS involves the question of the ownership over sea features and adjacent waters. As we have briefly mentioned, the Middle East is China’s largest source of energy and majority of the trade is being conducted by sea.66 In this regard, although, China–Myanmar pipelines provide a certain degree of relief by reducing the country’s reliance on the conventional shipping route along the Malacca, the anticipated 20 million tons of oil to be delivered annually is still a fraction of China’s use of oil, considering the fact that China consumes about 1.5 million tons of crude oil daily. Consequently, energy cooperation with Russia helps ease the Malacca problem since, ideally, the more energy China receives from Russia via overland pipelines, the less reliant it will become on the sea routes. A reduced concern regarding sea transportation along the Indian Ocean and the SCS would allow China with a greater room for maneuver in the region to act with assertiveness over the disputed territories while worrying less over a potential energy chokehold by the US Navy.67 China’s recent SCS moves such as island development, deployment of defense systems on newly-built islands in Paracel and Spratly island groups and increasing activity by the Chinese Navy and Coast Guard in the region can be viewed under this light. Less dependence on the hydrocarbons transported through the chokepoints in the SCS reduces Beijing’s worries with respect to the security of supplies as Russia begins to take up a greater share in China’s mix of energy imports via secure pipeline transport. Accordingly, as with the case of the Ukrainian crisis, China, and Russia utilize energy diplomacy to respond to strategic challenges in the SCS and cooperate on a wide range of issue areas of international politics. 4 Conclusion It appears that a number of centripetal factors lead to China–Russia policy convergence and cooperation. These factors mainly involve geopolitics and geoeconomics. Geopolitically, broad lines of cooperation emerge from intense major power competition as China and Russia engage the United States in Eurasia and the Asia-Pacific. Geoeconomically, compatibility, acceptability, and availability of Chinese and Russian markets for bilateral trade and investment facilitate deeper interaction. Due to its central position in global economic activities within and across national borders, trade and investment in energy cuts across political and economic spheres, which renders it a valuable policy instrument. It is understood that, thanks to its inter-spherical feature, when used effectively, energy diplomacy generates synergy to explore political and economic points of convergence that can be meaningfully exchanged and mutually reinforced. In the context of China–Russia relations, catalyzed by viable conjunctures, the strategic importance of energy as a policy tool has grown considerably over the years, helping create a virtuous cycle of greater cooperation in response to internal needs and external challenges. The energy nexus, in this case, reflects the centrality of resource diplomacy in the triangulation of domestic, regional and international politics. Indeed, as being observed in the cases of the Ukrainian crisis and the SCS disputes, for the two countries, energy constitutes a political and economic response to security challenges of varied characteristics. Therefore, when we attempt to look into the role of energy as shaping and reinforcing China–Russia strategic partnership in the long run, one of the factors to consider would be the question of its continued feasibility to create desired strategic outcomes. Therefore, it is imperative to investigate whether energy diplomacy would continue to have any impact on urgent challenges the two countries face. If the impact is assessed to be positive for both sides (albeit at varying degrees, which unavoidably creates an impression of greater dependency of one side upon the other), it can be argued that energy will continue to be referred to as an instrument both to broaden bilateral cooperation and to address threats. If the outcome appears to be desirable for one of the sides only, then energy diplomacy may become conditional to other imperatives, no longer serving as a strategic instrument in itself. Given that recent improvements in China–Russia energy relations have been encouraged in part by external developments (which, in fact, explains why energy is viewed as more than simply one of the commodities in the broad spectrum of diplomatic activities), so long as those external conditions exist, the centrality of energy diplomacy will remain, creating path dependencies. That is to say, the mechanisms and norms formed under the pressure of outside factors will not cease to exist even after those factors are no longer relevant. This conditionality is further reinforced if one considers the fact that energy involves diuturnal investment and trade arrangements, which extend the strategic implications of cooperation into a continuum of opportunities. Hence, we argue that China and Russia will have an increasingly broader and deeper cooperation and energy diplomacy will maintain centrality as a basis to add material substance to the relationship. In this essay, we examined the role of energy diplomacy in China–Russia strategic partnership, looking, for this purpose, at the cases of the Ukrainian crisis and the SCS disputes as they relate to major power competition. We have found that cooperation in energy trade and investment has become an integral part of the two countries’ foreign diplomacy in response to external challenges. For Russia, energy cooperation with China offers the much needed financial relief and political backing as it faces unfavorable economic situation due to developments related to the Ukrainian crisis. For China, comprehensive energy ties with Russia reduces the country’s dependence on the oil and natural gas transported via strategic sea lanes and thereby opening up a larger room for policy maneuver in relation to the SCS territorial disputes. Thus, the two governments build implementation mechanisms such as agreements, regular meetings between officials from various levels, and business meetings in energy-related spheres, and utilize these mechanisms as platforms to facilitate strategic partnership in non-energy realms.68 The energy nexus between the two countries appears asymmetrical due, largely, to the relatively nonequivalent political and economic benefits each side accrues from the common energy-based strategic convergence of interests. While Beijing diversifies its sources of energy supply and target-markets for its goods by maintaining relations with all countries, Russia struggles against Western sanctions and draws suspicion from a number of neighboring countries. In fact, seeking a solution, Russia has recently begun to shift the direction of its foreign policy toward developing relations with Asia-Pacific states; however, this diversification has so far not been very successful and brought the country to an even greater dependence on China. It is observed that, although China and Russia have, to a large extent, overcome the traditional reluctance and political incrementalism in favor of an active energy interaction, which is closely linked to external geopolitical developments,69 looking into future, Moscow’s worries with respect to China’s growing national power and influence may lead to the reemergence of a strategic cynicism especially if external economic-political conjectures change in favor of Russia and allow it a larger freedom of movement. Nevertheless, existing differences or disagreements would not derail the established China–Russia ties since the larger ideational similarities, including their vision of international governance, could hardly be changed by conjectural factors. Apparently, in the face of political and economic challenges that currently leave few options for the two countries but cooperate, the two sides will likely to continue to seek areas of cooperation to justify further strategic alignment. To be sure, using energy as a geopolitical and geoeconomic tool is not a novel policy application; the very concept of petrodollar proves the historical causality between economy and politics. In the case of China and Russia, what is to be retrospectively questioned would be why the two large neighbors did not begin to utilize energy as a strategic instrument to achieve national objectives much earlier. A number of reasons have been mentioned in the previous pages, including such existential concerns as the risk of over-dependence on each other as an import or export destination and Russia’s fear of being reduced to a minor partner status due to a shift in the balance of power, particularly, in Central Asia. Furthermore, technical disagreements such as pricing and pipeline routes have slowed down progress in energy cooperation. Nonetheless, in this article, we sought to account for the growing role of energy as a tool of diplomacy at a time China and Russia are ideationally and strategically of a similar mind with respect both to their vision of global governance, and, hence, to their response to the challenges posed by external developments. It is, therefore, of great significance to keep monitoring China–Russia energy nexus within the larger context of the two powers’ strategic partnership and the ever-evolving external environment surrounding the two neighbors. 1 Chen, A. UPDATE 1-Russia beats Saudis as top China crude supplier for 4th month in 2015. (2016, January 26). Reuters. http://www.reuters.com/article/china-crude-russia-idUSL3N1592TM (10 February 2017, date last accessed). 2 Downs, E. S. (2010) ‘Sino-Russian Energy Relations: An Uncertain Courtship,’ in James A. Bellacqua, ed., The Future of China-Russia Relations, pp. 146-175. Lexington, USA: University Press of Kentucky. 3 Oil and natural gas sales accounted for 38.3% of Russia’s total export revenues in 2015. See: Novak A.V. (2016) Itogi raboty Misenergo Rossii i osnovnye resultaty funkcionirovaniya TEK v 2015 godu: Zadachi na srednesrochnuyu perspectivu (“The results of Russian Misenergo and the main results of FEC functioning in 2015: the mid-term perspective”). Ministry of Energy of the Russian Federation. http://minenergo.gov.ru/node/4436 (10 February 2017, date last accessed). Dolya TEK v rossiyskom exporte v 2015 g. upala nije 63% (The FEC’s share in Russia’s exports in 2015 fell below 63%). Finmarket. http://www.finmarket.ru/news/4227843 (10 February 2017, date last accessed). 4 Shadrina, E. (2014) ‘Russia’s natural gas policy toward Northeast Asia: rationales, objectives and institutions,’ Energy Policy, 74, 54. 5 Meckstroth, D. China has a dominant share of world manufacturing. (2014, January 6). MAPI. https://www.mapi.net/blog/2014/01/china-has-dominant-share-world-manufacturing (10 February 2017, date last accessed). 6 Jakobson, L., Holtom, P., Knox, D., et al. China’s energy and security relations with Russia: hopes, frustrations and uncertainties. (2011, 29 October). SIPRI Policy Paper no. 29, pp. 26. 7 China’s November Russian crude imports hit record high. (2014, December 23). Platts. http://www.platts.com/latest-news/oil/singapore/chinas-nov-russian-crude-imports-hit-record-high-26967924 (10 February 2017, date last accessed). The second stage of the ESPO, which delivers oil to the port of Kozmino in the Pacific, gives Russia another option to deliver more oil to China by a sea route. 8 Russia overtakes Saudi Arabia to become biggest crude exporter to China. (2015, June 23). RT News. https://www.rt.com/business/269146-russia-china-oil-trade/ (10 February 2017, date last accessed). 9 Rosneft and CNPC sign memorandum to expand cooperation in upstream projects in East Siberia. (2013, October 18). Rosneft. https://www.rosneft.com/press/releases/item/24361/, (10 February 2017, date last accessed). 10 Rosneft and Sinopec agree on the joint development of Russkoye and Yurubcheno-Tokhomskoye fields. (2015, September 3). Rosneft. https://www.rosneft.com/press/releases/item/176069/ (10 February 2017, date last accessed). We would like to note that the said agreement (Framework Agreement on the Purchase of 10% Share Stake of Vankorneft) has not been concluded and negotiations have been held on the price of the stake since 2014. See: Russia’s Rosneft sells 15% in Vankorneft to India's ONGC. (2015, September 4). TASS. http://tass.ru/en/economy/818658 (10 February 2017, date last accessed). 11 Xiāofèi jìnkǒu jūn jiāng kuàisù zēngzhǎng zhuānjiā jiànyì quèlì tiānránqì de zhànlüè dìwèi (Consumer imports are fast growing, experts suggest to determine the strategic position of natural gas). (2013, June 24). Xinhua. http://news.xinhuanet.com/energy/2013-06/24/c_124899522.htm (10 February 2017, date last accessed). 12 Grattan R. China’s natural gas demand continues to grow. (2014, August 18,). Fuel Fix. http://fuelfix.com/blog/2014/08/18/chinas-natural-gas-demand-continues-to-grow/#26533101=0 (10 February 2017, date last accessed). 13 Country Analysis: Russia, Energy Information Administration, July 28, 2015. http://www.eia.gov/beta/international/analysis_includes/countries_long/Russia/russia.pdf (10 February 2017, date last accessed). 14 According to estimates, when the east and west routes are operational, Russia will account for more than 40% of China’s natural gas consumption. See, China, Russia reach another energy milestone. (2014, November 9). China Daily. http://www.chinadaily.com.cn/world/2014apec/2014-11/09/content_18890866.htm (10 February 2017, date last accessed). 15 Weitz R. (2014) ‘The Russia-China gas deal: implications and ramifications’. World Affairs Journal. http://www.worldaffairsjournal.org/article/russia-china-gas-deal-implications-and-ramifications (10 February 2017, date last accessed). 16 Snyder M. Who Is behind the oil war and how low will the price of crude go in 2015?. (2014, December 3).The Economic Collapse. http://theeconomiccollapseblog.com/archives/behind-oil-war-low-will-price-crude-go-2015 (10 February 2017, date last accessed). 17 Harsem Ø. and Harald Claes D. (2013) ‘The interdependence of European–Russian energy relations’, Energy Policy, 59, 785. 18 Russia: International energy data and analysis. (2015, July 28). Energy Information Administration. http://www.eia.gov/beta/international/analysis_includes/countries_long/Russia/russia.pdf (10 February 2017, date last accessed). 19 Shadrina E. (2014) ‘Russia’s natural gas policy toward Northeast Asia: rationales, objectives and institutions’, Energy Policy, 74, 55. 20 Dickel R, Hassanzadeh E, Henderson J., et al. (2014) Reducing European Dependence on Russian Gas: Distinguishing Natural Gas Security from Geopolitics, pp. 57-58. Oxford, UK: The Oxford Institute for Energy Studies. 21 Russia: International energy data and analysis. (2015, May 14). Energy Information Administration. http://www.eia.gov/beta/international/analysis.cfm?iso=CHN (10 February 2017, date last accessed). 22 Daojiong Z. and Meidan M. (2015) China and the Middle East in a New Energy Landscape, pp. 2. London, UK: Chatham House; Rose A. and Chen A. Amid global price rout, China crude oil imports hit record. (2016, January 13). Reuters. http://www.reuters.com/article/us-china-economy-trade-crude-idUSKCN0UR0DU20160113 (10 February 2017, date last accessed). 23 Rapoza K. Putin promises to sell more oil in yuan, ruble. (2014, November 16). Forbes.http://www.forbes.com/sites/kenrapoza/2014/11/16/putin-says-country-will-be-selling-more-oil-in-yuan-ruble/#495d2ed47970 (10 February 2017, date last accessed). 24 UPDATE 2-Russia's Yamal LNG gets round sanctions with $12 bln Chinese loan deal. (2016, April 29). Reuters. http://af.reuters.com/article/energyOilNews/idAFL5N17W2G8?sp=true (10 February 2017, date last accessed). 25 Although China and Russia have been developing indigenous technologies, they still lag behind the developed Western and Japanese energy companies in a number of core technologies in drilling, well testing and logging. See, for example, China extends tax waivers for importing oil, gas drilling equipment. (2017, January 6). EP Mag.http://www.epmag.com/china-extends-tax-waivers-importing-oil-gas-drilling-equipment-1457366 (10 February 2017, date last accessed); Williams J. Shell partners with Russia for arctic Oil another attempt at arctic oil production. (2013, April 9). Energy & Capital.http://www.energyandcapital.com/articles/shell-nyse-rdsa-partners-with-russia-for-arctic-oil/3265 (10 February 2017, date last accessed). 26 (2014) Power of Siberia Construction Launched. Gazprom. http://www.gazprom.com/press/news/2014/september/article200026/ (10 February 2017, date last accessed). 27 Rossiya i Kitay podpisali dogovor o sozdanii grazhdanskogo tyazhelogo vertoleta (Russia and China signed an agreement about creating a civilian heavy helicopter). (2016, June 25). RIA Novosti.https://ria.ru/east/20160625/1451681283.html (10 February 2017, date last accessed). 28 Koch-Weser I. and Murray C. (2014) The China-Russia Gas Deal: Background and Implications for the Broader Relationship, pp. 16-27. US-China Economic and Security Review Commission. http://origin.www.uscc.gov/sites/default/files/Research/China%20Russia%20gas%20deal_Staffbackgrounder.pdf (10 February 2017, date last accessed). 29 Skalamera M. China can’t solve Russia’s energy technology trap. (2015, February 13). The Diplomat.http://thediplomat.com/2015/02/china-cannot-solve-russias-energy-technology-trap/ (10 February 2017, date last accessed). 30 Kuchma A. China continues to expand presence in Russian energy sector. (2015, December 22). RBTH. http://rbth.com/business/2015/12/22/china-continues-to-expand-presence-in-russian-energy-sector_553451 (10 February 2017, date last accessed). Bokarev D. Russia and China in the nuclear energy sector: cooperation or competition?. (2015, December 14). New Eastern Outlook. http://journal-neo.org/2015/12/14/russia-and-china-in-the-nuclear-energy-sector-cooperation-or-competition (10 February 2017, date last accessed); “China seeks to arrange joint Arctic expedition with Russia,” TASS, February 9, 2016, http://tass.ru/en/science/855387 (10 February 2017, date last accessed). 31 Henderson J. (2011) The Pricing Debate over Russian Gas Exports to China Oxford Institute of Energy Studies, pp. 6-11. Oxford, UK: Oxford Institute for Energy Studies. 32 Gazprom: power of Siberia GTS moving forward. (2014, June 19). LNG World News. http://www.lngworldnews.com/gazprom-power-of-siberia-gts-moving-forward/ (10 February 2017, date last accessed). 33 Hille K. Russia and China: friends with benefits. (2016, February 5). Financial Times. https://next.ft.com/content/f8959924-cab6-11e5-a8ef-ea66e967dd44 (10 February 2017, date last accessed). 34 ‘Gazprom’ protiv integrirovannogo kontrakta po ‘Sile Sibiri-2’ s kitayskoy CNPC (“Gazprom” is against an integrated contract on ‘Power of Siberia-2’ with Chinese CNPC). (2016, July 1). Vedomosti.http://www.vedomosti.ru/business/articles/2016/07/01/647537-sila-sibiri-2-na-podhode (10 February 2017, date last accessed). Ulyukaev dopustil perenos nachala postavok gaza po ‘Sile Sibiri-2’ (Ulyukayev conceded postponing the start of gas supplies on the ‘Power of Siberia-2’). (2016, January 16). RBC. http://www.rbc.ru/rbcfreenews/569a616d9a79472631f65a67 (10 February 2017, date last accessed). 35 Astakhova O. and Chen A. Exclusive: Russia likely to scale down China gas supply plans. (2016, January 15). Reuters. http://www.reuters.com/article/us-russia-china-gas-exclusive-idUSKCN0UT1LG (10 February 2017, date last accessed). 36 Koroleva A. Kitay otsenil ob’em budushchih postavok rossiyskogo gaza (China assessed the volumes of future Russian gas supplies). (2015, September 30). Expert Online. http://expert.ru/2015/09/30/rossijskij-gaz-potechet-v-kitaj-rekoj/ (10 February 2017, date last accessed). 37 Farchy J. Gazprom's China contract offers no protection against low prices. (2015, August 10). Financial Times. https://search.proquest.com/docview/1710557781?accountid=10067. (10 February 2017, date last accessed). 38 Lo B. (2014) Sino-Russian Relations, pp. 3. Europe China Research and Advice Network (ECRAN). Short Term Policy Brief 87.http://www.eeas.europa.eu/archives/docs/china/docs/division_ecran/ecran_is109_paper_87_sino-russian_relations_bobo_lo_en.pdf (10 February 2017, date last accessed). 39 Socor V. ‘Strategic implications of the Central Asia-China gas pipeline’, Eurasia Daily Monitor, 6. https://jamestown.org/program/strategic-implications-of-the-central-asia-china-gas-pipeline-2/ (10 February 2017, date last accessed). Alexander Lukin; (2015) ‘Shanghai cooperation organization: looking for a new role’, Valdai Papers Special Issue, 4. http://valdaiclub.com/a/valdai-papers/valdai_paper_special_issue_shanghai_cooperation_organization_looking_for_a_new_role/ (10 February 2017, date last accessed). 40 Duchâtel M. and Godement F. China and Russia: gaming the West. (2016, November 2). ECFR. http://www.ecfr.eu/publications/summary/china_and_russia_gaming_the_west7166 (10 February 2017, date last accessed). 41 Billington J. H. (2004) Russia in Search of Itself, Washington D. C.: Woodrow Wilson Center Press with Johns Hopkins University Press. 42 Daksueva O. and Yilmaz S. (2014) ‘The Russia-China security partnership in the Asia-Pacific region: conjectural and structural dimensions’, Tamkang Journal of International Affairs 17, 61–92. 43 Quoted in Kuznetsov D.V. (2016) ‘China and the Ukrainian crisis: from ‘neutrality’ to ‘support’ for Russia”, China Report, 52, 94. 44 Mykal O. Why China is interested in Ukraine. (2016, March 10). The Diplomat. http://thediplomat.com/2016/03/why-china-is-interested-in-ukraine/ (10 February 2017, date last accessed). 45 The Trans-Caspian transport corridor will pass through Ukraine, Georgia, Azerbaijan, and Kazakhstan to Europe. See: Beijing supports Kiev’s proposal on Trans-Caspian route from China to Europe. (2016, January 25). TASS. http://tass.ru/en/economy/851885 (10 February 2017, date last accessed). 46 China Premier says respects Ukraine integrity, won't be drawn on Crimea. (2015, March 15). Reuters. http://www.reuters.com/article/us-china-parliament-ukraine-idUSKBN0MB05220150315 (10 February 2017, date last accessed). 47 Reilly W.M. China calls for political resolution of Ukrainian crisis. (2014, March 4). People’s Daily. http://en.people.cn/90883/8553801.html (10 February 2017, date last accessed). 48 (2014) ‘Security Council Fails to Adopt Text Urging Member States Not to Recognize Planned 16 March Referendum in Ukraine’s Crimea Region’, United Nations 7138th Meeting, March 15. http://www.un.org/press/en/2014/sc11319.doc.htm (10 February 2017, date last accessed). China also abstained from another UN General Assembly vote on a March 27 resolution calling for respecting Ukraine’s territorial integrity. Russia, along with ten other countries, voted against the resolution, which was not legally binding. The resolution passed with 100 countries voting in favor. 49 Zhao J. How to resolve the Ukrainian crisis. (2014, March 6). China.org.cn. http://www.china.org.cn/opinion/2014-03/06/content_31690062.htm (10 February 2017, date last accessed). 50 Boren Z.D. Ukraine crisis: top Chinese diplomat backs Putin and says West should ′abandon zero-sum mentality′. (2015, February 28). The Independent. http://www.independent.co.uk/news/world/europe/ukraine-crisis-top-chinese-diplomat-backs-putin-says-west-should-abandon-zero-sum-mentality-10075762.html (10 February 2017, date last accessed). 51 China pledges to help Russia overcome economic hardships. (2014, December 23). Russia Today. https://www.rt.com/news/216563-china-russia-economic-hardships/ (10 February 2017, date last accessed). 52 Gabuev A. (2016) Did Western Sanctions Affect Sino-Russian Economic Ties? Carnegie Moscow Center. http://carnegie.ru/2016/04/26/did-western-sanctions-affect-sino-russian-economic-ties/ixo5 (10 February 2017, date last accessed). 53 China expressed its interest in buying Rosneft’s shares. See: China interested in buying shares in Russia’s Rosneft oil giant. (2016, April 19). Sputnik. http://sputniknews.com/business/20160419/1038255076/china-rosneft-oil.html (10 February 2017, date last accessed). 54 Russian oil exports to China hit record high in April. (2016, May 23). Russia Today.https://www.rt.com/business/344060-china-russia-oil-imports/ (10 February 2017, date last accessed). 55 China has overtaken Germany as Russia’s biggest oil customer, the International Energy Agency (IEA) revealed on Friday. (2016, March 11). Sputnik. http://sputniknews.com/business/20160311/1036148349/china-germany-russian-oil.html (10 February 2017, date last accessed). Holodny E. Russia is now China's biggest oil partner—and it's a huge problem for Saudi Arabia. (2016, February 2). Business Insider. http://www.businessinsider.com/russia-vs-saudi-arabia-in-chinas-oil-market-2016-2 (10 February 2017, date last accessed). 56 It has also be pointed out that the protracted negotiations over the gas deal were eventually overcome after Russia, facing US-led sanctions over the annexation of Crimea, showed willingness to lower the price of gas. 57 Wan W. and Hauslohner A. China, Russia sign $400 billion gas deal. (2014, May 21). Washington Post. https://www.washingtonpost.com/world/europe/china-russia-sign-400-billion-gas-deal/2014/05/21/364e9e74-e0de-11e3-8dcc-d6b7fede081a_story.html (10 February 2017, date last accessed). 58 Glaser B.S. (2012) Armed Clash in the South China Sea, Contingency Planning Memorandum No. 14, Council on Foreign Affairs. http://www.cfr.org/asia-and-pacific/armed-clash-south-china-sea/p27883 (10 February 2017, date last accessed). 59 Daksueva O. (2015) ‘Sino-centrism in Russia’s South China Sea Policy’, Issue Briefings 1. South China Sea Think Tank, http://scstt.org/issue-briefings/2015/137/. Mihaylov S. Kitay rasshirayet granicy. (2015, April 23) (10 February 2017, date last accessed). Gazeta. http://www.gazeta.ru/busines/2015/04/17/6644201.shtml; Tsvetov A. Did Russia just side with China on the South China sea? (2016, April 21). The Diplomat. http://thediplomat.com/2016/04/did-russia-just-side-with-china-on-the-south-china-sea/ (10 February 2017, date last accessed). 60 China, Russia oppose Internationalizing South China Sea Dispute. (2016, April 18). Beijing Review. http://www.bjreview.com.cn/Latest_Headlines/201604/t20160420_800054907.html (10 February 2017, date last accessed). 61 Premier Li wins backing over South China sea at ASEM summit. (2016, July 17). China Daily.http://www.chinadaily.com.cn/world/2016-07/17/content_26116524_2.htm (10 February 2017, date last accessed). 62 Russia supports China’s stance on South China sea. (2016, September 5). Sputnik News.https://sputniknews.com/world/201609051044988523-russia-china-putin/ (10 February 2017, date last accessed). 63 Lendon B. and Hunt K. China, Russia begin joint exercises in South China Sea. (2016, September 13). CNN.http://edition.cnn.com/2016/09/12/asia/china-russia-south-china-sea-exercises/index.html (10 February 2017, date last accessed). 64 Vietnam was reported to “to prohibit the maintenance of long-range Russian aircraft in Vietnamese airports,” under US pressure. See, Russia to take part in South China sea naval exercises. (2015, May 30). Sputnik. http://sputniknews.com/asia/20150530/1022753332.html (10 February 2017, date last accessed). 65 Obama lifts arms embargo on Vietnam. (2016, May 23). Reuters. http://www.reuters.com/video/2016/05/23/obama-lifts-arms-embargo-on-vietnam?videoId=368607688 (10 February 2017, date last accessed). 66 Lee J. (2012) ‘China’s geostrategic search for oil’, The Washington Quarterly 35, 77. 67 Best frenemies: Vladimir Putin pivots eastward. Should America be worried? (2014, May 24). The Economist.http://www.economist.com/news/leaders/21602695-vladimir-putin-pivots-eastward-should-america-be-worried-best-frenemies (10 February 2017, date last accessed). 68 Zhiznin S. Vostochnoe napravlenie (The Eastern direction,). (2011, April 13) Nezavisimaya gazeta.http://www.ng.ru/energy/2011-04-13/14_rus_china.html (10 February 2017, date last accessed). 69 Ebinger C.K. and Boersma T. Sino-Russian gas deal shows center of gravity has shifted from West. (2014, April 3). Global Times. http://www.globaltimes.cn/content/863631.shtml (10 February 2017, date last accessed). © The author 2017. Published by Oxford University Press in association with the Japan Association of International Relations; all rights reserved. For Permissions, please e-mail: journals.permissions@oup.com http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Relations of the Asia-Pacific Oxford University Press

The energy nexus in China–Russia strategic partnership

Loading next page...
 
/lp/ou_press/the-energy-nexus-in-china-russia-strategic-partnership-OBJrvseREL
Publisher
Oxford University Press
Copyright
© The author 2017. Published by Oxford University Press in association with the Japan Association of International Relations; all rights reserved. For Permissions, please e-mail: journals.permissions@oup.com
ISSN
1470-482X
eISSN
1470-4838
D.O.I.
10.1093/irap/lcx003
Publisher site
See Article on Publisher Site

Abstract

In this article, we examine the energy nexus in China–Russia strategic relations. We find that, over the past few years, the two countries have taken concrete steps to reinforce partnership in other strategic issue areas. Energy, in this respect, has been utilized as an effective policy instrument to deal with immediate challenges such as the Ukrainian crisis and the South China Sea disputes. We argue that cooperation in energy helps the two countries adopt common positions toward non-energy related issues and facilitate long-term deeper interaction. We thus maintain that energy will occupy an increasingly central position as China and Russia continue to seek to align their strategies more comprehensively against the backdrop of the evolving geopolitical environment by working to overcome existing disagreements and exploring new areas of cooperation. 1 Introduction Ever since the economic opening up in the late 1970s, China’s demand for energy has grown considerably along with increased industrial, civilian, and military consumption, which eventually made the country the largest consumer and importer of energy in the world. Despite its geographical proximity to Russia, a major supplier of oil and natural gas, China, for quite long time, remained reluctant to set up viable energy ties with the northern neighbor. Over the past decade, however, the picture has changed dramatically. With the signing of the Treaty of Good Neighborliness and Friendly Cooperation in 2001, in which the two sides pledged to upgrade their partnership, the overall China–Russia relations began to improve. Ever since, cooperation in energy (particularly in crude oil and, potentially, in natural gas) has grown significantly, involving not only trade in energy resources but also energy-related investment, equity ownership, infrastructure development, and technology exchange. Eventually, in December 2015, Russia became China’s largest crude oil supplier, overtaking Saudi Arabia.1 Also, in 2014, the two countries signed a major gas deal worth 400 billion USD for a period of 30 years, which will boost Russia’s presence as China’s leading natural gas import destination, as well. Thus, considerable progress has been made so far in China–Russia energy relationship although certain disagreements and policy divergence still exist. Aside from its function as a key instrument in strengthening Sino-Russian economic relations, energy has also began to occupy a more central place in the two countries’ strategic interaction, constituting a significant base for pragmatic cooperation. Over the past few years, the two countries have taken concrete steps to reinforce partnership in other strategic issue areas. Energy, in this respect, has been utilized as an effective policy instrument to deal with immediate challenges such as the Ukrainian crisis and the South China Sea disputes. Drawing on this observation, in this article, we attempt to examine the energy nexus in China–Russia strategic relations, arguing that cooperation in energy helps the two countries adopt common positions toward non-energy related issues and facilitate long-term deeper interaction. We, thus, maintain that energy will occupy an increasingly central position as China and Russia seek to align their strategies more comprehensively against the backdrop of the evolving geopolitical environment by working to overcome existing disagreements and exploring new areas of cooperation. However, we also note that energy is only one of the indicators that help understand and evaluate the China–Russia relationship as there are other dimensions to bilateral interaction that are cooperative or competitive in nature. In the ensuing pages of this article, we first offer a brief historical investigation of China–Russia energy relations. Then we go on to analyze what we call the China–Russia energy nexus, bringing up, in this vein, two major contemporary cases. First, we examine how the two countries have utilized energy politics to address the Ukrainian crisis and, more specifically, economic sanctions placed on Russia by the United States and the European Union (EU) in response to Russia’s annexation of Crimea. We find that China has assisted economic sanctions-hit Russia by providing the most needed funds in the form of growing energy imports from and energy-related investments in the country. We then turn to China and investigate how Moscow assists Beijing through its energy diplomacy in East Asia. On this, we pay particular attention to the ongoing disputes in the South China Sea (SCS) over the issues of maritime territorial ownership, entitlements, and delimitation. We find that Moscow has assisted Beijing by presenting itself as a supporter of China’s position and a reliable energy supplier, thereby easing China’s historical Malacca Dilemma and providing the country with a greater room for maneuver in the SCS conflict. In the last section, we debate the prospects for China–Russia partnership with energy acting as a major propeller for more comprehensive strategic engagement. 2 The energy nexus in China–Russia relations China–Russia oil trade has grown considerably under favorable geographic and economic conditions.2 Geographically, Russia has major oil and natural gas fields in Eastern Siberia, which borders China’s industrialized northeast, and in Western Siberia, which borders China’s upstream Tarim Basin in the northwest. Economically, Russia’s resource-based economy is complementary to China’s manufacturing-driven economy. In 2015, the fuel and energy sector contributed to 27% of Russia’s GDP, accounting for around 63% of total export earnings while oil and natural gas took up 43% of federal revenues.3 In 2013, oil and gas sectors represented over 40% of investment and 75% of merchandise exports.4 China, on the other hand, has a dominant position in global manufacturing (22% share in 2012) and is home to an ever-growing civilian energy consumption base.5 It is the largest consumer of energy in the world, and according to estimations, national consumption will continue to increase for the foreseeable future even though energy intensity decreases. However, although China became a net crude oil importer from the mid-1990s and its consumption has increased exponentially ever since, Russia fared relatively poorly until recently. In 2000, its share in China’s total oil import was around 2%.6 In 2005, Russia was still not among China’s top ten sources of crude oil, while in 2010, it accounted for only about 6% share as the fifth largest supplier. In 2011, Russia began to supply oil through the Skovorodino branch of the East Siberia–Pacific Ocean (ESPO) pipeline in the Amur region near the border with China, and in the next five years crude exports more than doubled.7 In May 2015, Russia took the top spot as China’s largest provider of oil.8 A number of large energy deals signed between the two countries over the years. In June 2013, Russia’s Rosneft and China’s CNPC agreed on a 25-year oil deal worth 270 billion USD. In the same year, Rosneft signed another 85 billion USD deal with China’s Sinopec to deliver 100 million tons of crude oil for ten years. In addition to purchase deals, Chinese companies have started to buy equity stakes in oil and gas fields in Russia. Among the major deals has been CNPC’s agreement with Rosneft to jointly develop oil and gas fields in East Siberia9 and the agreement between Rosneft and Sinopec on the proposed joint development of Russkoye and Yurubcheno-Tokhomskoye fields.10 The increase in equity agreements indicates qualitatively improving relationship and strategic trust given that, under President Putin, Russia has nationalized the energy industry and closed it almost entirely to foreign investment. Currently, natural gas accounts for only about 5% of China’s total energy mix.11 However, the country’s consumption increased at a rate of 16% during 2003–13. China’s shift from coal to clean burning resources in order to cut carbon emissions suggests that the demand will further grow and surpass the world average in the medium to long-term.12 Russia, on the other hand, holds world’s largest natural gas reserves and is currently the second biggest producer13 Despite the apparent compatibility between the two countries, Russia has yet to occupy a meaningful space in China’s natural gas import. Currently, China receives Russian LNG shipments via sea routes but the amount remains insignificant. However, the 2014 gas deal is expected to change China’s natural gas landscape with Russia achieving a prominent position.14 Under the 2014 deal, starting from 2018, Russia will supply natural gas to China from East Siberian fields for 30 years, meeting one-fifth of China’s total demand.15 The eastern and western branches of the Power of Siberia pipeline will carry the gas to Russia’s Pacific coasts, connecting with China’s border at several points. These oil and gas deals are important from several perspectives, including geopolitics and geoeconomics. Geopolitically, the deals symbolize a new stage in China–Russia coordinated diplomacy in the face of major global challenges. Geoeconomically, they demonstrate the two sides’ willingness to take advantage of geographic proximity and resource-market compatibility to provide mutual strategic support. 2.1 The energy nexus: geopolitics and geoeconomics As mentioned above, the China–Russia energy relationship has begun to improve over the past few years in response to a number of geopolitical and geoeconomic challenges. Geopolitically, both China and Russia have been facing major developments in their near peripheries. In the SCS, territorial disputes over uninhabited rocks and reefs get increasingly complicated and multilateralized with growing activities by the regional disputants and external actors such as the United States, Japan, and India, which poses a major challenge to China. In addition, under the ‘rebalance toward Asia’ strategy, Washington has reinforced its security alliance network and military footprint in the Asia-Pacific. China, in the meantime, seeks to increase its defense capabilities through military development and build up, and promote the One Belt One Road (OBOR) initiative to transform itself from a territorial into a comprehensive land and maritime power. Accordingly, politics in the region has become more contentious and inflammable with increased military posturing of the regional stakeholders and growing presence of extra-regional actors. Russia, on the other hand, has been involved in a deep conflict with the United States and its European allies over the situation in Ukraine, reminiscent of the accident-prone Cold War era. Especially after the annexation of Crimea into Russia, the collective Western response has included a wide range of punitive economic measures. Indirectly, Moscow has seen energy prices kept artificially low, which jeopardizes the country’s revenue-from-energy dependent national budget.16 Directly, Moscow has been subject to punitive measures by the United States, the EU and some other countries, which have cut trade ties, sanctioned Russian politicians and businesspersons, and excluded Moscow from the Western-controlled global financial regimes and platforms. Consequently, China and Russia have begun to view developing deeper energy cooperation to respond to the urgent geopolitical challenges as a viable strategy. Besides geopolitics, the two countries’ desire to diversify export and import sources of energy contributes to the development of closer ties. Indeed, Europe’s import dependency on Russian energy represents only one aspect of the ‘dynamic asymmetric interdependence’ between Russia and Europe since, from a supply side perspective, Russia is greatly dependent on the European markets for its exports.17 Besides, Western companies are heavily involved in Russia’s exploration activities, especially in the growing Sakhalin Island region. This export (and to a lesser degree, investment) dependence has been intensified further in recent years due to low commodity prices and the large share of revenues from energy export in Russia’s national budget. The European Union maintains a dominant position in Russia’s foreign trade, holding over 50% share with energy as the biggest item. In 2014, for instance, about 90% of Russia’s natural gas and 70% of its crude oil was exported to European markets.18 Therefore, much as European dependence on Russian energy is a strategic asset for Moscow, its own export dependence on the European markets is a liability.19 China, in this vein, offers Russia a long-term market for export diversification, especially with respect to natural gas.20 World’s largest energy consumer since 2011, China is heavily reliant on the Middle East for its oil and, to a lesser degree, natural gas, with the hydrocarbon-rich region accounting for two-thirds of the country’s total imports in oil and 40% of its total imports in natural gas (2014).21 The growing importance of the region in China’s energy mix is likely to further grow unless new sources of energy are found. For instance, China’s imports of crude oil from the Middle East rose from 2 million b/d in 2012 to 7.8 million b/d in December 2015.22 Obviously, the volatile political situation in the region creates serious reliability issues for China’s energy market. Furthermore, the fact that the imported resources are transported via maritime routes (80% of China’s crude oil import traverses through the Malacca Strait) raises trade route safety issues, which would be further aggravated in the event of a conflict in the SCS. Accordingly, facilitated by extant geoeconomical conditions, Russia and China’s export and import diversification strategies are rendered compatible and complementary. Financially, too, energy cooperation corresponds to the two sides’ long-term goal of decoupling from the USD-dominated international trade in favor of trade in domestic currencies, which involves commodities such as crude oil and natural gas.23 Also, since the sale of energy resources composes a large portion of Russia’s revenue from exports, Moscow looks for new markets to offset the economic loss from the falling oil prices and financial sanctions. With its increasing use of energy, China (as well as other developing countries in the Asia-Pacific) is a natural destination for Russia to make up for the revenues lost due to tense relations with the West. Additionally, China’s financial strength allows for major energy deals that involve large-scale investment in logistics, construction, and maintenance work. For instance, in 2016, the Export-Import Bank of China and the China Development Bank agreed to provide a $12 billion loan to Russian Yamal LNG, 30% of which is controlled by CNPC (20%) and the Silk Road Fund (9.9%), for covering external financing needs.24 The established Chinese and Russian technological capabilities, albeit not at the level of the developed West, facilitate cooperation on projects’ speedy execution within the agreed timeframe.25 This, in turn, contributes to the financial viability of the deals. Technologically, China and Russia are able to undertake difficult projects such as the ‘Power of Siberia’ pipeline, which poses considerable technical and engineering hardships due to harsh terrain and climatic conditions.26 Hence, in addition to cooperation on joint projects, China and Russia share technology in areas (that are directly and indirectly related to energy) they lack capability. For example, in June 2016 both countries agreed to develop jointly a civilian advanced heavy-lift (AHL) helicopter.27 Technological cooperation is critical for Russia at a time the US and European companies reduce technology transfers as part of the sanctions. As quoted in a report by US–China Economic and Security Review Commission, ‘Russia will increase purchases of shale oil extraction equipment from China if US and European firms continue to scale back technology transfers as part of ongoing sanctions against Russia.’28 Others, however, have argued that China would hardly be able to substitute the West as a technology provider for Russia.29 Nevertheless, if Russia lifts the restrictions on foreign investment in Russian energy companies, the combined Chinese–Russian technological and logistical capacity might encourage further cooperation. As a matter of fact, over the years, such cooperation has increased in scale and scope, involving wide range of areas such as loans and acquisitions, nuclear energy projects, and Arctic off shore and shale explorations.30 2.2 Existing challenges Whereas, geopolitical and goeconomic factors encourage China–Russia strategic cooperation, a number of counter-factors affect energy relations negatively. First, currently, an important roadblock is economic considerations, especially issues related to price formation, loans, equity ownership, volumes, and location of the supply sources. The 2014 natural gas deal is a good example. Disagreements over pricing and pipeline routes dragged negotiations over the construction of the pipeline for more than two decades.31 With respect to disagreement over pricing, whereas Russia declined to sell the gas at a lower rate than paid by the Europeans, China did not want to pay more than it paid for the gas it received from the Central Asia. Similarly, on the question of the initial source of supply, Moscow insisted on utilizing existing lines to deliver gas at the northwest of China–Russia border in which China already received gas from Turkmenistan, Kazakhstan, and Uzbekistan. Beijing, on the other hand, requested delivery at the northeast to supply gas directly to the industrial regions with high energy demand. The impasse was partially overcome in 2014 after the two countries reached a deal over pricing and the delivery of the gas through the Power of Siberia pipeline (currently under construction) at the Russia–China border in the northeast.32 Even though the overall relations between China and Russia are described as being ‘on the rise and undergoing the best period in their centuries-long history’, on the energy front, a number of recent projects face prolonged negotiations.33 Discussions on the Power of Siberia-2, planned to be finalized in January 2016, were delayed due to disagreements between the two sides over the construction and management of the pipeline as well as questions related to joint production and gas sales.34 Also, unfavorable external factors such as the fall in global energy prices, slowing domestic consumption in China, and the growing cost of pipeline construction, especially costs related to the West Siberian branch, held up a final agreement. Accordingly, it has been reported that the deadline to start sending Russian gas into Chinese territory might be further postponed.35 It has also been argued that Russia has been in a less advantageous position partly due to the tense relations with the West and low oil and gas prices, while China is strategically less constrained as it can wait for better conditions in the market or at the negotiation table.36 In particular, the ‘Power of Siberia’ pipeline, seen as one of the Kremlin’s achievements against the Western sanctions, may bring economic losses for Gazprom if oil prices remain low.37 Hence, it is obvious that diverse external environment creates differing conditions, which result in unequal benefits for each side; hence, the two countries appear to have uneven interdependence. It is seen that, whereas diversification of import and export sources strategy pushes the two states toward broader energy interaction, concerns related to over-dependence and a potential shift in the balance of power cause hesitation. In fact, observers have noted that the China–Russia partnership is in fact an ‘axis of convenience’ rather than a common front driven by ‘a deeper likemindedness’.38 If the perception of an asymmetric relationship is reinforced, as the argument goes, it may lead to further hesitation in cooperation in various strategic areas, including energy. Indeed, the presence of such concerns may explain the belated natural gas agreement, which was signed long after China set up viable energy ties with Central Asian resource rich countries. As argued by some analysts, Russia views China’s extensive energy connections in Central Asia as a challenge both to its status as a dominant resource provider and as a historically influential actor in the region.39 As a way of countering this challenge, it seeks to occupy a larger space in China’s energy market and maintain its bargaining power on pricing, pipeline routes selection and other issues while avoiding investment concessions to Chinese energy companies. It has also been held that Russia is concerned about the widening power parity in China’s favor, which allows Beijing to increase its influence in Central Asia and Eastern Europe under various One Belt One Road projects, potentially disturbing the balance of power in the two regions in favor of China. Thus, even if it would be inconceivable to anticipate the already established China–Russia ties that involve institutionalized cooperation on various economic and security realms to weaken beyond repair, these concerns stand as potential obstacles that might slow down the progress in bilateral relations and thus reduce the utility of energy as an effective policy instrument, as was the case until the late 2000s. Overall, the challenges to China–Russia energy nexus are numerous and the two sides are required to continuously address them, as was the case with the disagreement over the pricing of natural gas that led to extended negotiations until an agreement was reached in 2014. It can be maintained that external conditions that lead to changes in the way the two countries perceive each other have played considerable role in the present cooperation and collaboration. In this regard, especially the worsening relations between Russia and the West encouraged Moscow to turn to China as a strategic leverage. This re-calibration explains both the lack of progress in energy diplomacy over the past several decades and the speedy progress over the past several years. Hence, so far, under the new conditions, China and Russia have shown greater interest in teaming up ‘on an issue-by-issue basis’ while the two have refrained from defining their relations within the framework of a formal alliance.40 3 The China–Russia energy nexus: cooperation on non-energy related fronts In the post-Cold War era, China–Russia strategic cooperation has developed under the influence of certain internal and external factors. Therefore, it would be inadequate to attempt to explain the evolving relationship by drawing exclusively on one or the other aspect. Internal factors involve the two countries’ calculations of survival and development in isolation from external geopolitical concerns. Both China and Russia experienced struggle among competing foreign policy paradigms seeking to influence the strategic orientation of the state. In both countries, in general terms, those who advocated regional integration and those who favored deeper economic-political cooperation with the West offered opposite foreign policy roadmaps.41 Eventually, the forces that called for region-oriented foreign diplomacy gained upper hand. In China, the opening up in the late 1970s remained limited to economics whereas in Russia, following intense struggle during the 1990s, pro-western inclinations in foreign policy were curbed. In this, non-satisfaction toward the modern international system played a decisive role. Thus, informed by domestic dynamics and global conditions, China and Russia contextualized their international relations along regionalist, anti-globalist and anti-unilateralist lines. Especially over the past decade, China and Russia have faced numerous geopolitical challenges on multiple fronts. North Korean nuclear proliferation, the ongoing negotiations between Washington and Seoul on establishing missile defense system in South Korea and the territorial disputes in the SCS are among the pressing issues that Beijing faces now. In the meantime, the US has continued to build security alliances and partnerships along Russia’s western and southwestern borders. It has also initiated sanctions on Russian economy in the aftermath of the annexation of Crimea and is in the process of establishing anti-ballistic missile systems in several Eastern European countries. The Ukrainian situation, economic hardships due to falling energy prices and the sanctions, and NATO’s growing geographic proximity are among the immediate challenges Moscow faces. The unfavorable geostrategic picture has led China and Russia to seek cooperation on a broader range of issue areas and the synergy created through energy cooperation has served as one of the fundaments to reinforce bilateral relations. In another word, existing energy ties and prospects for further improvement have helped strengthen the geostrategic alignment by giving it a more solid material basis. Thus, although conjectural developments led to certain policy discrepancies in China–Russia relations in the post-Cold War era, the two countries’ strategies have remained structurally aligned across conceptual lines.42 A strong material linkage between China and Russia supports ideational alignment and its reflections on the ground in the form of policies. By providing a flexible policy tool, cooperation on energy has encouraged the two sides to seek further alignment in terms of their policy response to urgent global issues such as the Ukrainian crisis and the SCS conflict. In a sense, material ties have helped rationalize policy convergence, which, in turn, has reinforced ideational commonalities even though the scope and scale of these commonalities have remained constrained by a number of strategic divergences and policy disagreements. In the ensuing pages, we examine two issues of great geopolitical significance in which China and Russia have been cooperating on, and directly or indirectly, assisting each other, utilizing, among others, energy-related diplomacy tools. To this end, we look at the Ukrainian crisis and the SCS territorial disputes. In both cases, we analyze how the two countries make use of energy diplomacy to support each other. We argue that energy provides a flexible and multi-pronged policy instrument to further rationalize and reinforce strategic cooperation. Since energy relationship involves at once various aspects of foreign diplomacy from geopolitics to geoeconomics, it gives the two countries a versatile instrument to achieve desired strategic outcomes. Thus, in both Ukrainian and SCS cases, China and Russia have utilized energy to respond to the perceived challenges and influence them to their advantage. 3.1 The Ukrainian crisis During the initial months of the Ukrainian crisis in the late 2013 in which mass protests were staged in the Maidan Square in Kiev, China called for political solution to the crisis in which all legitimate parties’ concerns would be taken into consideration. Even after the culmination of the crisis with the ouster of the pro-Moscow president Viktor Yanukovych and the referendum that resulted in the participation of the former Crimean autonomous republic into Russia, Beijing held strict neutrality. In general, it pursued a low profile strategy well after the internal situation in Ukraine worsened. China’s position has been noticed by Ukraine. As stated by Oleg Demin, Ukraine’s Ambassador to China, ‘China has a stake in seeing Ukraine in Europe because once Ukraine is there it will serve China as a gateway to Europe’.43 After the Deep and Comprehensive Free Trade Agreement (DCFTA) signed by the EU and Ukraine in January 2016, China’s economic interest toward the Eastern European country has significantly increased. China sees that Kiev’s association with Europe provides great trade and investment opportunities due to Ukraine’s geographic location and manufacturing potential.44 In January 2016, Beijing officially expressed its support toward the new branch of the Silk Road, which would bypass Russia.45 Thus, China has maintained its neutral position and pursued to develop close economic ties with all related actors, including Ukraine. That said, geopolitically, while attempting to leave room for future contingencies, Beijing has remained rather sensitive toward Moscow’s concerns, seeking to balance among various regional and global interests and expectations. Especially after the launch of punitive economic sanctions on Russian trade and financial institutions by the United States and the EU, China adopted a more pro-Russia diplomacy. Even though it was unsatisfied with the way the crisis in Ukraine eventually led to the secession of Crimea and to a separatist civil war, Beijing continued to observe critically the root causes of the crisis and remained determined not to get involved in it.46 During the urgent meeting on Ukraine at the UNSC, reiterating Beijing’s position on respecting sovereignty and the territorial integrity of Ukraine, China’s ambassador drew attention to the underlying ‘reasons for why the situation in Ukraine is what it is today’, signaling Beijing’s sympathy with Moscow which it perceived as being forced to intervene in the face of critical developments across its borders.47 On 15 March 2014, China abstained from a Security Council vote on the draft resolution, which would have urged the member states not to recognize the referendum held in Crimea.48 Majority of the scholarship in China, too, came to perceive the tense situation in Ukraine as being instigated by the US and the EU, which aimed to reduce Russia’s influence in its near periphery and push forcefully for NATO’s enlargement to militarily encircle the country. For example, Jinglun Zhao maintained that, although initially there were Ukrainians asking genuinely for change in the country’s management, later foreign-influenced radical factions took over the protests, which led to the subsequent collapse of the ruling government. Eventually, Zhao contended, the Ukrainian situation evolved into a proxy war among major powers.49 Hence, incrementally, Beijing’s larger strategic calculations replaced the initial concerns regarding interventionism. China’s formal support became more vocal as sanctions on Russia intensified. Beijing urged Western powers to consider Moscow’s strategic interests and concerns, and seek a compromised solution.50 Other than expressing its official position through various platforms, in light of the worsening economic situation in Russia, Beijing pledged to offer concrete support, including financial assistance, if Moscow needed it.51 However, some scholars notice that Chinese help to Russia in reality has been limited due to the Western sanctions, which render the Russian market risky and unattractive.52 Nevertheless, energy investment and trade by the state owned enterprises became an important dimension of China’s political and economic support to Russia. The energy trade included large ticket deals and equity share agreements (e.g. the acquisition of oil and gas companies such as Yamal LNG, Vankorneft and Rosneft, and equity share deals) and provision of loans by Chinese banks to Russian energy companies that were barred from raising loans in Western markets.53 A key indication of support, without a doubt, has been the dramatic increase in China’s oil imports from Russia, which, elevating the country to the top position as a crude oil provider has helped to relieve the negative implications of sanctions for Russian economy. In the first quarter of 2016, Russian exports in oil reached a record high with a 52.4% increase over the same period in previous year.54 Similarly, in March 2016, China surpassed Germany as Russia’s top oil customer.55 Another important indicator of support has been the successful conclusion of the long-dragged natural gas negotiations. In the same month, President Obama signed an executive order, which authorized sanctions on Russian individuals and entities for violating Ukrainian sovereignty, and only a few days before Russia annexed Crimea, China and Russia signed the $400 billion natural gas agreement.56 Kept at the negotiation table for more than 20 years, the agreement’s timing, announced in the wake of a visit paid by the US Treasury Secretary to Beijing in which he ‘appealed to China… to avoid actions that might limit the impact of recent Western sanctions against Russia’, was not apparently coincidental.57 The deal, which opened China’s vast energy market to Russian natural gas exports for the first time, was an explicit reaction to the Western sanctions against Russian economy. Thus, aside from the symbolic meaning of the agreement that signified the expanse of China–Russia cooperation, the political and economic implications also appeared to be large especially when thought within the context of the Ukrainian crisis and Europe’s quest for alternative sources of natural gas to reduce dependence on Russia. Deepening energy relations have enabled Russia both to construct new policy responses to help allay negative implications of sanctions on the economy as well as to solidify China–Russia relations around energy politics. However, although the strategy offered a quick remedy for Russia to maintain its policy with respect to Ukraine, in the long run, it could be economically less effective due to a potential over-dependency on China and fluctuations in oil and gas prices. Nevertheless, energy deals with Russia and the strict observation of non-interference policy have allowed Beijing to avoid taking a strong political position with respect to the Ukrainian crisis but, instead, stand as an impartial economic actor that is able to maintain practical dialogue with all sides. Hence, within the context of China–Russia strategic partnership, energy has proven to offer a critical nexus to reinforce bilateral relations and provide economic tools to handle geopolitical challenges. 3.2 South China sea disputes The disputes in the SCS involve the question of ownership of the sea features spread in four major island groups and delimitation of territorial waters claimed individually or as a whole by China, Taiwan, Vietnam, the Philippines, Indonesia, Malaysia, and Brunei. Thus, a major characteristic of the disagreement is the non-identical nature of the individual overlapping claims. This along with other reasons, on the one hand, prevents bloc politics in the region and renders the dispute protracted, and, on the other, keeps it from developing into war.58 However, strategic significance of the disputed waters attracts external actors such as the United States, Japan, India, and Australia, which complicate the situation and increase the stakes for each player, including China. The SCS conflict is a primary challenge for China considering the presence of powerful extra-regional actors, especially the United States, which enjoys a well-positioned naval dominance in the region. China’s concerns are reinforced as its perception of the United States as an impartial mediator wanes due to deep policy disagreements over issues such as the island build-up and development activities in the region, US naval incursions in the areas claimed by China as territorial waters and Washington’s attempts to strengthen military ties with the states related directly or indirectly to the disputes. Thus, recognition of its position in the SCS is significant for Beijing and Moscow’s diplomatic support matters greatly, in this regard. Russia’s political and economic engagement in Southeast Asia developed through bilateral ties with a larger focus on traditional industries, such as defense and energy. However, Russian participation in regional institutional frameworks remained limited. On the particular issue of territorial disputes in the SCS, Moscow has maintained a policy of non-interference. Whereas, some analysts view Russia’s limited engagement in the region, especially its arms trade with Vietnam, as undermining China’s policy, thus unfriendly, others take Russia’s impartial approach on the key issues of contention in SCS as a silent approval of China’s strategy in the region.59 Recently, however, Moscow has verbally expressed its objection toward the internationalization of the conflict in the SCS, a position that corresponds with China’s basic SCS policy.60 For example, at the 11th Asia-Europe Meeting (ASEM) held in Mongolia in July 2016, Russian Prime Minister Dmitry Medvedev underlined Moscow’s opposition to ‘the internationalization of the South China Sea disputes or any interference by the forces outside the region’, lending support to ‘China's principles on resolving the disputes’.61 President Putin, too, reiterated Russia’s stance on non-interference in the SCS disputes and backed China’s position on non-acceptance of the PCA ruling.62 In addition to political rhetoric, in September 2016, Russia held a week-long joint naval exercise with China in the SCS, which was perceived as a significant statement in support of Beijing.63 Several factors can be cited to explain this ‘benevolent neutrality’ and growing China–Russia strategic alignment in the SCS. First, United States’ deepening security ties with Russia’s traditional security partners such as Vietnam force Moscow to take stronger posture in the region on the side of China with less concern about losing other minor allies.64 Second, seeing the ever growing multilateralization of the territorial disputes in the SCS with the United States being the leading external actor, Russia sides with China to counterbalance the United States in the European theater. Finally, deepening presence of the US military in Southeast Asia will likely result in a decline in Russia’s weapons trade with the region. For instance, recent announcement by the Obama administration about lifting the decades-old arms embargo on Vietnam is a strong message to Russia since Vietnam is one of the major customers of Russian arms.65 Therefore, trade in energy with China (which is also a significant importer of Russian defense platforms) becomes even more critical. Supporting China strategically in the SCS ensures stronger trade and security ties. The role of energy in China–Russia relationship within the context of SCS dispute may also be analyzed from the perspective of China’s Malacca Dilemma even though Beijing’s primary concern in the SCS involves the question of the ownership over sea features and adjacent waters. As we have briefly mentioned, the Middle East is China’s largest source of energy and majority of the trade is being conducted by sea.66 In this regard, although, China–Myanmar pipelines provide a certain degree of relief by reducing the country’s reliance on the conventional shipping route along the Malacca, the anticipated 20 million tons of oil to be delivered annually is still a fraction of China’s use of oil, considering the fact that China consumes about 1.5 million tons of crude oil daily. Consequently, energy cooperation with Russia helps ease the Malacca problem since, ideally, the more energy China receives from Russia via overland pipelines, the less reliant it will become on the sea routes. A reduced concern regarding sea transportation along the Indian Ocean and the SCS would allow China with a greater room for maneuver in the region to act with assertiveness over the disputed territories while worrying less over a potential energy chokehold by the US Navy.67 China’s recent SCS moves such as island development, deployment of defense systems on newly-built islands in Paracel and Spratly island groups and increasing activity by the Chinese Navy and Coast Guard in the region can be viewed under this light. Less dependence on the hydrocarbons transported through the chokepoints in the SCS reduces Beijing’s worries with respect to the security of supplies as Russia begins to take up a greater share in China’s mix of energy imports via secure pipeline transport. Accordingly, as with the case of the Ukrainian crisis, China, and Russia utilize energy diplomacy to respond to strategic challenges in the SCS and cooperate on a wide range of issue areas of international politics. 4 Conclusion It appears that a number of centripetal factors lead to China–Russia policy convergence and cooperation. These factors mainly involve geopolitics and geoeconomics. Geopolitically, broad lines of cooperation emerge from intense major power competition as China and Russia engage the United States in Eurasia and the Asia-Pacific. Geoeconomically, compatibility, acceptability, and availability of Chinese and Russian markets for bilateral trade and investment facilitate deeper interaction. Due to its central position in global economic activities within and across national borders, trade and investment in energy cuts across political and economic spheres, which renders it a valuable policy instrument. It is understood that, thanks to its inter-spherical feature, when used effectively, energy diplomacy generates synergy to explore political and economic points of convergence that can be meaningfully exchanged and mutually reinforced. In the context of China–Russia relations, catalyzed by viable conjunctures, the strategic importance of energy as a policy tool has grown considerably over the years, helping create a virtuous cycle of greater cooperation in response to internal needs and external challenges. The energy nexus, in this case, reflects the centrality of resource diplomacy in the triangulation of domestic, regional and international politics. Indeed, as being observed in the cases of the Ukrainian crisis and the SCS disputes, for the two countries, energy constitutes a political and economic response to security challenges of varied characteristics. Therefore, when we attempt to look into the role of energy as shaping and reinforcing China–Russia strategic partnership in the long run, one of the factors to consider would be the question of its continued feasibility to create desired strategic outcomes. Therefore, it is imperative to investigate whether energy diplomacy would continue to have any impact on urgent challenges the two countries face. If the impact is assessed to be positive for both sides (albeit at varying degrees, which unavoidably creates an impression of greater dependency of one side upon the other), it can be argued that energy will continue to be referred to as an instrument both to broaden bilateral cooperation and to address threats. If the outcome appears to be desirable for one of the sides only, then energy diplomacy may become conditional to other imperatives, no longer serving as a strategic instrument in itself. Given that recent improvements in China–Russia energy relations have been encouraged in part by external developments (which, in fact, explains why energy is viewed as more than simply one of the commodities in the broad spectrum of diplomatic activities), so long as those external conditions exist, the centrality of energy diplomacy will remain, creating path dependencies. That is to say, the mechanisms and norms formed under the pressure of outside factors will not cease to exist even after those factors are no longer relevant. This conditionality is further reinforced if one considers the fact that energy involves diuturnal investment and trade arrangements, which extend the strategic implications of cooperation into a continuum of opportunities. Hence, we argue that China and Russia will have an increasingly broader and deeper cooperation and energy diplomacy will maintain centrality as a basis to add material substance to the relationship. In this essay, we examined the role of energy diplomacy in China–Russia strategic partnership, looking, for this purpose, at the cases of the Ukrainian crisis and the SCS disputes as they relate to major power competition. We have found that cooperation in energy trade and investment has become an integral part of the two countries’ foreign diplomacy in response to external challenges. For Russia, energy cooperation with China offers the much needed financial relief and political backing as it faces unfavorable economic situation due to developments related to the Ukrainian crisis. For China, comprehensive energy ties with Russia reduces the country’s dependence on the oil and natural gas transported via strategic sea lanes and thereby opening up a larger room for policy maneuver in relation to the SCS territorial disputes. Thus, the two governments build implementation mechanisms such as agreements, regular meetings between officials from various levels, and business meetings in energy-related spheres, and utilize these mechanisms as platforms to facilitate strategic partnership in non-energy realms.68 The energy nexus between the two countries appears asymmetrical due, largely, to the relatively nonequivalent political and economic benefits each side accrues from the common energy-based strategic convergence of interests. While Beijing diversifies its sources of energy supply and target-markets for its goods by maintaining relations with all countries, Russia struggles against Western sanctions and draws suspicion from a number of neighboring countries. In fact, seeking a solution, Russia has recently begun to shift the direction of its foreign policy toward developing relations with Asia-Pacific states; however, this diversification has so far not been very successful and brought the country to an even greater dependence on China. It is observed that, although China and Russia have, to a large extent, overcome the traditional reluctance and political incrementalism in favor of an active energy interaction, which is closely linked to external geopolitical developments,69 looking into future, Moscow’s worries with respect to China’s growing national power and influence may lead to the reemergence of a strategic cynicism especially if external economic-political conjectures change in favor of Russia and allow it a larger freedom of movement. Nevertheless, existing differences or disagreements would not derail the established China–Russia ties since the larger ideational similarities, including their vision of international governance, could hardly be changed by conjectural factors. Apparently, in the face of political and economic challenges that currently leave few options for the two countries but cooperate, the two sides will likely to continue to seek areas of cooperation to justify further strategic alignment. To be sure, using energy as a geopolitical and geoeconomic tool is not a novel policy application; the very concept of petrodollar proves the historical causality between economy and politics. In the case of China and Russia, what is to be retrospectively questioned would be why the two large neighbors did not begin to utilize energy as a strategic instrument to achieve national objectives much earlier. A number of reasons have been mentioned in the previous pages, including such existential concerns as the risk of over-dependence on each other as an import or export destination and Russia’s fear of being reduced to a minor partner status due to a shift in the balance of power, particularly, in Central Asia. Furthermore, technical disagreements such as pricing and pipeline routes have slowed down progress in energy cooperation. Nonetheless, in this article, we sought to account for the growing role of energy as a tool of diplomacy at a time China and Russia are ideationally and strategically of a similar mind with respect both to their vision of global governance, and, hence, to their response to the challenges posed by external developments. It is, therefore, of great significance to keep monitoring China–Russia energy nexus within the larger context of the two powers’ strategic partnership and the ever-evolving external environment surrounding the two neighbors. 1 Chen, A. UPDATE 1-Russia beats Saudis as top China crude supplier for 4th month in 2015. (2016, January 26). Reuters. http://www.reuters.com/article/china-crude-russia-idUSL3N1592TM (10 February 2017, date last accessed). 2 Downs, E. S. (2010) ‘Sino-Russian Energy Relations: An Uncertain Courtship,’ in James A. Bellacqua, ed., The Future of China-Russia Relations, pp. 146-175. Lexington, USA: University Press of Kentucky. 3 Oil and natural gas sales accounted for 38.3% of Russia’s total export revenues in 2015. See: Novak A.V. (2016) Itogi raboty Misenergo Rossii i osnovnye resultaty funkcionirovaniya TEK v 2015 godu: Zadachi na srednesrochnuyu perspectivu (“The results of Russian Misenergo and the main results of FEC functioning in 2015: the mid-term perspective”). Ministry of Energy of the Russian Federation. http://minenergo.gov.ru/node/4436 (10 February 2017, date last accessed). Dolya TEK v rossiyskom exporte v 2015 g. upala nije 63% (The FEC’s share in Russia’s exports in 2015 fell below 63%). Finmarket. http://www.finmarket.ru/news/4227843 (10 February 2017, date last accessed). 4 Shadrina, E. (2014) ‘Russia’s natural gas policy toward Northeast Asia: rationales, objectives and institutions,’ Energy Policy, 74, 54. 5 Meckstroth, D. China has a dominant share of world manufacturing. (2014, January 6). MAPI. https://www.mapi.net/blog/2014/01/china-has-dominant-share-world-manufacturing (10 February 2017, date last accessed). 6 Jakobson, L., Holtom, P., Knox, D., et al. China’s energy and security relations with Russia: hopes, frustrations and uncertainties. (2011, 29 October). SIPRI Policy Paper no. 29, pp. 26. 7 China’s November Russian crude imports hit record high. (2014, December 23). Platts. http://www.platts.com/latest-news/oil/singapore/chinas-nov-russian-crude-imports-hit-record-high-26967924 (10 February 2017, date last accessed). The second stage of the ESPO, which delivers oil to the port of Kozmino in the Pacific, gives Russia another option to deliver more oil to China by a sea route. 8 Russia overtakes Saudi Arabia to become biggest crude exporter to China. (2015, June 23). RT News. https://www.rt.com/business/269146-russia-china-oil-trade/ (10 February 2017, date last accessed). 9 Rosneft and CNPC sign memorandum to expand cooperation in upstream projects in East Siberia. (2013, October 18). Rosneft. https://www.rosneft.com/press/releases/item/24361/, (10 February 2017, date last accessed). 10 Rosneft and Sinopec agree on the joint development of Russkoye and Yurubcheno-Tokhomskoye fields. (2015, September 3). Rosneft. https://www.rosneft.com/press/releases/item/176069/ (10 February 2017, date last accessed). We would like to note that the said agreement (Framework Agreement on the Purchase of 10% Share Stake of Vankorneft) has not been concluded and negotiations have been held on the price of the stake since 2014. See: Russia’s Rosneft sells 15% in Vankorneft to India's ONGC. (2015, September 4). TASS. http://tass.ru/en/economy/818658 (10 February 2017, date last accessed). 11 Xiāofèi jìnkǒu jūn jiāng kuàisù zēngzhǎng zhuānjiā jiànyì quèlì tiānránqì de zhànlüè dìwèi (Consumer imports are fast growing, experts suggest to determine the strategic position of natural gas). (2013, June 24). Xinhua. http://news.xinhuanet.com/energy/2013-06/24/c_124899522.htm (10 February 2017, date last accessed). 12 Grattan R. China’s natural gas demand continues to grow. (2014, August 18,). Fuel Fix. http://fuelfix.com/blog/2014/08/18/chinas-natural-gas-demand-continues-to-grow/#26533101=0 (10 February 2017, date last accessed). 13 Country Analysis: Russia, Energy Information Administration, July 28, 2015. http://www.eia.gov/beta/international/analysis_includes/countries_long/Russia/russia.pdf (10 February 2017, date last accessed). 14 According to estimates, when the east and west routes are operational, Russia will account for more than 40% of China’s natural gas consumption. See, China, Russia reach another energy milestone. (2014, November 9). China Daily. http://www.chinadaily.com.cn/world/2014apec/2014-11/09/content_18890866.htm (10 February 2017, date last accessed). 15 Weitz R. (2014) ‘The Russia-China gas deal: implications and ramifications’. World Affairs Journal. http://www.worldaffairsjournal.org/article/russia-china-gas-deal-implications-and-ramifications (10 February 2017, date last accessed). 16 Snyder M. Who Is behind the oil war and how low will the price of crude go in 2015?. (2014, December 3).The Economic Collapse. http://theeconomiccollapseblog.com/archives/behind-oil-war-low-will-price-crude-go-2015 (10 February 2017, date last accessed). 17 Harsem Ø. and Harald Claes D. (2013) ‘The interdependence of European–Russian energy relations’, Energy Policy, 59, 785. 18 Russia: International energy data and analysis. (2015, July 28). Energy Information Administration. http://www.eia.gov/beta/international/analysis_includes/countries_long/Russia/russia.pdf (10 February 2017, date last accessed). 19 Shadrina E. (2014) ‘Russia’s natural gas policy toward Northeast Asia: rationales, objectives and institutions’, Energy Policy, 74, 55. 20 Dickel R, Hassanzadeh E, Henderson J., et al. (2014) Reducing European Dependence on Russian Gas: Distinguishing Natural Gas Security from Geopolitics, pp. 57-58. Oxford, UK: The Oxford Institute for Energy Studies. 21 Russia: International energy data and analysis. (2015, May 14). Energy Information Administration. http://www.eia.gov/beta/international/analysis.cfm?iso=CHN (10 February 2017, date last accessed). 22 Daojiong Z. and Meidan M. (2015) China and the Middle East in a New Energy Landscape, pp. 2. London, UK: Chatham House; Rose A. and Chen A. Amid global price rout, China crude oil imports hit record. (2016, January 13). Reuters. http://www.reuters.com/article/us-china-economy-trade-crude-idUSKCN0UR0DU20160113 (10 February 2017, date last accessed). 23 Rapoza K. Putin promises to sell more oil in yuan, ruble. (2014, November 16). Forbes.http://www.forbes.com/sites/kenrapoza/2014/11/16/putin-says-country-will-be-selling-more-oil-in-yuan-ruble/#495d2ed47970 (10 February 2017, date last accessed). 24 UPDATE 2-Russia's Yamal LNG gets round sanctions with $12 bln Chinese loan deal. (2016, April 29). Reuters. http://af.reuters.com/article/energyOilNews/idAFL5N17W2G8?sp=true (10 February 2017, date last accessed). 25 Although China and Russia have been developing indigenous technologies, they still lag behind the developed Western and Japanese energy companies in a number of core technologies in drilling, well testing and logging. See, for example, China extends tax waivers for importing oil, gas drilling equipment. (2017, January 6). EP Mag.http://www.epmag.com/china-extends-tax-waivers-importing-oil-gas-drilling-equipment-1457366 (10 February 2017, date last accessed); Williams J. Shell partners with Russia for arctic Oil another attempt at arctic oil production. (2013, April 9). Energy & Capital.http://www.energyandcapital.com/articles/shell-nyse-rdsa-partners-with-russia-for-arctic-oil/3265 (10 February 2017, date last accessed). 26 (2014) Power of Siberia Construction Launched. Gazprom. http://www.gazprom.com/press/news/2014/september/article200026/ (10 February 2017, date last accessed). 27 Rossiya i Kitay podpisali dogovor o sozdanii grazhdanskogo tyazhelogo vertoleta (Russia and China signed an agreement about creating a civilian heavy helicopter). (2016, June 25). RIA Novosti.https://ria.ru/east/20160625/1451681283.html (10 February 2017, date last accessed). 28 Koch-Weser I. and Murray C. (2014) The China-Russia Gas Deal: Background and Implications for the Broader Relationship, pp. 16-27. US-China Economic and Security Review Commission. http://origin.www.uscc.gov/sites/default/files/Research/China%20Russia%20gas%20deal_Staffbackgrounder.pdf (10 February 2017, date last accessed). 29 Skalamera M. China can’t solve Russia’s energy technology trap. (2015, February 13). The Diplomat.http://thediplomat.com/2015/02/china-cannot-solve-russias-energy-technology-trap/ (10 February 2017, date last accessed). 30 Kuchma A. China continues to expand presence in Russian energy sector. (2015, December 22). RBTH. http://rbth.com/business/2015/12/22/china-continues-to-expand-presence-in-russian-energy-sector_553451 (10 February 2017, date last accessed). Bokarev D. Russia and China in the nuclear energy sector: cooperation or competition?. (2015, December 14). New Eastern Outlook. http://journal-neo.org/2015/12/14/russia-and-china-in-the-nuclear-energy-sector-cooperation-or-competition (10 February 2017, date last accessed); “China seeks to arrange joint Arctic expedition with Russia,” TASS, February 9, 2016, http://tass.ru/en/science/855387 (10 February 2017, date last accessed). 31 Henderson J. (2011) The Pricing Debate over Russian Gas Exports to China Oxford Institute of Energy Studies, pp. 6-11. Oxford, UK: Oxford Institute for Energy Studies. 32 Gazprom: power of Siberia GTS moving forward. (2014, June 19). LNG World News. http://www.lngworldnews.com/gazprom-power-of-siberia-gts-moving-forward/ (10 February 2017, date last accessed). 33 Hille K. Russia and China: friends with benefits. (2016, February 5). Financial Times. https://next.ft.com/content/f8959924-cab6-11e5-a8ef-ea66e967dd44 (10 February 2017, date last accessed). 34 ‘Gazprom’ protiv integrirovannogo kontrakta po ‘Sile Sibiri-2’ s kitayskoy CNPC (“Gazprom” is against an integrated contract on ‘Power of Siberia-2’ with Chinese CNPC). (2016, July 1). Vedomosti.http://www.vedomosti.ru/business/articles/2016/07/01/647537-sila-sibiri-2-na-podhode (10 February 2017, date last accessed). Ulyukaev dopustil perenos nachala postavok gaza po ‘Sile Sibiri-2’ (Ulyukayev conceded postponing the start of gas supplies on the ‘Power of Siberia-2’). (2016, January 16). RBC. http://www.rbc.ru/rbcfreenews/569a616d9a79472631f65a67 (10 February 2017, date last accessed). 35 Astakhova O. and Chen A. Exclusive: Russia likely to scale down China gas supply plans. (2016, January 15). Reuters. http://www.reuters.com/article/us-russia-china-gas-exclusive-idUSKCN0UT1LG (10 February 2017, date last accessed). 36 Koroleva A. Kitay otsenil ob’em budushchih postavok rossiyskogo gaza (China assessed the volumes of future Russian gas supplies). (2015, September 30). Expert Online. http://expert.ru/2015/09/30/rossijskij-gaz-potechet-v-kitaj-rekoj/ (10 February 2017, date last accessed). 37 Farchy J. Gazprom's China contract offers no protection against low prices. (2015, August 10). Financial Times. https://search.proquest.com/docview/1710557781?accountid=10067. (10 February 2017, date last accessed). 38 Lo B. (2014) Sino-Russian Relations, pp. 3. Europe China Research and Advice Network (ECRAN). Short Term Policy Brief 87.http://www.eeas.europa.eu/archives/docs/china/docs/division_ecran/ecran_is109_paper_87_sino-russian_relations_bobo_lo_en.pdf (10 February 2017, date last accessed). 39 Socor V. ‘Strategic implications of the Central Asia-China gas pipeline’, Eurasia Daily Monitor, 6. https://jamestown.org/program/strategic-implications-of-the-central-asia-china-gas-pipeline-2/ (10 February 2017, date last accessed). Alexander Lukin; (2015) ‘Shanghai cooperation organization: looking for a new role’, Valdai Papers Special Issue, 4. http://valdaiclub.com/a/valdai-papers/valdai_paper_special_issue_shanghai_cooperation_organization_looking_for_a_new_role/ (10 February 2017, date last accessed). 40 Duchâtel M. and Godement F. China and Russia: gaming the West. (2016, November 2). ECFR. http://www.ecfr.eu/publications/summary/china_and_russia_gaming_the_west7166 (10 February 2017, date last accessed). 41 Billington J. H. (2004) Russia in Search of Itself, Washington D. C.: Woodrow Wilson Center Press with Johns Hopkins University Press. 42 Daksueva O. and Yilmaz S. (2014) ‘The Russia-China security partnership in the Asia-Pacific region: conjectural and structural dimensions’, Tamkang Journal of International Affairs 17, 61–92. 43 Quoted in Kuznetsov D.V. (2016) ‘China and the Ukrainian crisis: from ‘neutrality’ to ‘support’ for Russia”, China Report, 52, 94. 44 Mykal O. Why China is interested in Ukraine. (2016, March 10). The Diplomat. http://thediplomat.com/2016/03/why-china-is-interested-in-ukraine/ (10 February 2017, date last accessed). 45 The Trans-Caspian transport corridor will pass through Ukraine, Georgia, Azerbaijan, and Kazakhstan to Europe. See: Beijing supports Kiev’s proposal on Trans-Caspian route from China to Europe. (2016, January 25). TASS. http://tass.ru/en/economy/851885 (10 February 2017, date last accessed). 46 China Premier says respects Ukraine integrity, won't be drawn on Crimea. (2015, March 15). Reuters. http://www.reuters.com/article/us-china-parliament-ukraine-idUSKBN0MB05220150315 (10 February 2017, date last accessed). 47 Reilly W.M. China calls for political resolution of Ukrainian crisis. (2014, March 4). People’s Daily. http://en.people.cn/90883/8553801.html (10 February 2017, date last accessed). 48 (2014) ‘Security Council Fails to Adopt Text Urging Member States Not to Recognize Planned 16 March Referendum in Ukraine’s Crimea Region’, United Nations 7138th Meeting, March 15. http://www.un.org/press/en/2014/sc11319.doc.htm (10 February 2017, date last accessed). China also abstained from another UN General Assembly vote on a March 27 resolution calling for respecting Ukraine’s territorial integrity. Russia, along with ten other countries, voted against the resolution, which was not legally binding. The resolution passed with 100 countries voting in favor. 49 Zhao J. How to resolve the Ukrainian crisis. (2014, March 6). China.org.cn. http://www.china.org.cn/opinion/2014-03/06/content_31690062.htm (10 February 2017, date last accessed). 50 Boren Z.D. Ukraine crisis: top Chinese diplomat backs Putin and says West should ′abandon zero-sum mentality′. (2015, February 28). The Independent. http://www.independent.co.uk/news/world/europe/ukraine-crisis-top-chinese-diplomat-backs-putin-says-west-should-abandon-zero-sum-mentality-10075762.html (10 February 2017, date last accessed). 51 China pledges to help Russia overcome economic hardships. (2014, December 23). Russia Today. https://www.rt.com/news/216563-china-russia-economic-hardships/ (10 February 2017, date last accessed). 52 Gabuev A. (2016) Did Western Sanctions Affect Sino-Russian Economic Ties? Carnegie Moscow Center. http://carnegie.ru/2016/04/26/did-western-sanctions-affect-sino-russian-economic-ties/ixo5 (10 February 2017, date last accessed). 53 China expressed its interest in buying Rosneft’s shares. See: China interested in buying shares in Russia’s Rosneft oil giant. (2016, April 19). Sputnik. http://sputniknews.com/business/20160419/1038255076/china-rosneft-oil.html (10 February 2017, date last accessed). 54 Russian oil exports to China hit record high in April. (2016, May 23). Russia Today.https://www.rt.com/business/344060-china-russia-oil-imports/ (10 February 2017, date last accessed). 55 China has overtaken Germany as Russia’s biggest oil customer, the International Energy Agency (IEA) revealed on Friday. (2016, March 11). Sputnik. http://sputniknews.com/business/20160311/1036148349/china-germany-russian-oil.html (10 February 2017, date last accessed). Holodny E. Russia is now China's biggest oil partner—and it's a huge problem for Saudi Arabia. (2016, February 2). Business Insider. http://www.businessinsider.com/russia-vs-saudi-arabia-in-chinas-oil-market-2016-2 (10 February 2017, date last accessed). 56 It has also be pointed out that the protracted negotiations over the gas deal were eventually overcome after Russia, facing US-led sanctions over the annexation of Crimea, showed willingness to lower the price of gas. 57 Wan W. and Hauslohner A. China, Russia sign $400 billion gas deal. (2014, May 21). Washington Post. https://www.washingtonpost.com/world/europe/china-russia-sign-400-billion-gas-deal/2014/05/21/364e9e74-e0de-11e3-8dcc-d6b7fede081a_story.html (10 February 2017, date last accessed). 58 Glaser B.S. (2012) Armed Clash in the South China Sea, Contingency Planning Memorandum No. 14, Council on Foreign Affairs. http://www.cfr.org/asia-and-pacific/armed-clash-south-china-sea/p27883 (10 February 2017, date last accessed). 59 Daksueva O. (2015) ‘Sino-centrism in Russia’s South China Sea Policy’, Issue Briefings 1. South China Sea Think Tank, http://scstt.org/issue-briefings/2015/137/. Mihaylov S. Kitay rasshirayet granicy. (2015, April 23) (10 February 2017, date last accessed). Gazeta. http://www.gazeta.ru/busines/2015/04/17/6644201.shtml; Tsvetov A. Did Russia just side with China on the South China sea? (2016, April 21). The Diplomat. http://thediplomat.com/2016/04/did-russia-just-side-with-china-on-the-south-china-sea/ (10 February 2017, date last accessed). 60 China, Russia oppose Internationalizing South China Sea Dispute. (2016, April 18). Beijing Review. http://www.bjreview.com.cn/Latest_Headlines/201604/t20160420_800054907.html (10 February 2017, date last accessed). 61 Premier Li wins backing over South China sea at ASEM summit. (2016, July 17). China Daily.http://www.chinadaily.com.cn/world/2016-07/17/content_26116524_2.htm (10 February 2017, date last accessed). 62 Russia supports China’s stance on South China sea. (2016, September 5). Sputnik News.https://sputniknews.com/world/201609051044988523-russia-china-putin/ (10 February 2017, date last accessed). 63 Lendon B. and Hunt K. China, Russia begin joint exercises in South China Sea. (2016, September 13). CNN.http://edition.cnn.com/2016/09/12/asia/china-russia-south-china-sea-exercises/index.html (10 February 2017, date last accessed). 64 Vietnam was reported to “to prohibit the maintenance of long-range Russian aircraft in Vietnamese airports,” under US pressure. See, Russia to take part in South China sea naval exercises. (2015, May 30). Sputnik. http://sputniknews.com/asia/20150530/1022753332.html (10 February 2017, date last accessed). 65 Obama lifts arms embargo on Vietnam. (2016, May 23). Reuters. http://www.reuters.com/video/2016/05/23/obama-lifts-arms-embargo-on-vietnam?videoId=368607688 (10 February 2017, date last accessed). 66 Lee J. (2012) ‘China’s geostrategic search for oil’, The Washington Quarterly 35, 77. 67 Best frenemies: Vladimir Putin pivots eastward. Should America be worried? (2014, May 24). The Economist.http://www.economist.com/news/leaders/21602695-vladimir-putin-pivots-eastward-should-america-be-worried-best-frenemies (10 February 2017, date last accessed). 68 Zhiznin S. Vostochnoe napravlenie (The Eastern direction,). (2011, April 13) Nezavisimaya gazeta.http://www.ng.ru/energy/2011-04-13/14_rus_china.html (10 February 2017, date last accessed). 69 Ebinger C.K. and Boersma T. Sino-Russian gas deal shows center of gravity has shifted from West. (2014, April 3). Global Times. http://www.globaltimes.cn/content/863631.shtml (10 February 2017, date last accessed). © The author 2017. Published by Oxford University Press in association with the Japan Association of International Relations; all rights reserved. For Permissions, please e-mail: journals.permissions@oup.com

Journal

International Relations of the Asia-PacificOxford University Press

Published: Mar 13, 2017

There are no references for this article.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create lists to
organize your research

Export lists, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off