With energy security rightfully ratcheting up the global agenda, Russia’s invasion of Ukraine has triggered a mad scramble in the West to shore up energy supplies.
Boris Johnson is set to unveil his energy security strategy soon, focusing efforts on three fronts – onshore wind farms, nuclear and potential green light on oil and gas exploration. And the EU has vowed to slash Russian gas imports by two-thirds this year and end its reliance before 2030.
In the Far East, however, China is making no such moves. Its ferocious appetite for energy is only expected to sky-rocket in the coming years. With the Kremlin critical to meeting its future energy needs this dependence is leaving China’s hands tied when it comes to Russia.
Chinese imports of Russian energy are crucial to powering its homes and factories. In 2021 Russia was China’s second-largest oil supplier, and its third-largest natural gas supplier. For gas in particular, analysts predict China’s consumption will far outweigh Europe’s by 2030 as it scales back on coal usage and accelerates towards renewables.
There’s currently a gap in China’s armour when it comes to energy security as it relies on vulnerable shipping routes like the Malacca Strait that could easily be disrupted by the US’s powerful pacific fleet. China’s already taken huge strides to beef up its defences by constructing various new pipelines across Central Asia and Myanmar into Southern and Western regions, according to the Oxford Institute for Energy.
Whilst the world has turned its back on Russia, relations between Presidents Xi and Putin have never been better. Last month Gazprom, and its Chinese counterpart, Chinese National Petroleum Corporation, struck a new gas pipeline deal worth $100 billion, dubbed the Power of Siberia 2. The pipeline is expected to cross through Mongolia and enter into the energy intensive regions near Beijing. When operational this pipeline will boost Russian export capacity to China by almost 25%.
This should worry Europe and the US. It means China will be able to receive over a third of its gas imports via land that circumvents the sea where the US holds considerable sway. It will also come from Russia, a country where any call to stop exports is likely to fall on deaf ears.
But Beijing’s alliance with the Kremlin could be a double-edged sword. China’s coming under increasing pressure to distance itself from Russia. The message from Washington couldn’t be clearer: you’re either with us or against us. The severe sanctions imposed by the UK, EU and US have rattled the Chinese market. There have been widespread reports that from purchasing and shipping to credit, Chinese firms seeking to buy Russian oil are encountering roadblocks. China’s independent refiners and banks have been treading carefully, at risk of falling foul of looming US sanctions.
China’s apparent neutrality and failure to lay blame for the invasion at Russia’s door has also sparked capital flight. A staggering $9 billion of Chinese stock has been dumped so far. Further support to Russia could discourage future foreign investment.
Against this backdrop, China’s taken a decision to open more of its market to the world in a bid to entice investors. President Xi hopes to take the sting out of any retaliatory measures by increasing his country’s interdependence with the West.
China is also relentlessly focusing on diversification of its energy supplies; it already draws oil from Africa, and LNG (liquified natural gas) from Australia and Qatar. Watching the energy crisis unfold in Europe the economic superpower knows dependence on one supplier could leave it in a weaker bargaining position in the long run.
For now, though Russia will continue to be among the world’s largest energy peddlers, China, like Europe, will be asking itself some tough questions – does it see Russia as central to its energy future? And if so, at what cost?
Kay Abdilahi (@kay_abd) is an independent writer on geopolitics with a focus on Russia and China.
