‘Power of Siberia’: Russia’s rising Eastern gas empire?

DISCLAIMER: All opinions in this column reflect the views of the author(s), not of EURACTIV Media network.

'Power of Siberia' first welding. [Gazprom]

Behind the scenes of the crisis-hit Russian economy, the sanctions and the rouble crisis, Moscow and Bejing are busy building a counter-axis to EU-US world dominance, writes Szilvia Batkov.

Szilvia Batkov is an international journalist, running the English language website of Bulgaria’s daily Standart.

Last week, Russian Foreign Minister Sergey Lavrov boasted that “the Russian-Chinese relations are at the highest level ever”. In a parallel PDA during a Hong Kong visit for talks with investors, Russian energy giant Gazprom deputy CEO Alexander Medvedev emphasized that possibilities and prospects on the Asian market as the most attractive for gas supplies.

The benchmark project of Russian-Chinese relations is the recently signed $400 billion Power of Siberia pipeline, designed to supply natural gas to China after more than a decade of negotiations. Yet the ‘Power of Siberia’ will be much more than just a pipeline: it is meant to start a new era in the balance of power of the global energy market. This tilting of the world’s largest energy exporter towards Asia – and away from Europe – is also exemplified by the re-routing of South Stream to Turkey, a longtime buffer zone between the East and the West.

Once completed, the 3,968 KM Power of Siberia will be the world’s largest gas infrastructure. The pipeline’s completion will most likely bind China and Russia together for a while, especially since according to confidential sources, the Chinese refuse to pay for the construction of the pipe itself – which is in turn putting a serious burden on Russia’s Gazprom.

Work on the 1,860-mile Power of Siberia was already launched in Yakutia on 1 September 2014. This historic gas deal between Russia and China is particularly bad news for the petrodollar, as through this one deal, the Russians will provide about 25% of China’s current natural gas demand. And the two old/new best friends seem to agree that they do not want to use the dollar anymore in order to make that happen, which could pose a threat to the American currency by bringing down the artifically pumped demand for it.

In addition, the BRICS countries recently announced the creation of a new lending institution to end the USD -based monopoly of the World Bank and the IMF. As such, these debts will not be paid in USD anymore in the near future – which would further decrease demand for the American currency.

Besides the staggering momentum of the project, putting the ‘Power of Siberia’ into context is making it even more significant. We see America increasing its LNG shippments to Europe on one side, versus Russia and China teaming up with the ‘Power of Siberia’ mega project.

On the one hand, Russia is turning its attention -and resources – eastwards, away from the European market, where it already has a dominant position with supplying almost 80% of the EU’s gas. Additionally, Gazprom has a need for a bigger market, especially since the company’s profits are shrinking due to the sharp fall in gas prices.

On the other hand, as leaked documents revealed, the EU has been asking the US for increased supplies, particularly crude oil and LNG produced by its shale gas revolution. The leak came just before the EU and US restarted their long-forgotten free trade negotiations, which will eventually lead to the $4.7 trillion Transatlantic Trade and Investment Partnership.

Since the Western axis has NATO as its military alliance, Russia and China are increasingly working to strengthen the Shanghai Cooperation Organization.

SCO is well worth our attention: as a Eurasian political, economic and military alliance which was founded in 2001 by the leaders of China, Kazakhstan, Kyrgyzstan, Russia, Tajikistan and Uzbekistan, it is the scene of some of the most significant developments on the other side of the Pacific Ocean. The newly established Eurasian Union and the SCO seem to have a true potential to become the legitimate counters to the EU and NATO. In an interesting recent development, the US has finally pulled out of its huge, important military base in Manas, Kyrgyzstan, which it built right after 9/11 and was its biggest base in Central Asia. Some observers take that to mean that the US has basically given up trying to be a major player in Central Asian politics, except for trying to exploit Kazakh oil, which it already does.

Russia is not making a secret of the fact that it is aiming to create a new post-US world order. Russian Foreign Minister Sergey Lavrov reiterated that the “Shanghai Cooperation Organisation is working to establish a rational and just world order” and that “the Shanghai Cooperation Organisation provides a unique opportunity to take part in the process of forming a fundamentally new model of geopolitical integration”.

The signing of the $400 billion natural-gas deal between China and Russia has a life-span of 30 years and is the biggest in the history of the natural-gas industry. Nevertheless, the two nations’ alliance is more powerful than most are willing to acknowledge. Consider Bejing’s support for Moscow throughout the Ukraine crisis: when Russia invaded Crimea in March, China tacitly supported the move by abstaining from a vote in the United Nations. And when new EU sanctions against Russia came out, Beijing suggested that additional sanctions “may lead to new and more complicating factors” in Ukraine. China’s Vice Premier Wang Yang even expressed that Western countries mistakenly imposed the sanctions against Russia. One party’s mistake is another party’s benefit. China seems to be coming out as the laughing third from the tensions between the EU and Russia.

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