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Russia and China Bond over Energy

Prepared by: Esther Pan
April 5, 2006

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Relations between Russia and China have never been better. On Russian President Vladimir Putin's state visit to Beijing in March—the fifth time in a year that he's met Chinese President Hu Jintao—the two sides signed dozens of landmark energy and trade deals (Times of London). Russia hopes that supplying China's voracious markets will help it become an energy superpower. But the policy is not without its domestic critics. Vladimir Milov of Russia's Institute of Energy Policy said at a recent meeting at the Carnegie Endowment for International Peace that Russia doesn't have the resources to become an energy superpower and supply its own population.

Russia's new friendship with China is giving it greater geopolitical options, as explained in this CFR Background Q&A by Esther Pan. Vladimir Radyuhin writes in India's The Hindu that Russia is playing the energy card, putting Europe and Japan on notice that they will have to compete with China for Russia's resources. The competition is well underway: Pekka Sutela, Head of the Bank of Finland Institute for Economies in Transition, told a Carnegie meeting that European dependence on Russian energy gives Moscow political leverage. China and Japan are maneuvering to route a projected Russian oil pipeline toward their preferred ports, as portrayed in this RFE/RL analysis.

The Sino-Russian relationship is deeply significant for Central Asia, where democratic stirrings and U.S. efforts to spread reforms are seen by Moscow and Beijing as threatening moves. A rash of energy deals involving Central Asian countries and China and India is boosting the region's economy, and could firmly turn it eastward (RFE/RL). Experts say Moscow and Beijing are also using the Shanghai Cooperation Organization, a regional security body, to maneuver the United States out of Central Asia. The group issued a communiqué last summer calling for a timeline for withdrawal of U.S. forces from military bases in the region. Uzbekistan's president subsequently evicted the United States from an air base.

A new CFR Task Force on Russia warns about the country's rollback of economic reforms and recent use of energy exports as what it calls a foreign policy weapon. It urges a more developed U.S.-Russian nuclear cooperation but also says Washington needs to speak more directly with Moscow about the disagreements between the two sides. Andrew Kuchins of Carnegie writes in the Moscow Times that the Russia-China relationship highlights the growing global divide between democracies and dictatorships. Retired diplomat Dan Simpson writes in the Toledo Blade (Ohio) that "America is probably doomed to continue to lose ground to Russia and China" until it ends the Iraq war, reins in defense spending, and deals with the ballooning budget deficit. But David Zweig and Bi Jianhai argue in a recent Foreign Affairs article that in the case of China, the country's new energy needs allow considerable room for cooperation with the United States. They say the two states share an interest in "viable oil prices, secure sea-lanes, and a stable international environment."

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