Russia pushes to cement energy ties to China

By bne IntelliNews February 21, 2013

Ben Aris in Moscow -

Marriages are founded on love, but bilateral relations between would-be superpowers are based on energy supplies. Russia's biggest oil company Rosneft is looking to cement the Kremlin's desire to tie the knot with Beijing by opening talks to raise oil supplies to China.

Rosneft CEO Igor Sechin met with Chinese Vice Premier Wang Qishan in the Chinese capital at the weekend and opened talks with state oil companies Sinopec and CNPC to increase crude exports, Rosneft announced on February 18. Rosneft also said that it was toying with the idea of inviting CNPC to participate in upstream projects. "The sides discussed a wide range of issues about increasing oil supplies to the People's Republic of China as well as participation of the companies in mutual work in upstream and downstream sectors, both in Russia and China," Rosneft said in a statement.

Rosneft said it is also in discussion with Chinese offshore oil and gas specialist CNOOC about the possibility of participation in joint projects to tap offshore deposits. After selling off its last large identified oilfields in December, Russia is entering a new phase where the emphasis will be on exploration as it searches for new deposits to supply the world with energy over the long term. The main thrust of this effort will focus firstly on the country's continental shelves.

On the table is the potential to double crude exports - currently 300,000 barrels per day - to China. Everyone is wooing Beijing, thanks to its rapid development and 1.1bn population. Given that relations with the US are bad and getting worse, Moscow has committed itself to competing with Washington for China's attention. Playing the oil card was always the trump in Moscow's hand, and now it is coming out.

Russia has fewer options than the US, as it is much more exposed to the Chinese economy than most other countries in the world. That dependence will only increase as trade between Asia and Europe - the fastest growing route on the planet according to report by Goldman Sach's last year - increases over the next two decades.

The bid to boost crude exports is also a Russian bid to tap into China's biggest resource - cash. Moscow is reportedly in talks to secure $30bn in oil-for-loans. The Russian economy is slowing, and the make or break of the economy this year will be the Kremlin's success in boosting soggy investment, which is currently sagging to around 7% of GDP. For long-term sustainable growth, Russia needs capital investment growth of at least 25% a year.

If the deal to double the volume of oil sold to China goes ahead, it would become Russia's biggest customer in the world, and account for around 20% of all exports. It would also cause problems for Europe, as it would divert supplies away to the east. Given its dwindling production levels, Russia can't supply both.

In yet another bid to finally increase energy tis between the pair, Rosneft also says it has offered to study a possible partnership with China in developing liquefied natural gas (LNG). The state-controlled company agreed last week to consider a project to build an LNG plant on the Pacific island of Sakhalin with US giant Exxon Mobil.

Russia pushes to cement energy ties to China

Related Articles

Drum rolls in the great disappearing act of Russia's banks

Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more

Kremlin: No evidence in Olympic doping allegations against Russia

bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more

PROFILE: Day of reckoning comes for eccentric owner of Russian bank Uralsib

Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more

Register here to continue reading this article and 2 more for free or 12 months full access inc. Magazine and Weekly Newspaper for just $119/year.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

IntelliNews Pro subscribers click here

Thank you. Please complete your registration by confirming your email address. A confirmation email has been sent to the email address you provided.

Thank you for purchasing a bne IntelliNews subscription. We look forward to serving you as one of our paid subscribers. An email confirmation will be sent to the email address you have provided.

To continue viewing our content you need to complete the registration process.

Please look for an email that was sent to with the subject line "Confirmation bne IntelliNews access". This email will have instructions on how to complete registration process. Please check in your "Junk" folder in case this communication was misdirected in your email system.

If you have any questions please contact us at

Subscribe to bne IntelliNews website and magazine

Subscribe to bne IntelliNews website and monthly magazine, the leading source of business, economic and financial news and commentary in emerging markets.

Your subscription includes:
  • Full access to the bne content daily news and features on the website
  • Newsletters direct to your mailbox
  • Print and digital subscription to the monthly bne magazine
  • Digital subscription to the weekly bne newspaper

IntelliNews Pro subscribers click here

bne IntelliNews
$119 per year

All prices are in US dollars net of applicable taxes.

If you have any questions please contact us at

Register for free to read bne IntelliNews Magazine. You'll receive a free digital subscription.

If you have already registered, enter the information below with the same email you used previously and you will be granted immediate access.

Thank you. Please complete your registration by confirming your email address. The confirmation email has been sent to the email address you provided.

IntelliNews Pro offers daily news updates delivered to your inbox and in-depth data reports.
Get the emerging markets newswire that financial professionals trust.

"No day starts for my team without IntelliNews Pro" — UBS

Thank-you for requesting an IntelliNews Pro trial. Our team will be in contact with you shortly.