29 March 2013, 15:48

China to become the main buyer of the Russian oil and gas

Газпром Роснефть Газпром 2012 сентябрь коллаж

The political situation in Europe and the global economical conjecture are stimulating Russia’s search for commercial opportunities in the East. In this context, the relationship between Russia and China has become highly synergetic. The growth of oil and gas trade between the two countries is a win-win scenario. Russia will be less dependent on the economic conditions in Europe. China will be less vulnerable in case of an “energy embargo” imposed by the West.

China has become a high-priority market for Russia. The Russian state company Rosneft is set to triple its oil deliveries to China. The volume of the daily deliveries will reach 1 million barrels per day. Rosneft will also increase its exports to China by an additional 31 million tons over the next 25 years. Long term trade agreements between the two countries show that there is a high level of trust between China and Russia.

Besides increasing the oil imports, both countries are looking to boost their natural gas trade. Gazprom’s CEO Alexei Miller expects that the final agreement concerning the deliveries of the Russian gat to China will be signed in June, after several years of tough negotiations. If signed, the agreements will allow Gazprom to deliver up to 68 billion of cubic meters of natural gas per year.

For the European customers, the increase of energy trade between Russia and China will mean the loss of bargaining power in relationship with Gazprom. So far, European customers could exploit the fact that they were the biggest buyers of Russian oil and gas. After the focus of the Russian energy exports shifts to the East, the European countries will no longer be the biggest and most important consumers. It is likely that the EU will not react positively to such changes but there is nothing the Europeans can do to stop the growth of energy cooperation between Russia and China. So far, all the attempts to find alternative supplier that could replace Gazprom in the European market have been futile. The European “shale gas revolution”, the “LNG solution” and Nabucco pipeline are nothing more than wishful thinking.

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