Russia’s president Vladimir Putin met with Chinese President Xi Jinping in Beijing during the Belt and Road Forum earlier this week. Putin praised “unprecedented” energy cooperation between China and Russia, while the head of Russian energy firm Rosneft, Igor Sechin, lauded that Russia had become China’s top oil supplier, ahead of Saudi Arabia, in 2023. Russia’s government aspires to start construction of the the long-proposed Power of Siberia 2 natural gas pipeline in 2024. The pipeline would provide natural gas in volumes up to 50 bcm/year, supplying China with Russian gas. Notwithstanding their hopes to begin work on the pipeline, Russian officials downplayed expectations for a deal at the Belt and Road event.
China’s Vice Premier Ding Xuexiang in separate comments said supporting energy infrastructure interconnectivity, cooperating on renewable energy development, and coordinating to ensure stable oil markets would be critical to deepen Chinese-Russian energy ties.
Why it matters: Much like their March meeting in Moscow, Putin and Xi’s October meeting in Beijing yielded warm sentiments for future energy cooperation, but no new Chinese commitments to increased Russian oil and gas imports. It’s not that Chinese officials were hesitant to sign new deals during the forum; CNOOC, PetroChina, and Sinopec signed new agreements with two Kazakh energy firms, including an extension of a gas supply contract covering 2023-2026. Since 2018, Kazakhstan has exported approximately 6.2 bcm to China annually. China has shown increased interest in developing Central Asia’s gas infrastructure, while Kazakhstan and its neighbor Uzbekistan received Russian gas exports this month. If the deal continues, it may allow Kazakhstan to export more of its own gas to China in the future.
Since Russia’s invasion of Ukraine, Moscow has sought to boost exports to China and other countries to compensate for lost exports to Europe. In 2023, China imported an average of 2.1 million barrels/day of crude oil from Russia, compared to 1.6 million b/d in 2021. Natural gas imports from Russia grew 54% from 2022 as Russia became China’s second largest source of pipeline gas, partly due to existing agreements for the Power of Siberia 1 and the “Far Eastern Route,” though the overall volumes remain a fraction of past exports to the west. Beijing has been slow to accept new long-term deals with Moscow, favoring other suppliers, including the Central Asian states. This raises the question of whether Beijing is looking for a better deal before agreeing to a new Russian pipeline, does not see the need for a new pipeline with the first Power of Siberia pipeline still well below full capacity, or simply prefers other sources (including, perhaps, purchasing Russian LNG in shorter-term arrangements). Watch this space.