ABSTRACT
How can the security and energy security in Eurasia be discussed without first examining the relationship between the major powers in the area, Russia and China? To make things clear, Russia is the world’s second largest oil producer, after Saudi Arabia, and China the world’s second largest oil consumer, after the United States. Although bilateral trade-flow is still small, there is great potential inherent in the relationship. Old hostilities have been put aside after the final settlement in 2004 of a series of disputes along the 3645-kilometre border which had plagued Sino-Russian relations for centuries and causedwar in 1969. Moreover, Beijing andMoscow have compatible views on separatism, Islamism, terrorism, democratization and stability. The new Sino-Russian relationship is driven by trade and mutual eco-
nomic interest. China’s economy is the fourth largest in the world, with a gross domestic product (GDP) of US$2.8 trillion; in terms of purchasing power parity it is the second largest, with an output of US$8.6 trillion.1
China has pursued a dual transition process, moving simultaneously from a planned economy to a market economy and from a rural, agrarian economy to a more urban, industrial one. In this process it has emerged as the world’s second largest consumer of oil products at 7.4 million barrels per day,2 a figure projected to at least double to 13.4 million barrels per day by 2025. Around 40 per cent of the growth in world oil demand between 2001 and 2005 came from China. Russia provided 10.1 per cent of China’s total oil imports in 2005. This
amounted to 257,000 barrels per day, and was up from 29,700 barrels in 2000.3 However, this figure is set to increase steeply, particularly if Russia’s oil can provide China with a more secure foundation for its economic transformation than supplies from volatile Middle Eastern and African states. Energy reserves in western Siberia are estimated at up to 200 billion barrels, and those in eastern Siberia 50 billion barrels. In the Sakhalin region there could be 28 billion barrels. For comparative purposes, Iraq is thought to hold 112.5 billion barrels.4 Rising global temperatures will in the future make it easier for Russia to access these resources. Geography in the form of the shared Sino-Russian border has a crucial
impact on the potential for trade between the two countries. For China, the
strategic importance of access to Russian raw materials is great, because other assets are largely dependent on open waterways, particularly the straights of Hormuz and Malacca. These could be cut off in the event of a crisis over Taiwan or other major confrontation with the United States. Moreover, conflicts not directly related to China and beyond its control could result in supply disruption, for example a confrontation between Iran and the United States. Iran currently supplies 11.2 per cent of China’s total imports and the Middle East as a whole supplies 47.2 per cent of total oil imports.5 China sources 30.3 per cent of its total petroleum imports from Africa.6 A crisis in these regions would have severe consequences for Beijing. By contrast, Russian supplies can arrive in China through their shared border or the Pacific, and therefore carry a different risk profile. In fact, Chinese imports of raw materials from conflict-ridden countries in
Africa, the Middle East, Latin America and Asia is a reflection of China’s rising demand for imported raw materials, and a series of pragmatic decisions to channel Chinese investment to states where there is little competition from American and European corporations. China seeks to expand control over supplies of petroleum, minerals and other raw materials through equity investments, primarily for reasons of state and economic security. This strategy has in a sense been encouraged by Washington, because it
has sought to block Chinese bids for less controversial assets, such as the China National Offshore Oil Corporation’s (CNOOC) US$18.5 billion attempted takeover of Unocal, on the grounds that China should not be allowed to take over ‘American’ resources. China has strong incentives to increase imports from Russia, even though the current political climate in Russia makes it unlikely that China will be allowed to make large equity investments.
