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Chinese President Xi Jinping (L) and his Russian counterpart Vladimir Putin attend the opening ceremony of the "Year of Chinese Tourism in Russia" at the State Kremlin Palace in Moscow, March 22, 2013. (© POOL New / Reuters/REUTERS)
Chinese President Xi Jinping (L) and his Russian counterpart Vladimir Putin attend the opening ceremony of the "Year of Chinese Tourism in Russia" at the State Kremlin Palace in Moscow, March 22, 2013. (© POOL New / Reuters/REUTERS)

The bear and the dragon: Russia pivots to China in the face of Western sanctions Add to ...

“But there is a strong political will from the Kremlin to boost gas sales to Asia from 6 per cent to more than 30 per cent by 2035.”

Implicit in these plans are a challenge to the rest of the world, not least Canada: If Russia succeeds, it will displace gas supplies from other countries eager to sell to China. Academics and financial analysts say it stands to cut prices in the daily liquefied natural gas trade by $2 per million BTUs, a direct challenge to the profitability of potential export projects in Canada.

What the deal won’t necessarily mean is starving Europe of gas. The Eastern Siberia fields are major discoveries, but disconnected from those farther east that supply Western consumers. Gazprom has, in fact, also laid plans to boost its European market share by some 25 per cent over the next 15 years, although those prospects have grown decidedly hazy as EU leaders seek to wean themselves from Russian gas.

The vast untrammelled stretches of Eastern Siberia nonetheless offer all manner of opportunity for profit between Russia and China. Flowing atop underground reserves of oil, gas and minerals are untamed rivers that could pump large volumes of hydroelectricity to China. It’s a matter of no small interest for Beijing as it seeks smog-free ways to power its cities – an argument that also favours a Sino-Russian gas trade.

“In many ways, Russia to China looks similar to Canada to the United States,” said Peter Hartley, an economics professor at the University of Western Australia who has written extensively about energy economics and has helped develop a global model of natural gas flows and economics. “There’s great potential.”

But, he said, the issues of trust that have historically separated Russia and China – the two sides exchanged fire as recently as the 1960s – remain real. Watching Mr. Putin’s tactics in Ukraine, where he has shown an eagerness to use Russian energy to serve its political interests, is unlikely to bring China much comfort.

There is, then, a certain irony to Russia’s moves in Ukraine: Even as it drives the Kremlin east, it may also make it more difficult to do so.

Does Beijing really want it energy beholden to “a guy like Putin being being able to turn it off at a moment’s notice?” Mr. Hartley asked. “I don’t think so.”

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