- RUSSIA HAS SOUGHT ALTERNATIVE ENERGY CONSUMERS IN GLOBAL ENERGY MARKETS. CHINA IS A MAJOR CONSUMER OF HYDROCARBON RESOURCES, OIL AND GAS. CHINA IS ALSO CONVENIENTLY LOCATED LOGISTICALLY TO PURCHASE RUSSIAN OIL AND GAS.
- BY EXPORTING OIL AND GAS TO THE EAST AND WEST, RUSSIA IS AT THE CENTER OF THE EURASIAN ENERGY SYSTEM. THIS GIVES RUSSIAN ENERGY COMPANIES SOME INFLUENCE OVER WHO THEY TRADE WITH AND HOW THEY SET PRICES.
- THE EMERGENCE OF EURASIA MAY BE THE GREATEST GEOPOLITICAL EVENT OF THE 21ST CENTURY. THE CONCEPT AND IMPLEMENTATION OF EURASIA WILL LIKELY DEFINE THE 21ST CENTURY AND BEGIN TO FLOURISH AROUND THE YEAR 2030 – 2050.
1. RUSSIAN ENERGY MARKETS
The geopolitical situation on energy markets has changed significantly in recent years as a result of the rapprochement between China and Russia. This follows significantly increased efforts by both sides to integrate each other’s energy markets and to intertwine trade relations in energy and trade.
Energy markets play an important role in the intergovernmental affairs of both countries, as trade relations in this area will create mutually beneficial links between companies and organizations on both sides. Energy relations are also an important lever for Sino-Russian relations in terms of supply chain disruption and the sudden increase in insurance premiums. Higher premiums would have to be paid to transport hydrocarbons across the world’s oceans.
One reason for this maneuvering is that China is primarily dependent on energy trade transiting the western Pacific, particularly the Strait of Malacca. Closer ties to Russian energy markets therefore serve the strategic purpose of diversifying its energy sources away from the Strait of Malacca and toward Eurasia.
It is easier for both Russia and China to monitor and control energy trade within the Eurasian continent than to engage in maritime trade in hydrocarbon resources in the Indian Ocean and Western Pacific. This varies from case to case, but depending on the exact circumstances, land trade may be an appropriate option for trading partners. The amount of action that needs to be taken to ensure safe passage across two oceans may not even justify the overall benefits of such action.
The new Silk Road, which has already developed over the past decade, is being further energized by closer relations between China and Russia.
The Eurasian energy system is still under construction. China pushed development along the ancient Silk Roads. Russia had similar plans. Both countries are combining their strengths to support this effort. Europe can further benefit from the Silk Road Initiative by leading development in Eastern Europe and by expanding networks.
The year 2050 could mark the time when the center of the energy world will have shifted to Central Asia. As electricity and gas networks in the center of Eurasia expand, there is less and less incentive to transport energy commodities by sea. This process could be gradual. The volume of trade in the center of Eurasia could slowly increase.
We have previously written about this particular issue and the alignment of energy relations between China and Russia. With best wishes, we hope you find this article helpful in gaining perspective on what is happening on the Eurasian continent and in energy trade.