China/Russia Gas Deal Changes Dynamics

With China closing multi-billion dollar trade deals on a near-daily basis, it would be easy to overlook the most recent energy deal which China and Russia have agreed upon. However, there were some interesting details in a Reuters article which caught my attention.

The most significant item is that under the terms of the deal, China would likely become the single-largest buyer of natural gas from Russia, surpassing Germany. This is a dramatic change from previous years – where virtually all of Russia’s natural gas exports have gone to Europe.

As most readers likely already know, Russia’s natural gas is of critical importance to Europe as the most-economical fuel for heating their homes. On several occasions already, Russia has used this dependence to persuade/blackmail European governments to further Russia’s foreign policy objectives – especially pushing back against the militarization of Eastern European nations against Russia, by the U.S.

The problem in the past when Russia has tried to use this “lever” is that Russia has also been dependent on energy revenues as it still works to rebuild its economy following the debt-implosion of the Soviet Union. Thus, Russian threats to Europe about “cutting off exports” has never been entirely effective because Russia had no alternative markets for that gas. This deal changes that situation, and automatically increases the political leverage of future threats to suspend natural gas exports to Europe.

Vladimir Putin, who remains the unofficial “overlord” of Russia, was blunt:

“Both China and Russia have very peaceful foreign policies. We are not fighting wars anywhere. We do not have troops deployed overseas. The joint position of Russia and China on some issues restrains some of our hot-headed colleagues.”

Clearly, Putin left little doubt about to whom he was referring. The increasingly coordinated policies of China and Russia are proving effective in blunting U.S. military imperialism through political and economic means – replacing the brute-force military counterbalance which was the framework for the “Cold War”. Putin’s attitude was echoed in the Reuters piece by a Chinese academic, although expressed in much milder terms.

 

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