September 4, 2014 by AK
From the 1990s until very recently, domestic critics of government policies repeated the mantra that Russia was but a resource appendage of the West. Now that Russia’s use of Western financial markets and petroleum technology has been restricted, China seems to be coming to the rescue, asking for greater access to Russian hydrocarbons in return. China has already extended large loans against future deliveries to Russian oil and gas companies and plans to lend more.
There’s a sense of purpose about it. Western banks and oil traders used to offer export financing to Russian companies for no reason other than earning money for their shareholders. But Chinese companies seem to be offering long-term loans against future deliveries for a strategic objective – to provide China with reliable, predictable sources of oil and gas for decades ahead. It’s not about CNPC or Sinopec as such but all about Corporation China.
If Russia eventually becomes China’s resource colony, it will be the outcome not of complex interactions in global energy markets but of Russia’s readiness to accept this role at the prompting of China in the face of the Western sanctions. “Overall, we are very cautious when it comes to choosing foreign partners but, of course, there are no restrictions for our Chinese friends,” according to President Putin.
Specifically, he has welcomed the sale of an equity share in one major upstream project, Rosneft’s Vankor, to Chinese investors. “Today, Vankor is one of Russia’s largest enterprises by production, with great prospects,” said Putin. True, and that’s why the deal is out of the ordinary. Most of the field’s future output, though 2038, has been pledged to China anyway. But that is no longer enough for China, which prefers an ownership share and some degree of oversight at the wellhead.