Russia’s Economic Future: Part 4
Part D. Russian International Economic Relations
- Countries and Regions
- Central Asia and Eurasian Economic Union
The Eurasian Economic Union (EAEU) consists of Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia. Efforts to attract Uzbekistan, Tajikistan and Turkmenistan have failed for various reasons, but this does not mean that Russia regards these countries as unimportant. According to its internet site, the EAEU is an international organization for regional economic integration. It “provides for free movement of goods, services, capital and labor, pursues coordinated, harmonized and single policy in the sectors determined by the Treaty and international agreements within the Union.”[1] There is no provision for common foreign policy and security arrangements, which has given Kazakhstan room to manoeuvre as it expressed views on Russian actions in Ukraine.
Li Ziguo of the China Institute of International Studies notes that Russian stitched together the EAEU by offering costly “benefit lures” such direct payments, subsidies, and preferential tariff and import rule exceptions. He summarizes the issue in the following way: “While the European Union puts forward various requests to applicant countries if they want to join the union, the situation in the EAEU is totally opposite: applicant countries put forward various requests before they agree to join the union.”[2]
A July 2023 RIAC report on the EAEU says that “for Russia, the implementation of an EAEU integration project was an opportunity to attain and strengthen its status as a leader in the international economic and political scene.”[3] Moscow is interested in labour migration from Central Asia” because it helps “compensate for the shortage of labour in low-level positions”, “helps maintain social stability in the countries that export migrants” (remittances from migrant workers are very important for several Central Asian countries); and “promotes Russian soft-power” in the region. Citizens from EAEU countries find it easier to obtain work in Russia than non-EAEU countries in Central Asia who must apply for visas.
According to a report prepared by the Russian Ministry of Economy,[4] 1.7 million people came to work in the Russian Federation in 2022 from the other four countries of the EAEU – the same as in 2021 – with more than half of the workers from Kyrgyzstan (1 million people).
In the first quarter of 2023, 350,000 Tajik citizens entered Russia; as did more than 630,000 Uzbek citizens; and nearly 173,000 Kyrgyz citizens. According to Russian authorities, a total of almost 1.3 million foreign citizens entered Russia in the first quarter of 2023 (January 1-March 31) with “work” as the stated purpose of their visit — 60 percent more than the same period in 2022.[5]
The remittances send to Kyrgyzstan in 2022 were equal to nearly a quarter of GDP, but in the case of Kazakhstan it was less than 0.5% of GDP.[6]
According to Kommersant, “the share of workers from the EAEU countries is not the most significant part of labor migration to the Russian Federation. During the year, up to 9–10 million people can work in the country in total, a significant part of which are visitors from Uzbekistan and Tajikistan which are not EAEU members.”[7] “It should be noted that the relatively massive exodus of Russian citizens from the country, which occurred after the start of the military operation, and then in connection with mobilization, somewhat changed the migration flows in the EAEU. Thus, according to the estimates of the Armenian government, last year about 100 thousand Russians moved to that country, while labor migration from Armenia to Russia is estimated by the authors of the government report at 300 thousand people. Apparently, a comparable number of Russian workers also left for Kazakhstan (200,000 in the opposite direction). However, it is still impossible to estimate what part of those who left continue to work remotely for Russian companies, thus actually remaining part of the Russian labor market.[8]
As noted earlier in this text, there are many estimates of the number of workers who left – and even returned – after February 2022.
According to Putin, internal EAEU trade grew by 14% in 2022 to $83.3bn. The July 2023 RIAC report says that since the establishment of the EAEU, its combined GDP (PPP) has fluctuated within 5.5–5.7% of the global GDP. “In 2021, the Union’s share in global GDP (in current prices) was 2.1%, or slightly above $2 trillion in absolute terms.”[9]
Earlier in this text I wrote about the National Projects covering development and expenditure on various aspects of Russian society and economy in the 2019-2024 period.[10] One of these national projects concerned “International cooperation and export” which includes “formation of an effective system of division of labor and production cooperation within the framework of the EAEU in order to increasing the volume of trade between the Member States of the Union not less than one and a half times and ensure the growth of the volume of accumulated mutual investment by one and a half times”.
Deputy Prime Minister and Minister of Industry and Trade, Denis Manturov, was asked about this particular national project in a media interview in July 2023.[11] He said that it had been extended from 2024 until 2030 and said that “for the first time in the ten years of the existence of the EAEU, an effective mechanism of financial support will be launched, which will allow enterprises of the EAEU countries to implement significant cooperation projects, develop industrial cooperation and create new joint ventures. Support will be provided through subsidizing interest rates on credits and loans issued by international and national financial organizations. In May, the heads of the EAEU member states signed a protocol on amending the treaty on the EAEU, which provides for the possibility of implementing such a mechanism. The next step is the development of criteria for selecting cooperative projects for financial assistance. It has already been decided that such projects should be implemented by participants from three or more member states of the union. Moreover, we are talking about both technological cooperation and industrial cooperation, as well as the use of raw materials and materials, and the establishment of supply chains.”[12]
On 16 July 2023 Kommersant reported on how this cooperation might begin. Lists of types of work needed to replace foreign supplies and to create new production facilities have been sent to Russian regions. “It is assumed that they know the optimal points for industrial growth: the federal center does not have data on the numerous needs of various industries.”[13] Analysts at the Higher School of Economics (HSE) have done their own statistical study hoping to identify regions in Russia and other EAEU countries that have industries where such cooperation is most likely.[14]
The HSE report says “the potential of industrial cooperation was assessed through the identification of complementary branches of specialization based on the analysis of intersectoral balances according to the OECD.[15] Thus, we get these types of examples:
Steel production has ties to nine industries, including: motor vehicle manufacturing; computers, electronic and optical products; electrical equipment; other machines and equipment; rubber and plastic products; furniture, other finished products; mining; water supply, water disposal, waste collection and disposal; supply of electricity, gas and steam, air conditioning.”[16]
“Chemicals and products manufacturing has ties to eight industries, including: coke and petroleum products; electrical equipment; rubber and plastic products; medicines and materials; textile products; mining; wood processing, production of paper, wood products and paper; supply of electricity, gas and steam, air conditioning.”[17]
I certainly get the idea of clusters, but these examples are so broad to be almost meaningless. One could almost make a similar type of claim of connection between industries that use electricity!
EAEU member countries – particularly Kazakhstan — may fear Russia, with the example of Ukraine clear to all, but neither do they want to be left alone in the face of rising Chinese power and assertiveness. In my view, the future of the EAEU is not bright, although it is not about to collapse any time soon.[18]
In 2017 I wrote a very long report on Russia’s relationship with Central Asia and China within the context of the Belt and Road Initiative and the Shanghai Cooperation Organization (SCO) entitled “New Eurasian Age: China’s Silk Road and the EAEU in SCO Space”, which can be accessed here.[19]
In light of the Russian invasion of Ukraine, Kazakhstan is showing a quite strong streak of independence. It has never recognized Crimea as part of Russia and Kazakh President Kassym-Jomart Tokayev has openly refused to support Russia. Domestically, Kazakhstan has countered any signs of support for Russia’s war on among Kazakh society by banning Russian military propaganda symbols. Russia, in turn, seems to have decided to punish Kazakhstan more than once reducing – for claimed “maintenance” reasons – the flow of Kazak oil through the Caspian Pipeline Consortium (CPC). This pipeline which goes to the Russian port of Novorossiysk on the Black Sea, handles about 80% of Kazakhstan’s oil exports.
A May 2022 summit of EAEU[20] leaders focused on improving energy ties and developing regional trade routes. Despite not being a EAEU member, Uzbekistan maybe interested in working with Russia and Kazakhstan on a “trilateral gas union”[21] which may include supplying natural gas to China. Uzbekistan was initially hesitant, but recent energy problems may be causing a rethink.
Kazakhstan is interested in the idea of a n international North-South transport corridor (INSTC) running from Russia south through Kazakhstan, Turkmenistan and Iran to the Persian Gulf with a sea route to India etc. An alternative route would go from Russia, through Azerbaijan to Iran.
Two other proposed international transport corridors (ITCs) are the Trans-Caspian International Transport Route (TITR) and the East–West Transport Corridor (EWTC). The last of these runs through Russia.
The Trans-Caspian International Transport Route (TITR) is mostly used to ship cargo from China to Europe via Kazakhstan, Azerbaijan and Georgia, bypassing Russia. The TITR is also linked to Ukraine. Nevertheless, the bulk of the commodity turnover is contributed by exchanges between the EU and China, whereas trade between the remaining participants is modest (about $10 billion in 2021). Therefore EAEU countries on this route are not exploiting its full export potential.[22]
- China
In October 2022 the Centre for Contemporary China Studies, a think-tank inside the Indian Ministry of External Affairs, asked me to go to New Delhi to speak on “China-Russia Relations in the Era of Putin and Xi”. I prepared a long background paper to my presentation which can be accessed here.[1] My general views about this relationship remain unchanged.
Russia and China are not an easy fit as far as people go. There has been a Russian tendency in the words of a former Russian diplomat, Georgy Toloraya, to “habitually look down on China”.[2] Sergei Karaganov, a prominent Russian commentator who favours closer relations with China, noted in early 2018 interview with an Indian newspaper that “there are some members of the Russian elite who are fearful of China”.[3]
In 2017, a Chinese academic gave his opinion on the superficiality of this partnership: “We don’t trust each other and the partnership is unreliable. It’s just that we don’t have a choice, because we are great neighbours. Russia’s strategic position is isolation. The Russians only like Europe and the United States, but it is not reciprocal because nobody likes them.”[4]
Wang Huiyao, a Chinese foreign policy advisor and president of the Center for China and Globalization, a Beijing-based think tank, said in June 2023: “It’s not that China wants to be closer to Russia. It’s that the U.S. is forcing that.[5]” Dmitri Trenin, a prominent Moscow analyst, has succinctly summed up the the relationship saying it is “founded on the premise that the two will never turn against each other, but neither will they automatically follow each other: a fine combination of reassurance and flexibility” [6]
A September 2022 Valdai paper, “Russia-China Strategic Partnership in the Context of the Crisis in Europe”[7] says that “when future historians will look for the starting point of the collapse of the old international order and the rise of a new world order where a small group of powers can no longer claim undivided leadership, they can begin with the February 24, 2022” Russian invasion of Ukraine.
While acknowledging some sanctions caused difficulties between Russia and China, and – in my view – optimistically painting a positive picture of future developments, the Valdai paper concludes that “in their decision to openly confront Russia over Ukraine, the Western countries underestimated the scale and depth of the Russia-China strategic partnership in the new era”. This Valdai paper is typical of many of its previous reports in attempting to promote a – in my view – unrealistic or even romantic vision of the Russia-China relationship.
Alexander Gabuev says that “Russia is reorienting itself to China. But their relationship now is deeply asymmetric. China is clearly the stronger partner”. “That said, the Chinese are skillfully massaging Russia’s ego with their rhetoric. And their broader attitudes toward each other helps. China doesn’t care about Alexei Navalny, and Russia doesn’t care about Xinjiang. That provides a type of glue for their relationship that makes it more comfortable for them to talk.”
Nearly a year and a half into the full-scale invasion, the relationship between Russia and China is largely following the same pattern as before. Chinese investment in Russia remains relatively small compared to it investments elsewhere, partly because Moscow is not prepared to accept Chinese investment without certain restrictions.
A RIAC 2022 report focussed on Russia-China relations barely mentions cooperation in science and technology, which is hardly surprising because for most of 2000 and all of 2001 travel between Russia and China was severely restricted. The RIAC 2001 report[8] does, however, have quite a large section which claims that “scientific cooperation between Russia and China is marked by its sheer diversity, touching on many fields and using numerous mechanisms at the same time. While these areas are not always fully coordinated, they are nevertheless in the spirit of the general logic to continue to search for new projects and expand interaction.”
The RIAC 2022 report then goes on to say that “despite the long list of areas in which the two sides cooperate, real and productive research interaction can only be seen on a small range of issues”:
“Several hundred agreements on scientific, technical and educational interaction have been concluded between the countries’ research institutions and universities over the past decade. However, many of these agreements remain on paper as the sides do not really know how to carry out this interaction, and because the documents themselves are full of abstract plans and declarative statements. Many initiatives are limited to science exchanges and research conferences, with no joint research projects being carried out at all. However, more active forms of interaction have appeared in recent years, mainly in hi-tech fields.”
I have already covered some aspects of Russia-China cooperation earlier when looking at Russia’s policy of “technological sovereignty” – including aircraft construction — and will not elaborate further here.
Views on military cooperation between Russia and China vary. Alexander Gubaev seems convinced that it is “robust” and points to lots of meetings between high-level officials.[9] However, he does not provide much substantial evidence besides this. It may be that these meetings are a harbinger of what is to come, but I think that China will remain very cautious.
In June 2023, the publication “War on the Rocks” reported on a study “using a comprehensive collection of Russian and Chinese language media reporting and technical articles on bilateral military ties”.[10] The authors say they “analyzed key bilateral agreements and official statements, all major arms sales and other forms of military-technical cooperation, exchanges of military personnel for education and training, joint military exercises and operations, and other relevant military-to-military engagements” primarily covering the period from 2014 to November 2022.”
According to the study: “Despite a number of rhetorical flourishes at leadership summits, after undergoing a period of rapid expansion from 2014 to 2019, Russian-Chinese military cooperation has largely plateaued in recent years. There is little evidence of continued expansion since 2020 in either military-technical cooperation or joint military activities.”[11]
“When discussing purely military technology development, the partnership has remained somewhat one-sided, with little evidence of technology transfer from China to Russia. Russia has turned to China in its efforts to replace key Ukrainian and Western dual-use components, especially in areas such as optics and electronics, although these projects have been limited to some extent by sanctions. Some projects initiated after 2014, especially the purchase of Chinese marine engines, have been curtailed because Chinese equipment was found to be of insufficient quality.” “Overall, Russian-Chinese military-technical cooperation continues to operate at a high level, though there is potential for further growth if the two sides can overcome lingering concerns over issues such as reverse engineering, competition in global arms markets, reluctance to share sensitive technologies, and an enduring preference to maintain self-sufficiency in defense production.”[12]
“Russia and China have demonstrated relatively few aspects of the advanced military cooperation practiced by the United States with its European and Asian allies which generally occurs through the establishment of integrated military command centers, joint deployments, base sharing, and, at the highest levels, the formulation of a common defense policy.”[13]
Temur Umarov and Alexander Gabuev write:[14] “Unlike Russia, which views its security interests in Central Asia in terms of national security and geopolitical competition, China is content with protecting its commercial interests and making sure that developments in neighboring countries do not endanger political stability at home. Xinjiang Province, in China’s far west, borders Kazakhstan, Kyrgyzstan, and Tajikistan, and it resembles them in culture, ethnicity, language, and religion far more than it resembles other parts of China. Ever since these nations gained independence following the breakup of the Soviet Union, Beijing has sought friendly ties with them for fear that they might otherwise inspire or foment separatism in Xinjiang.”
In 2016 Putin spoke about coordinating the work of the EAEU and the Silk Road Economic Belt (SREB) — which is the land part of what is now called the Belt and Road Initiative (BRI) — to “promote an extensive Eurasian partnership, which promises to evolve into one of the formative centres of a vast Eurasian integration area.”[15] At the May 2017 Belt and Road Summit in Beijing, Putin said: “I believe that by adding together the potential of all the integration formats like the EAEU, the OBOR (One Belt. One Road now known as BRI), the SCO and the ASEAN, we can build the foundation for a larger Eurasian partnership”.
While Putin spoke of the “extensive Eurasian partnership”, some Russian analysts referred to “a partnership or community of Greater Eurasia”.[16] A succession of Valdi Discussion Club reports — under the influence of Sergei Karaganov – with the general motto “Towards the Great Ocean” calling for “the transformation of Central Eurasia into a zone of joint development” by combining the SREB with the Russian EAEU project[17] [18] were subsequently released.
References to “security” eventually were eventually included in these reports, with a “rejuvenated SCO with China, India, Kazakhstan, Pakistan, other regional powers, and eventually Iran.”[19] That is, a “Community of Greater Eurasia” geopolitical bloc which will include “China, Russia, India, Kazakhstan, Iran, and many other states”. However, whereas Kazakhstan as a country continually gets a separate mention in the Valdai reports, Putin has never separately mentioned Kazakhstan in his speeches or written documents – but rather always envisages it participating in Eurasian integration as part of the EAEU and not as an individual country.
It is noteworthy that when Xi Jinping visited Kazakhstan just prior to the 2022 SCO summit in Uzbekistan, he specifically said that “China will always support Kazakhstan in maintaining national independence, sovereignty and territorial integrity”[20].
On their side, the Chinese have few ideas of their own about Greater Eurasia and – in my experience – when directly asked about it are likely to refer to the writings of Karaganov and express scepticism. According to Ka-Ho Wong, writing in a RIAC ‘blog’, “A Comparative Study of the Greater Eurasian Partnership: The Chinese and Russian Perspectives”, “Chinese scholars understand the Greater Eurasian Partnership by reading Sergei Karaganov’s articles and the relevant Valdai club reports”.[21]
Ka-Ho Wong says that Russian scholars perceive the “Greater Eurasian Partnership” initiative as “grand strategy”, while Chinese scholars consider it an “opportunistic move” by Russia to cope with its “international isolation”. The Chinese consider the idea to have a “bleak future” because of its “vagueness” and “strong political sense”. They consider Russia a “Eurocentric country” which will abandon the partnership “following rapprochement with the West”. “Meanwhile”, Ka-Ho Wong adds, “the EAEU has suffered from institutional deficiency and consequently most cooperation between China and the EAEU member states is on the bilateral level”.
The mainstay of Russia’s exports to is energy, which accounted for 75% of Russia’ exports to China in 2022. In 2022, China’s exports of high-tech products to Russia surged by 51%, and its exports of automobiles and parts increased by 45%.
In early 2023, Russia surpassed Saudi Arabia to become the largest crude oil exporter to China. In 2022, Russia accounted for only 10% of Chinese LNG imports and 25% of pipeline gas imports; Turkmenistan is the main supplier of piped gas to China. [22] In 2022 the value of Russia’s agricultural product exports to China increased to $US7 billion. China imports about 110 million metric tonnes of grain every year, and only about 1 million tonnes of it is imported from Russia, accounting for less than 1%. China imports only 1% of its soybeans from Russia.
According to a “chinarussiareport.substack.com”, “Beijing is emphasizing to Russian elites that it seeks ties with Moscow due to an alignment of fundamental national interests. While Beijing is still expressing support for Putin, it’s also underscoring the non-personal aspects of the Sino-Russian bilateral relationship in the wake of the Wagner ‘mutiny plus’.”[23] “Despite its attempt to institutionalize the relationship, it appears that the China has abandoned calling Russia an ‘all-weather friend’, as it did briefly in 2021.”[24] “Accordingly, Beijing’s new framing of the Sino-Russian relationship – and avoidance of the ‘all-weather friend’ designation – appears aimed at institutionalizing ties and de-emphasizing the Xi-Putin personal relationship while also assuaging Russian anxieties about a junior partnership.”[25]
- Other significant near countries and regions
During the next decade or so, it is very hard to see Russia having extensive two-way economic relations with any country other than China or those in the EAEU or Central Asia. No significant country in Europe will want to deal with Russia in this way, while such countries as India, Turkiye, Iran and Azerbaijan will only be significant because of specific trade items or possible trade routes. A later section in this text will look at Russian international economic relations based of various Russian exports categories.
In 2018 I wrote a report on “Russia’s Approach to India and China (within Eurasia).[1] I concluded that Russia clearly, and logically, puts more emphasis on its relationship with China than with India. India, in recent years, has mainly been seen as a market for Russian military equipment and civilian nuclear technology. This has led Russia to be sometimes very casual when considering India’s broader interests. As a result, some Russian analysts believe that “Russia is losing India”. However, there are also signs that India’s growing ambitions — as evidenced in Russian eyes by the Quad — are leading to some Russian refocus on India.
Russia has been pushing for Turkiye to become a hub for distributing some of its natural gas to Europe, but Turkiye seems to have decided that it wants such a hub to handle non-Russian gas as well.[2] Russian natural gas imports account for around a third of Turkish natural gas consumption, with Iran and Azerbaijan also being significant suppliers.[3] It is also clear that Ankara sees Turkiye as a rising power in the region and is trying to boost its influence with countries of Central Asia with which its people generally share the Islam religion.
According to a 7 July 2023 Kommersant article[4], “Russia and Iran have begun substantively discussing partnerships in the field of IT and telecommunications. The Russian Ministry of Digital Development offered Tehran technological support for the North-South transport corridor (INSTC) – which was discussed earlier in this text – including strengthening data transmission channels. “The IT technology market in Iran is growing rapidly. However, experts note that the sector is well developed, effectively supported by the state, and the question is whether Russian solutions will be in demand.”[5]
- Products
The research company “World’s Top Exports” has produced useful data on Russian International Trade.[1] It says that the following export product groups represent the highest dollar value in Russian global shipments during 2022. Also shown is the percentage share each export category represents in terms of overall exports from Russia:[2]
Mineral fuels including oil: US$348.3 billion (69.5% of total Russian exports)
Iron, steel: $21.5 billion (4.3%)
Fertilizers: $17.4 billion (3.5%)
Gems, precious metals: $16.9 billion (3.4%)
Aluminum: $10 billion (2%)
Wood: $8.6 billion (1.7%)
Fish: $7.8 billion (1.6%)
Cereals: $7.24 billion (1.4%)
Copper: $7.16 billion (1.4%)
Inorganic chemicals: $5.8 billion (1.2%)
The importance of Russian energy exports to the economy is clear.
- Energy Exports
According to the 2023 “Statistical Review of World Energy”[1] published by the Energy Institute (and formerly published by BP): in 2022 Russia produced 11 million barrels of oil per day which (equal to 11.9% of world production); 618 billion cubic meters of natural gas (equal to 15.3% of world production); and 439 million tonnes of coal (equal to 5.3% of world production). Russia is the world’s largest exporter of fossil fuels.[2]
During his speech at the St Petersburg International Economic Forum (SPIEF) on June 16 2023, Putin claimed that Russia is “getting off the needle” of its raw materials export dependency and that the government is making progress in diversifying its revenue sources.[3] I assume that Putin was particularly referring to the policy of “economic and technology sovereignty” which I have already extensively discussed, and will not again do so here.
Bruegel, the “European thinktank”, has a “Russian crude oil tracker”[5] site which says in 2021 – a year earlier than for the above mentioned Energy Institute data – Russia produced 540 million tonnes of crude oil (accounting for 13% of global production). Of this, 260 million tonnes were exported directly as crude oil (comprising 13% of global exports). Russia refined the remaining 290 million tonnes, of which 140 million tonnes were exported as refined products (11% of global refined exports)
The Druzhba pipeline system carries oil to the EU, which has not been sanctioned by the EU, while the Easter Siberia – Pacific Ocean (ESPO) pipeline carries oil to China.[6]
Remaining Russian crude oil has historically been mainly exported by sea to the EU and China. “Historically, seaborne EU crude oil imports from Russia originated from Urals fields via western ports in the Baltic and Black Sea.” Bruegel says that “this is where the largest impacts of the Ukraine related embargoes and price caps are being felt. Eastern Siberian fields have historically served Asian customers, largely China.”[7]
Just what will be the influence of oil exports on Russia’s economic future is an extremely complex and speculative issue involving the war in Ukraine, OPEC policies, world demand (including the influence of climate change policies which are addressed later in this text) etc. I do not propose to attempt to delve into the oil issue here, except to note its importance for the macro-economic position of Russia.
According to the 2023 “Statistical Review of World Energy”[8] Russia produced 618 billion cubic meters (bcm) of natural gas — both pipeline and LNG (natural gas liquified by being cooled to minus 163 Celsius and transported by ships) — in 2022.
Before its February 2022 invasion of Ukraine, Russia sold over 150 billion cubic meters (bcm) of gas to Europe per year,[10] which was equal to about a third of Europe’s imports.[11] Most of this gas was sent by pipeline – including Nord Stream – from the Yamal Peninsula in the north of Russia. These gas flows have now mainly stopped.
European plans unveiled in 2021 to reduce use of fossil fuels meant that even before the invasion of Ukraine and associated events, Russia needed to think about new markets for Yamal gas.[12] China was the obvious potential market. According to the 2023 Statistical Review, in 2022 China accounted for about 26% of world primary energy (commercially traded fuels, including renewables used to generate electricity) consumption.[13] Over half of this was from relatively heavily polluting coal, so there would appear ample scope for increased use and imports of natural gas.
Russia already supplies about 16bcm gas to China each year via the Power of Siberia pipeline launched in 2019, and is expected to reach maximum capacity of 38 bcm per year in 2024[14] This gas comes from dedicated gas fields in eastern Siberia, which are far from the gas fields on the Yamal Peninsula, so Russia wants to construct another pipeline, known as Power of Siberia 2 (or PS2), to supply gas from the now idle fields in the Yamal Peninsula. The pipeline would cut across Siberia, pass by Irkutsk, and cross Mongolia to China.[15] However, even if Power of Siberia 2 is successfully constructed by 2030 with a capacity of 50bcm per year as suggested by some reports[16], it will not be able to compensate fully for the loss of the European market.[17] [18]
China presently gets about 5% of it gas from Russia, and that PS2 would lift this to about 20%. China appears to be in no hurry to agree to PS2 as it wants to have a diversified group of gas suppliers.[19] China also imports about 35 bcm of gas per year from Turkmenistan via three almost parallel pipelines, and wants a fourth – known as Line D.[20]
The already mentioned a possible Russia-Kazakhstan-Uzbekistan “gas union” would allow gas produced in the latter two countries to be exported to China with Russia providing compensatory gas to them, basically using existing pipeline networks. An analysis by Russia’s Yakov and Partners (former McKinsey)[21] reportedly concluded that up to 20 billion cubic meters can be delivered to Kazakhstan and Uzbekistan[22] and another 10 billion cubic meters can be delivered through Turkey if a project to create a gas hub is implemented.[23]
Despite Russian hopes for PS2 – and any financing commitments – and a “gas union”, China may prefer to rely more on LNG which is transported by ships with its supply not tied to fixed pipeline routes and suppliers.
World LNG demand is expected to increase very significantly over the coming decade, with greatly increased production in mainly the US and Qatar. A significant part of the plants under construction in these countries are expected to start production around 2025”[24]
In 2022, Russia was the world’s fourth largest LNG exporter with sales of over 40 bcm, equal to 8% of the total world market.[25] A 2021 document entitled “The Long-term Programme for the Development of Liquefied Natural Gas Production in the Russian Federation” assumed Russia would produce about 195 bcm per year by 2035, equal to 15-20% of total market.[26]
While the forecasts in the 2021 document have not been officially changed, Russian officials have more recently spoken about achieving LNG production capacity of around 140 bcm per year “in the medium term”.[27] The probable reduction in the production target from 195 bcm to 140 bcm can be attributed to the difficulties arising from the sanctions” and the need to develop home-grown technologies and train the personnel that would boost the potential of the domestic LNG sector.”[28]
Russian plans to boost domestic technology in LNG was noted earlier when discussing “technology sovereignty”, [29] as were doubts about how fast this could be achieved.[30]
Whatever the possibilities for the future, a production line at the Novatek Yamal LNG project with a capacity of over 1 bcm a year reportedly already operates using the Russian “Arkticheskiy kaskad” technology, [31] although Novatek has at times complained about the poor quality of components that were supplied by Russian companies.[32]
Western sanctions have also hit construction of Russia’s LNG transport capacity, both by Russian shipyards and foreign shipyards.”[33] In a July 2023 media interview, Deputy Prime Minister and Minister of Industry and Trade, Denis Manturov[34] spoke about ice-class LNG carriers for the Northern Sea Route: “At the present time five LNG carriers for Novatek are being built at SSK Zvezda in cooperation with partners. Ahead is the construction of 10 more such vessels. In addition, a roadmap for the design of a fully domestic gas carrier is currently being prepared: it will include the stages and deadlines for all work. This ice-class gas carrier is planned to be designed using Russian equipment. Therefore, at the moment, as part of the implementation of comprehensive projects for the creation of ship component equipment, measures are being taken to create domestic equipment for this gas carrier. The number of vessels in the domestic series and even the number of series of completely Russian gas carriers will depend on the actual need for the volume of LNG transportation from the Arctic fields.[35]
World coal production in 2022 was about 8,803 million tonnes,[36] of which Russia produced 440 million tonnes — or 5% of world output and 18% of global exports. (By contrast, China produced 4560 million tonnes.)
In commentary terms, Russian coal exports have received much less attention than oil or gas. However, in early 2023 – a year after Russian invasion of Ukraine — Indra Overland and Julia Loginova published a very useful overview of the Russian coal industry and its prospects,[37] and I quoted their report when looking at “technological sovereignty” issues earlier in this text.
They say that “Russian coal exporters have attempted to accelerate their shift to the East following the European Union’s sanctions over the war in Ukraine and the Russian coal infrastructure is being expanded to serve the Asia-Pacific market. The analysis concludes that the Russian coal industry is not preparing for more long-term changes in international coal markets, and this exacerbates the magnitude of risks for local communities and regional economies within Russia as well as for global de-carbonisation.” Overland and Loginova say this contrasts with the Russian oil and gas industries which have “demonstrated a significant capacity to adapt to new constraints such as low prices and Western sanctions”.[38]
The 2020 strategic program for the coal industry out to 2035 has scenarios for exports ranging from a “slight decline” to a rise of “almost 50%”. In the high scenario, the Russian Ministry of Energy hopes to raise Russia’s share of the world coal market to 25%.[39] Overland and Loginova say that “Russian strategic coal policy pays scant attention to global energy transition”, and has not been adjusted to reflect the impact of various (mainly EU) sanctions introduced on Russian coal in 2022.
Overland and Loginova say that “for over a decade” Russian policy has “focused on creating incentives for accelerated development of transport and coal handling infrastructure linking major coal basins in Siberia” with Asian markets. It invested over $10 billion “in the infrastructure along the Trans-Siberian Railway and the Baikal-Amur Mainline (BAM) and seaports in the Arctic and Far East in the expectation that Asian demand for imported coal will continues to rise”, and coal companies also invested in modernized facilities and transport capacity. “Despite these long-term efforts, the pressing need to swiftly shift to Asia following international sanctions remain constrained by railway and seaport bottlenecks.”[40]
Overland and Loginova are not very optimistic about the future of the Russian coal industry. Apart for climate change, foreign sanctions and transport logistic issues, they say that “coal production costs are already very low’ and that “coal freight is a is a low-margin business for Russian railways where it faces significant competition from other commodities (timber, minerals) and goods”.
[1] “2023 Statistical Review of World Energy”, Energy Institute
[2] Indra Overland and Julia Loginova, “The Russian coal industry in an uncertain world: Finally pivoting to Asia?”, Energy Research & Social Science, 8 June 2023
[3] “Russian President Putin said Russia is “getting off the needle” of raw material exports”, BNE, 16 June 2023
[4] “2023 Statistical Review of World Energy”, Energy Institute
[5] https://www.bruegel.org/dataset/russian-crude-oil-tracker
[6] https://www.bruegel.org/dataset/russian-crude-oil-tracker
[7] Bruegel
[8] “2023 Statistical Review of World Energy”, Energy Institute
[9] LNG weights about 45% of that of water. It is sometimes measured on tonnes, with 1 million tonnes equal to about 1.4 bcm. I have chosen to convert all the numbers in my referenced sources to bcm using this on-line Novatek calculator:
[10] Sergey Vakulenko, “Can China Compensate Russia’s Losses on the European Gas Market?”, Carnegie, 1 June 2023
[11] “2023 Statistical Review of World Energy”, Energy Institute
[12] Sergey Vakulenko, “Can China Compensate Russia’s Losses on the European Gas Market?”, Carnegie, 1 June 2023
[13] 2023 Statistical Review of World Energy”, Energy Institute
[14] “Power of Siberia: China keeps Putin waiting on gas pipeline”, FT, 25 May 2023
[15] “Power of Siberia: China keeps Putin waiting on gas pipeline”, FT, 25 May 2023
[16] Семь тощих лет газа”, Kommersant, 7 August 2023
[17] Sergey Vakulenko, “Can China Compensate Russia’s Losses on the European Gas Market?”, Carnegie, 1 June 2023
[18] Joseph Webster, “China and Russia May Be Expanding Natural Gas Cooperation – Just Not Via Power of Siberia 2”, The Diplomat, 17 June 2023
[19] “Power of Siberia: China keeps Putin waiting on gas pipeline”, FT, 25 May 2023
[20] “Power of Siberia: China keeps Putin waiting on gas pipeline”, FT, 25 May 2023
[21] “Семь тощих лет газа”, Kommersant, 7 August 2023
[22] “Семь тощих лет газа”, Kommersant, 7 August 2023
[23] “Семь тощих лет газа”, Kommersant, 7 August 2023
[24] Filip Rudnik, “Unfulfilled ambitions: Russia’s LNG sector in the grip of sanctions”, OSW, 2023-06-05
[25] Filip Rudnik, “Unfulfilled ambitions: Russia’s LNG sector in the grip of sanctions”, OSW, 2023-06-05
[26] Filip Rudnik, “Unfulfilled ambitions: Russia’s LNG sector in the grip of sanctions”, OSW, 2023-06-05
[27] Filip Rudnik, “Unfulfilled ambitions: Russia’s LNG sector in the grip of sanctions”, OSW, 2023-06-05
[28] Filip Rudnik, “Unfulfilled ambitions: Russia’s LNG sector in the grip of sanctions”, OSW, 2023-06-05
[29] Filip Rudnik, “Unfulfilled ambitions: Russia’s LNG sector in the grip of sanctions”, OSW, 2023-06-05
[30] Семь тощих лет газа”, Kommersant, 7 August 2023
[31] Filip Rudnik, “Unfulfilled ambitions: Russia’s LNG sector in the grip of sanctions”, OSW, 2023-06-05
[32] Filip Rudnik, “Unfulfilled ambitions: Russia’s LNG sector in the grip of sanctions”, OSW, 2023-06-05
[33] Filip Rudnik, “Unfulfilled ambitions: Russia’s LNG sector in the grip of sanctions”, OSW, 2023-06-05
[34] “Денис Мантуров: у нас есть четкие договоренности с автопромом о недопустимости завышения цен”, Interfax, 10 July 2023
[35] “Денис Мантуров: у нас есть четкие договоренности с автопромом о недопустимости завышения цен”, Interfax, 10 July 2023
[36] “2023 Statistical Review of World Energy”, Energy Institute
[37] Indra Overland and Julia Loginova, “The Russian coal industry in an uncertain world: Finally pivoting to Asia?”, Energy Research & Social Science, 8 June 2023
[38] Indra Overland and Julia Loginova, “The Russian coal industry in an uncertain world: Finally pivoting to Asia?”, Energy Research & Social Science, 8 June 2023
[39] In a later section on Russia’s “National Projects” I note the importance attached to KPIs. In regards to coal, Overland and Loginova wryly suggest that perhaps “one should not attach too much importance to official government planning documents, which might reflect political needs and the desirability of presenting ambitious targets, reminiscent of the Soviet fixation on output targets”.
[40] Indra Overland and Julia Loginova, “The Russian coal industry in an uncertain world: Finally pivoting to Asia?”, Energy Research & Social Science, 8 June 2023
[1] https://www.worldstopexports.com/russias-top-10-exports/
[2] World’s Top Exports site list a variety of data sources, all most recently accessed on 11 June 2023
[1] https://russianeconomicreform.ru/2018/08/russias-approach-to-india-china-within-eurasia/
[2] Nuray Alekberli-Museyibova, “Turkey’s Ambitious Bid to Diversify Natural Gas Sources and Reduce Dependency on Russia”, Eurasia Daily Monitor Volume: 20 Issue: 123, 1 August 2023
[3] Nuray Alekberli-Museyibova, “Turkey’s Ambitious Bid to Diversify Natural Gas Sources and Reduce Dependency on Russia”, Eurasia Daily Monitor Volume: 20 Issue: 123, 1 August 2023
[4] “Тегеранская преференция”, Kommersant, 7 July 2023
[5] “Тегеранская преференция”, Kommersant, 7 July 2023
[1] https://russianeconomicreform.ru/2022/10/china-russia-in-era-of-xi-and-putin/
[2] Georgy Toloraya, “Two Heads of the Russian Eagle”, Russia in Global Affairs, February 13, 2017 http://eng.globalaffairs.ru/number/Two-Heads-of-the-Russian-Eagle-18592
[3] Indrani Bagchi, “China and Russia are quasi allies”, The Times of India, February 28, 2018 https://blogs.timesofindia.indiatimes.com/Globespotting/china-and-russia-are-quasi-allies-on-strategic-affairs-russia- and-india-have-serious-conversations-only-at-top-level/
[4] Alexandre Sheldon-Duplaix, “Russia-China Naval Partnership and Its Significance”, Russia-China Relations: Emerging Alliance or Eternal Rivals?
[5] Dake Kang, “In China, a muted reaction to the revolt in Russia belies anxiety over war, global balance of power”, 27 June 2023 https://apnews.com/article/china-russia-ukraine-wagner-07903d30e08ac859f1ddb134574d7deb
[6] Dmitri Trenin, “National Interest, the Same Language of Beijing, Washington and Moscow”, Global Times, December 29, 2016 http://www.globaltimes.cn/content/1026358.shtml
[7] Timofei Bordachev , Vasily Kashin , Nikita Potashev , Egor Prokhin , Veronika Smirnova , Alexandra Yankova, “Russia-China Strategic Partnership in the Context of the Crisis in Europe”, Valdai Discussion Club, 9 June 2022 https://valdaiclub.com/a/reports/russia-china-strategic-partnership/
[8] https://russiancouncil.ru/en/activity/publications/russia-china-dialogue-the-2021-model/
[9] Alexander Gabuev, “What’s Really Going on Between Russia and China”, Foreign Affairs, 12 April 2023
[10] Dmitry Gorenburg, Elizabeth Wishnick, Paul Schwartz and Brian Waidelich, “How Advanced is Russian-Chinese Military Cooperation?”, War on the Rocks, 26 June 2023 https://warontherocks.com/2023/06/29000/
[11] Dmitry Gorenburg, Elizabeth Wishnick, Paul Schwartz and Brian Waidelich, “How Advanced is Russian-Chinese Military Cooperation?”, War on the Rocks, 26 June 2023 https://warontherocks.com/2023/06/29000/
[12] Dmitry Gorenburg, Elizabeth Wishnick, Paul Schwartz and Brian Waidelich, “How Advanced is Russian-Chinese Military Cooperation?”, War on the Rocks, 26 June 2023 https://warontherocks.com/2023/06/29000/
[13] Dmitry Gorenburg, Elizabeth Wishnick, Paul Schwartz and Brian Waidelich, “How Advanced is Russian-Chinese Military Cooperation?”, War on the Rocks, 26 June 2023 https://warontherocks.com/2023/06/29000/
[14] Temur Umarov and Alexander Gabuev, “Is Russia Losing Its Grip on Central Asia?”, Foreign Affairs, 30 June 2023. https://www.foreignaffairs.com/china/russia-losing-its-grip-central-asia
[15] Vladimir Putin, speech on subject of “The Future in Progress: Shaping the World of Tomorrow”, Valdai Discussion Club, October 27, 2016
[16] Sergei A. Karaganov, “From the Pivot to the East to Greater Eurasia”, Russian Embassy to UK, April 24, 2017 https://www.rusemb.org.uk/opinion/50
[17] “Toward the Great Ocean – 3: Creating Central Eurasia” Valdai Discussion Club, April 2015 http://valdaiclub.com/files/17658/
[18] Toward the Great Ocean 4: Turn to the East – preliminary results and new objectives”, Valdai Discussion Club, 2016 http://valdaiclub.com/files/11431/
[19] Sergei A. Karaganov, Kristina I. Cherniavskaia, Dmitry P. Novikov, “Russian Foreign Policy Risky Successes”, Perspectives, Spring 2016 https://we.hse.ru/data/2016/08/15/1117920075/Harvard_Interlational_Review.pdf
[20] Putin concedes China has ‘questions and concerns’ over Russia’s faltering invasion of Ukraine. By Nectar Gan, CNN. September 15, 2022
[21] Ka-Ho Wang, “A Comparative Study of the Greater Eurasian Partnership: The Chinese and Russian Perspectives”, RIAC 31 May, 2018 http://russiancouncil.ru/en/blogs/frankywongk/a-comparative-study-of-the-greater-eurasian-partnership-the-chinese- an/
[22] Wang Wen, “Uncapped China-Russian Cooperation”, Valdi, 26 June 2023
[23] “Xi aims to institutionalize bilateral ties “between our countries and peoples”, China-Russia Report, 17 July 2023
[24] “Xi aims to institutionalize bilateral ties “between our countries and peoples”, China-Russia Report, 17 July 2023
[25] “Xi aims to institutionalize bilateral ties “between our countries and peoples”, China-Russia Report, 17 July 2023
[1] http://www.eaeunion.org/?lang=en#about
[2] Li Ziguo, “Eurasian Economic Union: Achievements, Problems and Prospects”, China Institute of International Studies” August 19, 2016 http://www.ciis.org.cn/english/2016-08/19/content_8975486.htm
[3] “EAEU Development 2022+: Strategic Objectives and Demands of the Times”, RIAC, 10 July 2023
[4] Евразийская экономическая интеграция: 2023 — год председательства Российской Федерации в органах ЕАЭС
http://static.government.ru/media/files/4IPAqA7wIPXuhR6TLBdqEBjZoqkMOSK6.pdf
[5] Catherine Putz, “War and Migration: Central Asian Migrant Worker Flows Amid the Ukraine Conflict”, The Diplomat, 31 May 2023
[6] Евразийская экономическая интеграция: 2023 — год председательства Российской Федерации в органах ЕАЭС
http://static.government.ru/media/files/4IPAqA7wIPXuhR6TLBdqEBjZoqkMOSK6.pdf
[7] “Трудовая миграция в ЕАЭС обрела встречный характер”, Kommersant, 8 August 2023
[8] “Трудовая миграция в ЕАЭС обрела встречный характер”, Kommersant, 8 August 2023
[9] “EAEU Development 2022+: Strategic Objectives and Demands of the Times”, RIAC, 10 July 2023
[10] Национальные Проекты: Целевые Показатели и Основные Результаты
http://static.government.ru/media/files/p7nn2CS0pVhvQ98OOwAt2dzCIAietQih.pdf
[11] “Денис Мантуров: у нас есть четкие договоренности с автопромом о недопустимости завышения цен”, Interfax, 10 July 2023
[12] “Денис Мантуров: у нас есть четкие договоренности с автопромом о недопустимости завышения цен”, Interfax, 10 July 2023
[13] “Партнерство ради промышленности”, Kommersant, 16 July 2023
[14] Региональный потенциал промышленной кооперации в ЕАЭС
[15] Региональный потенциал промышленной кооперации в ЕАЭС
[16] Региональный потенциал промышленной кооперации в ЕАЭС
[17] Региональный потенциал промышленной кооперации в ЕАЭС
[18] For a more detailed consideration of the EAEU, see Jeff Schubert, “New Eurasian Age: China’s Silk Road and the EAEU in SCO Space”, April 5, 2017 https://russianeconomicreform.ru/2017/04/chinas-silk-road-and-the-eaeu-in- sco-space/
[19] https://russianeconomicreform.ru/2017/04/chinas-silk-road-and-the-eaeu-in-sco-space/
[20] “Leaders from Russia and Central Asia focus on energy and North-South trade at EAEU summit”, BNE, 25 May 2023
[21] “Leaders from Russia and Central Asia focus on energy and North-South trade at EAEU summit”, BNE, 25 May 2023
[22] “EAEU Development 2022+: Strategic Objectives and Demands of the Times”, RIAC, 10 July 2023