In connection with the strategic vulnerability and uncertainty that many expect will increasingly color European reliance on Russian gas in the wake of the Ukraine crisis, experts have repeatedly emphasized that the gas delivery contracts between Russia and China, which will account for up to 38 bcm (billion cubic meters) annually, will be fulfilled with gas stored in eastern Siberia, while gas destined for Europe will be kept in western Siberian tanks. The implication has been that, because Russia needs to offload its western stores exclusively to European customers, Europe will not have to compete with China and will additionally be able to place the Russian government under pressure by diversifying its supply sources.
However, a recently released transcript of a conversation between Russian president Putin and Gazprom head Alexei Miller indicates that Gazprom plans to sign an additional supply contract with China in November in Beijing, this time for at least 30 bcm, although figures as high as 100bcm have been floated. The novelty here is that this gas will be taken from western Siberia. The clear political message is that Russia, which currently exports 160 bcm into the EU annually, can easily compensate for reductions in demand.
ALEXEI MILLER: We plan to sign a contract for a volume of 30 billion cubic metres for 30 years, though the talks have also looked at other figures for new contracts concluded for the western route. We are looking at the possibilities for supplying 60 billion cubic metres or up to 100 billion cubic metres of gas to China.
VLADIMIR PUTIN: As far as I know, the western route could be even easier to build and operate than the eastern route.
ALEXEI MILLER: This is certainly the case. The western route has two advantages. First, it would use the existing gas transport system in western Siberia, and second, western Siberia has no need to build gas chemical or gas processing facilities. In this sense, the amount of investment that would be needed for the western route is less than what is needed for the eastern route.
On the other hand, the potential is enormous. It is even greater than in Eastern Siberia and, without a doubt, we can increase the volume of gas supplies very quickly via the western route, depending on the growth in demand in the Chinese market.
Downplaying the Russia-China partnership in the context of gas contracts in May, the Finacial Times has described Putin’s role in this development only as that of the “useful idiot”, today it proposes that Western sanctions have helped Russia overcome its “strategic paranoia” vis-à-vis China.
A political message to be sure, although questions regarding the price China stands to pay for its new gas deliveries as well as its future role in Russian resource exploitation remain open...