(continued from yesterday’s post…) Therefore the entry strategy of Russia into Indo-Pacific region (so far referred as Asia-Pacific region) through signing this deal with China assumes paramount importance for both China and Russia. The developing economies in the Indo-Pacific region bode well for Russia to emerge as the leading supplier of natural gas to the region in the years to come. The deal seems to be the first milestone in the ambitious path of President Putin that puts modernization of the Russian economy through FDI on one hand and integration of the international value chains of manufactured consumer goods on the other on priority as Russia finds itself gradually more alienated from the West.
For Russia, the dependence on EU nations for revenue from gas exports, is sure to hit more roadblocks in the times to come on issues such as pricing, payment schedules, recovery of past dues etc.; In this context, experts view Russia signing this deal with China as a shrewd political and commercial move ’just in time’ that diversifies the customer base for it. Diplomatically it also strengthens the bond between Russia and China.
On the other hand the EU will have to look for alternative suppliers to meet its energy requirement to fill up the void left by Russia. The Russo-China deal is certain to effectively reduce EU’s bargaining power with Russia. Further, if there is disruption in energy supplies from Russia, by the time EU scouts for new suppliers it would hit the already ailing and fragile European economy massively hit by financial crisis. Tighter the sanctions imposed on Russia by the US and the EU get, more serious would the Russian threat to shut off the natural gas supplies to European states grow. The possibility of this happening would increase manifold in case of non-payment of dues by the European states to Russia. With all these facts and figures the stakes are very high for both Russia and EU.
For China, the need for a cleaner fuel and a nearly unlimited supply of natural gas is being met through this deal. This agreement amounts to approximately 1/10th of China’s overall natural gas demand as estimated for 2020. With this deal in force China will be hardly facing any shortage of natural gas in the future Moreover burning of cleaner fuel would also eliminate pollution and smog to a certain extent as opposed to the burning of coal thus, lending further credence to China’s on-going initiative to preserve environment. By securing the region’s biggest gas reserves China would pioneer the creation of a gas distribution system in North West Asia and continue its dominance in the region to remain a force to reckon with. Availability of natural gas through this deal serving as a cheaper alternative to other conventional energy options would also help China to boost its industrial output, thereby benefitting its economy. Going forward, China will be in a position to offer more competitive products and services in various sectors which would be driven by this new energy supply from Russia.
According to Putin, besides having access to China through the Eastern route of Siberia, this contract opens the avenues for discussion on the feasibility of access through the Western route by the Atlay gas pipeline as well. Other nations in Indo-Pacific region like Japan, Taiwan, South Korea, etc. also anticipate a drop in the prices of gas as a consequence of this deal which guarantees the regular supply at competitive rates.
To conclude, for Russia the deal has not just economic but far more geo-political and strategic overtures attached, whereas for China the deal offers cheaper fuel to run its mass production factories through which it has been trying to capture markets across the world. The deal also solves China’s problem and need of cleaner energy. One is tempted to surmise that this collaboration between these two giant neighbours serves as a joint rebuttal of the US which incidentally is the main opponent of both these countries. In a way, this would be interesting to see if it undermines and checks the status of the US and the NATO as the dominant powers in the Indo-Pacific region and also Europe.
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