LONDON, Sept 14 (Reuters Breakingviews) – Selling more gas to China is one of Vladimir Putin’s oldest pet projects. And it would be a sensible thing to do for Russia, in order to diversify its export markets. Unfortunately for the Russian president, the idea has become both more urgent and less feasible after the war he launched on Ukraine.
European Union governments can ignore the Russian leader’s repeated threats that Moscow will sell to Beijing what Europeans no longer buy. A pivot of Russia’s gas trade towards China may well happen over time. But for the next few years, Moscow won’t have the pipelines, the ships, or even the gas to make Putin’s dream come true.
One pipeline, still in its ramp-up stage, is currently bringing gas to China at an annual pace of some 10 billion cubic metres (bcm), with the potential of delivering 38 bcm at full capacity in a few years. That compares with the 155 bcm that the EU bought in 2021, and 210 bcm of overall Russian pipeline exports. A deal was struck with Beijing for another one in February, and a long-time project to bring gas from the Yamal peninsula may even be agreed someday. But it can take up to 15 years, from conception to completion, to build a new pipeline.
China is also taking some of Russia’s liquefied natural gas, from Russia’s eastern fields. But that’s an area where Western sanctions are hitting hard. To increase deliveries, Russia would need new ships able to break through the ice during the long winter season. But those are made in South Korea, which takes part in the sanctions.
Even if Russia were able to build those ships, they would not be able to transport much extra gas. Gas from the new fields cannot be liquefied without Western technologies, and big Western oil companies such as Shell (SHEL.L) or TotalEnergies (TTEF.PA) have now pulled out from the projects they invested in.
Finally, if all of Putin’s pet projects with China panned out, the upper limit might be that Beijing may be loath to become too dependent on Russian energy, even though it became the main importer of Russian oil and gas this year as it leveraged its position to extract favourable prices.
Right now, European member states seem to be cooling on enforcing a cap on Russian gas prices. If this is out of fears that Moscow could pivot east, they should relax.
Chinese leader Xi Jinping is due to meet Russian President Vladimir Putin this week at the Shanghai Cooperation Organisation’s summit in Samarkand, Uzbekistan.
This will be the first time Xi has left China in more than two years.
Russian gas monopoly Gazprom said last week that it had signed an agreement with China to start payments for gas supplies to the People’s Republic in yuan and roubles instead of U.S. dollars.
[Source: https://www.reuters.com/breakingviews/europe-can-shrug-off-putins-chinese-gas-plan-b-2022-09-14/]