Russia's season for summits
By M K Bhadrakumar
By way of avuncular counsel, arguably, the Kremlin received two communications from the West in the weeks preceding President Dmitry Medvedev's September 26-28 state visit to China. One was an invitation for Medvedev to attend the forthcoming summit of the North Atlantic Treaty Organization (NATO) in Lisbon on November 19-20. The second, a week later, was an invitation from French President Nicolas Sarkozy to Medvedev to participate in a tripartite summit along with German chancellor Angela Merkel at the luxury French beach resort of Deauville from October 18-19.
Both invitations concerned joint security concerns of the West and Russia. Western media reported that the NATO invitation was a "bid to enhance security cooperation" over Afghanistan and Iran, among other things. The Kremlin was more explicit about the proposed summit at Deauville, which it said would give the three countries a "chance to have an in-depth exchange of views to develop their partnership for forming a common European security and cooperation space, responding to the common challenges in this area, and enhancing response mechanisms".
The West was destined to become an activist in the Russia-China strategic partnership and it seems that point has been reached. This is not because Russia or China is putting an anti-Western orientation on their mutual cooperation. Far from it. On the contrary, for both Russia and China enhancing ties with the United States remains and will remain for the foreseeable future a priority in foreign policy.
What emerges is that the trajectory of Russia-China cooperation is beginning to substantially impact on the Western countries' core interests, and the latter cannot but aspire to try to deflect it. The US reset with Russia already has an unobtrusive objective of incrementally eroding the Russia-China strategic understanding so as to isolate China, especially in Central Asia and Afghanistan.
How Russia and China safeguard their growing strategic partnership from Western pressures will become clearer in the coming period. But safeguard it they will. For Russia, strengthening its partnership with China gains it more strategic space, since it concurrently acquires the leverage to compel the West to negotiate with it. Looking at it another way, the growing strategic partnership with China enhances Russia's capacity to withstand Western pressures.
An oily embrace
China, for its part, feels the compulsion to keep Russia on its side at a juncture when stresses have appeared in its relations with the US. To be sure, Beijing regards Moscow's support for what China calls its "core interests" (in the Asia-Pacific region in particular) as invaluable. Beijing can be expected to go the extra league to cement the strategic understanding with Russia, especially in coordinating their stances on international and regional issues.
Medvedev's visit to China provided ample theater for some of these trends to manifest. Energy cooperation was the leitmotif of the Russian presidents journey east. The completion of the long-awaited pipeline from eastern Siberia to northeastern China "linking the world's largest oil producer with the world's largest energy consumer" was bound to be a happening of high drama.
After a prolonged period of uncertainty, the construction of the 999-kilometer pipeline began last year. That it took shape at all underscores the changed character of Chinese-Russian economic ties. The pipeline is part of a bilateral US$25 billion loan-for-oil deal struck in February 2009, when Russia was struggling to cope with its financial crisis. Under the deal, China lent the money while Russia would supply it with 300 million tons of oil through pipelines over a 20-year period starting from 2011.
Clearly, China is getting its hands on an assured source of Russian oil that doesn't have to be shipped through the Malacca Strait (which the US controls), while Russia gets much mileage by diversifying its oil exports away from the traditional European market. Truly, it is a win-win situation. From the Western perspective, though, a new competitor appearing in the East courting Russia's favors means the strengthening of Moscow's hand in its energy dialogue with its European buyers.
China has opened its highly lucrative retail market to Russian companies. This has been a longstanding Russian demand in European markets, too. When China obliges Russia, can Europe fall far behind?
The "loan-for-oil" China-Russia deal isn't a shot in the dark, either. On August 31, Beijing signed an agreement providing Russia with loans amounting to $6 billion in exchange for coal supplies from Russia's far east. Over the coming 25-year period, China will be importing at least 15 million tons of Russian coal annually. The Chinese loan will go towards mineral exploration projects, development of road and rail networks in Russia's far east for transportation of coal, and for export of mining equipment from China. The two countries will also set up joint ventures to develop Russian coal reserves in the Amur region.
For China, this is smart thinking since Russia is a next-door supplier and the price is much lower than for imported Australian coal ($87 vs $111 per ton). And elevating Russia as the fourth largest coal-supplying country (after Australia, Indonesia and Vietnam) means taking another leap in the overall energy partnership that inevitably brings China nearer to the European Union in its importance as a market for Russian energy exports.
However, from the Western perspective, the single-biggest "energy statement" to come out of Medvedev's visit was attributed to Russian Deputy Prime Minister Igor Sechin, who told journalists in Beijing, "Russia is ready to satisfy China's natural-gas demand in full volume." The import of these dozen words will be closely studied in the period ahead. During Medvedev's visit, Gazprom and the China National Petroleum Corporation signed a document that "coordinates all the main issues of Russian gas supplies to China, except the price".
A senior Gazprom executive has since been quoted as saying that "under the current road map, not later than July 1st, 2011 the sides will sign a contract on Russia's gas supplies to China that will outline the routes, the amounts and the price". According to Sechin, the supplies might start in 2015.
End of great game?
This is going to be a nail-biting finish. The West's best hope is that differences over pricing will cloud a Russian-Chinese deal. The conventional wisdom is that Russia's bargaining strength has weakened vis-a-vis China insofar as: world gas prices have fallen; China's import options have grown; Central Asian gas prices are much lower than the European prices that Russia may insist on; and China is seriously developing its shale-gas reserves. All in all, therefore, a final gas deal may elude the two countries.
The specter that haunts Europe is that instead of it diversifying its gas imports from Russia - as strongly urged by successive US administrations in the post-Soviet era - Russia is successfully diversifying its gas exports and a point may come when Europe will need to bargain hard to retain its status as Russia's prime energy partner. And China can turn out to be a serious competitor for Russian gas. The Russian energy industry is badly in need of fresh investments and China is in a position to make the sort of infusion that Russia requires.
The point is, as Sechin (who accompanied Medvedev) explained at a press conference in Beijing on Monday, that Russia may not have to scout around for markets anymore. "There are practically no limits to the growth of gas consumption in China. The Russian Federation has enough gas for the development of the Chinese economy."
Meanwhile, China is drawing Russia deeper into cooperation in the field of nuclear energy as well. During Medvedev's visit, Russia secured a deal for the construction of two more 1,060-megawatt units at the Tianwan nuclear power station outside Shanghai. In turn, China secured a $5 billion contract for the construction of a high-energy steam generator with a 490-megawatt capacity at the Russian city of Yaroslavl.
This expanding Russia-China energy cooperation strengthens Moscow's hand in its Caspian diplomacy on the whole. Most certainly, Russia is inching closer to securing participation in the management of the Ukrainian gas pipelines, which has been a highly contentious issue involving the US and European Union. Again, simply put, Western Europe will be gratified that Moscow is pressing ahead with the Nord Stream and South Stream gas-pipeline projects, both of which are expected to be operational during the period 2011-2015.
Equally, Europe may not have the stomach to create unpleasantness vis-a-vis Russia by bulldozing its way with the rival Nabucco project. Nabucco may now have to stand on its own economic legs as a viable project.
But, as Russian Prime Minister Vladimir Putin pointed out recently, "The main problem with Nabucco is the absence of guaranteed volumes of necessary product in this pipeline as there is no source for filling the system. Russia will not make any supplies there. The fields in Iran have not been developed yet. Azerbaijan has small volumes. Besides, Azerbaijan has signed a contract for gas supplies to Russia. There is Turkmenistan, but its volumes are not clear yet because a gas pipeline has been built from Turkmenistan to China for 30 billion cubic meters of gas. I think it would be hard to build the [Nabucco] system in this situation, to put it mildly, not to say impossible."
This brings us to the threshold of a tantalizing prospect: is the great game over Caspian oil withering away? How relevant are US-Russia energy rivalries with the appearance of China in the equation as an energy guzzler that can keep buying all that Russia can supply? This is a new ball game, so to speak, where from the US angle the great game is no longer about driving a wedge between Russia and Western Europe. Instead, it will be about offering incentives to Russia to hold it back from diversifying away from Western energy markets towards China.
China is strengthening its energy security by tying up supplies from Russia that are not dependent on the overstretched transportation routes (sea lanes) that largely pass through what American strategists euphemistically call the "global commons", meaning the great oceans that the US traditionally dominates. The geopolitical implications are quite profound.
What all this adds up to is that Russia is practicing its own version of a reset with the US, just as the latter has been doing with Russia. Medvedev's visit to China underlines emphatically that Moscow will be loath to allow the Russia-China strategic partnership to be eroded by its reset with the US. With this in mind, there is immense geopolitical significance to the fact that Russia has appeared by China's side over the current tensions in the Asia-Pacific region involving Japan.
While in China, Medvedev made some strong statements about the Soviet-Chinese alliance in China's war against Japan (1937-1945). He said:
"Friendship with China is Russia's strategic choice, it's a choice that was sealed by blood years ago."
"The friendship between the Russian and Chinese peoples, cemented by the military events, will be indestructible and will do good for our future generations." On the eve of Medvedev's visit to China and in the thick of the Sino-Japanese diplomatic row that erupted recently, Russian Foreign Minister Sergei Lavrov penned an article in China's Renmin Ribao where he robustly hailed the Russia-China strategic partnership and implicitly criticized the US-Japanese defense pact. He wrote:
Our [Russia-China] partnership serves the fundamental interests of both the nations, and is required for stability in its regional and global dimensions. Its deepening is one of the most important guarantees that the objective process of the formation of a polycentric international order will not be artificially impeded. Our countries concur that the Asia-Pacific region should be stable and prosperous. The processes occurring here have far-reaching consequences not only for the region's countries, but also for the future of the world order as a whole. In many countries, bloc structures are rightly being viewed as a threat to national security and a source of dividing lines, mutual distrust and suspicion.Significantly, Chinese President Hu Jintao openly called for the deepening of the bilateral mechanism of "strategic security negotiations while supporting each other on issues concerning their respective core interests". Among other statements that Hu made: "China and Russia will maintain international peace and stability and promote the overall recovery, health and stable development of the world economy."
"It is China's unswerving policy to constantly consolidate and enhance its strategic partnership of cooperation with Russia." In sum, Medvedev's visit to China underscores that despite the huge historical backlog of Sino-Russian ties, the two countries are succeeding in dovetailing their strategic partnership with their respective requirements - strategic, political and economic. Of course, they share certain notions about the world order: "multipolarization" of the global system, democratization of the international order and economic globalization. But then, these concepts are also in the two countries' long-term strategies. In short, they happen to share a lot of common interests. Medvedev could have spoken for both sides when he said in an interview with the People's Daily that the basic principles of Russian foreign policy were pragmatism, openness and the use of non-confrontational methods to promote Russia's own interests and its multi-directional diplomacy. But Moscow could hardly have any misconceptions regarding the resilience of Sino-American ties, either. After all, the day after Medvedev's departure from Beijing, the official China Daily proposed that stalled Sino-American military ties "should be brought back on track for the better development of bilateral relations as well as world peace. Neither government is taking the other as enemy and neither wants a military confrontation. Sino-US relations should be based on mutually assured dependence." Russia will have good use for the "China card" at the forthcoming summits in Deauville and Lisbon while navigating its relationships with the Western alliance, the US and the major European powers. But the Russian approach is diametrically opposite the one adopted by the US vis-a-vis its major interlocutors such as Russia or India. Whereas Russia displays its expanding and deepening strategic ties with China, Washington tries to distract business and political elites and public opinion in Moscow and New Delhi from the essence of the US-China relationship, giving it an altogether exaggerated shade of antagonism. But in reality it is a very profound relationship, rooted well in the global market, which all but precludes any scope for mutually debilitating confrontation. Ambassador M K Bhadrakumar was a career diplomat in the Indian Foreign Service. His assignments included the Soviet Union, South Korea, Sri Lanka, Germany, Afghanistan, Pakistan, Uzbekistan, Kuwait and Turkey. http://www.atimes.com/atimes/Central_Asia/LJ02Ag01.html
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