Putin’s pivot to the East

In his 1997 book The Grand Chessboard , the former US national security advisor Zbigniew Brzezinski has argued that “the struggle for global primacy (would) continue to be played” on the Eurasian “chessboard”, of which “ Ukraine was a geopolitical pivot… If Moscow regains control over Ukraine”, Russia would “automatically regain the wherewithal to become a powerful imperial state, spanning Europe and Asia”. Moscow might not have regained full control over Ukraine but the fear of losing Ukraine to the West seems to have accelerated Moscow’s efforts to pivot to Asia. The $400-billion ‘historic’ gas deal, signed between Russia and China on Wednesday in Shanghai — at a time when the Ukraine crisis is still simmering — has immense geopolitical dimensions.

Under the deal, Russia’s state-run energy giant Gazprom will supply 38 billion cubic metres (bcm) of gas each year for a 10-year period to China National Petroleum Corporation (CNPC). Though the financial details of the deal are a “commercial secret”, the total value is estimated to be around $400 billion. Russia will invest around $55 billion for developing new gas deposits in Siberia and building a pipeline network to carry the gas to China, while the latter will invest around $20 billion. The deal was in the making for the last 10 years but often stumbled over mutual mistrust and disagreement on pricing. Russian President Vladimir Putin, who had long been looking East to diversify Russia’s energy market, stepped up talks with China after Moscow’s relations with Europe deteriorated in the wake of the Ukraine crisis.

Besides the minor sanctions the European Union and the US imposed on Russia, a host of other factors appear to have prompted the Russian president to turn to China. In March, the EU declined to grant Moscow’s request to supply more gas to OPAL, a pipeline that carries Russian gas through Germany to the Czech border. Talks over the €16-billion South Stream pipeline project that would bypass Ukraine to transport Russian gas to Italy had also hit hurdles after the EU withheld regulatory approval. Russia could have supplied gas directly to Europe without depending on Ukraine.

At present, Europe gets around 30 per cent of its gas requirements from Russia, around half of which passes through Ukraine. Russia has now threatened to stop gas supply to Ukraine over a payment crisis.

The deal doesn’t immediately pose a threat to Europe’s energy security. The bulk of Russia’s GDP comes from its natural resources. Gas accounts for around 10 per cent of the country’s total exports and 6 per cent of government revenues. Putin’s government is greatly dependent on this revenue to finance its welfare programmes.

So, despite the threats to stop gas supplies through Ukraine, Moscow is unlikely to walk the talk as the move would hit its economy as badly as it hits European energy security.

Moreover, even if the required gas infrastructure in Siberia is built according to the schedule cited in the deal, gas supplies to China will begin in 2018. And the targeted annually supply of 38 bcm a year looks small compared with Gazprom’s European business. Last year, Gazprom’s Europe sales rose 15 per cent to 173 bcm — the highest since 2008 — from which the company made around $60 billion.

The real significance of the deal is that it brought together two prominent world powers — one is the world’s second largest and the fastest-growing major economy and the other is a former superpower that still nourishes great ambitions. This partnership has the potential to refashion Eurasian geopolitics as there are economic and strategic imperatives that demand their closer cooperation across a wide spectrum.

For example, Russia is rich with natural resources while China is badly in need of resources. China is facing heat from the US’ pivot to the East as Washington is trying to stitch together a loose alliance of Asian powers such as Japan, the Philippines, Vietnam and Australia to contain China’s rise. Russia is facing the same heat in Eastern Europe, as the US is arming its satellite countries in the region.

So the deal is a message both Russia and China are sending out to the West. Once the Siberian pipeline networks are fully ready, the Russians expect the supply to China could be doubled to 60 bcm a year as China’s demand for cleaner burning fuel is also set to rise.

Also, enhanced Russo-China economic cooperation will help Putin fast-track his Eurasian Union project, which seeks to set up a union of Eastern European and Asian countries on the line of the European Union.

It would be naïve to think that this partnership does not have a military dimension. Russia and China are currently carrying out a joint military exercise in the East China Sea near islands controlled by Japan, which has territorial disputes with both countries. With both the US and Russia pivoting to the East, it makes Asia the potential geopolitical theatre of the 21st century.

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