New Deal Boosts Russia-China Relations
Russia’s major state-run oil company, Rosneft, has agreed to a new oil supply deal with its Chinese partner CEFC China Energy. On Monday, November 20, Rosneft announced a new deal that will supply CEFC with 61m tonnes of oil between 2018 and 2022. The agreement will strengthen Russia’s ties with its eastern neighbor, contrary to its deteriorating relations with the west.
Investment deals- like Rosneft’s latest- compensate for Russia’s lost capital caused by EU and US imposed economic sanctions. In recent years, the Russian government has been encouraging energy companies to strike deals with Chinese investors. In the last 18 months alone, Chinese corporations have spent more than $15 billion on Russian energy projects and have purchased stakes in various investment projects. In fact, two month ago, CEFC bought a 14.15 percent stake in Rosneft for $9.1bn.
The new oil agreement includes the development of exploration and production projects in Siberia. Moreover, the two companies plan to cooperate in joint projects in oil refining, building petrochemical infrastructure, and crude trading.
The deal, which was agreed upon at a board of director meeting on Friday, is set to begin on January 1, 2018. China is the world’s largest oil importer and sees Russia’s extensive energy sources as an opportunity to create a well-organized, unified crude oil supply chain. Rosneft will supply CEFC with 244,000 barrels of crude oil at a fixed-price pegged to the world oil market price. The deal will help Russia maintain its dominance over Saudi Arabia as China’s major oil supplier, and it will also greatly boost CEFC’s reputation in the petroleum industry.
Apart from this deal, Russia is also in the process of constructing a new gas pipeline to China, with the hope of acquiring $400 billion in revenue from supply contracts over the next 30 years. In addition, Rosneft publicized on Monday that it had also signed an agreement with Greece’s Motor Oil Hellas; Rosneft will increase its exports to the Greek petroleum refinery, from 2m to 7.5m tonnes over the next five years.
The strengthening of economic ties will certainly further improve relations, but it is still uncertain as to what degree the two countries will become politically integrated.