Rosneft's Chinese Oil Card (Russia)

Moscow Times ^ | 06/25/2013 | Georgy Bovt

[TexGrill]

A major business deal in which Rosneft would deliver Russian oil to China for the next 25 years was announced at last week's St. Petersburg International Economic Forum. President Vladimir Putin set the value of the deal at $60 billion, while Rosneft CEO Igor Sechin put it at $270 billion, apparently multiplying the $100-per-barrel figure by the total number of barrels to be delivered to China under the agreement. But the real question is: How advantageous is this contract for Russia over the long-term?

Rosneft has now become a powerful player in the energy market, acting as the de facto and autocratic "steward" of all oil in the country's eastern regions. At the same time, Rosneft is fulfilling the state's strategic goal of diversifying oil deliveries. Although Russian leaders and Rosneft managers have made assurances that oil deliveries to China will in no way affect deliveries to the West, Moscow is, in fact, playing the "Chinese energy card" against the West, and primarily against Europe.

The Kremlin is infatuated with the idea of finally being able to reduce the country's dependence on exports to the West. In 2009, it released a document titled "Russia's Energy Strategy Through 2030" that contained the following passage: "The share of liquid hydrocarbon deliveries to Europe should steadily decrease in favor of deliveries to the east. The share of the latter should increase from 6 percent to from 20 percent to 25 percent for oil and from 0 percent to 20 percent for gas. These deliveries should contribute to the development of Russia's eastern territories, reducing the number of people leaving that region."

[TexGrill]

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