This paper
identifies the characteristics of energy development in Russia and China (with
the focus on oil sector), investigates the ways of cooperation and related to
it problems and how they influence the countries’ economic growth.
In this research, we study the wide range of problems related to the practical implementation of strategic cooperation between Russia and China in the energy sector, including the issue of safe and sustainable development of both countries and the related to this prospects of economic growth.
The
relevance of the thesis can be explained by the fact that the oil and gas
cooperation is profitable for both Russia and China as they are the largest
producers and consumers of energy in Eurasia. The prospects of bilateral
Russian-Chinese energy cooperation play a vital role for the countries due to the
need to diversify export supplies and delivery of energy resources.
Nowadays, Saudi Arabia and its cartel partners, such as Venezuela, are losing the Chinese market because of the growing cooperation between Russia and China. China and Russia are expanding their settlements in national currencies, avoiding the dollar, and are also implementing billion-dollar projects. Moreover, Chinese companies are getting shares in Russia’s largest oilfields. In addition, by buying more oil from Russia, China reduces its dependence on offshore oil supplies from countries in the Middle East that are prone to weather interruptions and other transaction problems.
The research
methodology is based on an interdisciplinary approach, covering economic and
political sciences. The application of general scientific principles and
methods such as analysis, synthesis, comparison, allow concentrating on
reviewing the most important aspects of the subject of study and provide the
diversity and integrity of the study. Statistics and econometric models allowed
to clearly represent a research problem and make certain conclusions.
Research
methods also include: grouping and classification; statistical and graphical
analysis; scientific abstraction; SWOT analysis.
KEY WORDS: Energy Market, Oil Industry,
Sino-Russian Cooperation, Oil Crisis, Economic Growth, Sustainability, Russia,
China.
Among all possible ways of cooperation between Russia and China, the energy sector seems to be the most perspective. Nowadays, China as an importer of the energy resources is in a quite difficult situation due to environmental issues, growing population and increasing demand for other kinds of energy that could substitute the use of coal which is the main reason for the serious environmental pollution in the country.
It is hard
to imagine today, that China was an importer of oil until 1994. After its own
large deposits were exhausted, and the growing economy required ever new
volumes of “black gold”, China began to actively buy up foreign oil,
becoming the largest exporter in the world. Since 1965, oil consumption in this
country has increased more than 25 times, while in the world as a whole less
than twice. At some point, China faced the need to find another large seller,
who guaranteed the supply of oil for a long time. At the same time, Russia
decided to stake on the countries of Asian Pacific Region, starting the
construction of the ESPO pipeline, which brought East Siberian oil to the Asian
market.
A Chinese
direction in oil and gas strategy of the Russian Federation is justified,
beneficial, and economically promising. This is due to the stability and
magnitude of the Chinese oil and gas market, a constant and growing demand of
Chinese industry for oil and gas, geographical and political proximity of the
two countries linked by strategic partnership. Moreover, both countries have
complementary interests: Russia needs to develop oil and gas resources of
Siberia and the Far East, and China needs to diversify energy sources.
In 1993,
when China for the first time in its history became a country-importer of oil,
dependence on oil imports increased from 7.6% in 1995 to 34.5% in 2003, the
Global energy Agency predicts that by 2030 this figure will increase to 80%.
According to the forecast, by 2020 China will need 600 million tons of oil per
year, which is more than three times higher than projected production in the
country.
But as an
importer of energy China is in a difficult position. It is critically dependent
on the Gulf countries, where it buys a large share of energy from. The route of
delivery of oil from this region is long and includes passage through several
Straits controlled by other countries. Therefore, the Russian Eastern Siberia,
close and politically stable, is a strategically important supplier of
hydrocarbons, which in the future should help to diversify the structure of
supply.
For Russia
the importance of Chinese export of hydrocarbons – is also very large. Today,
the Russian hydrocarbon export goes almost exclusively in Western direction:
the European Union consumes about 85% of the export of Russian oil and gas.
This makes Russia economically and politically vulnerable and too dependent on
the EU. Over time the position of Russia in this area can deteriorate, because
the integration of European countries within the European Union transforms them
into a single, virtually monopolistic consumer of Russian resources.
Besides, the
Russian Eastern Siberian and far Eastern regions are now most underdeveloped in
the country, which leads to a rapid outflow of population from these
territories into the European part of Russia. Moreover, the economic ties of
these regions with other parts of the country considerably weakened. To improve
the situation in this part of the state, it is critically important to
stimulate economic growth in the region and create the infrastructure that
connects the East and the West of Russia. The most effective method of
implementation of this project is the development of extraction of hydrocarbons,
creation of infrastructure for transportation and attraction of foreign
investments in these regions. Hydrocarbon resources in the East of Russia is
quite significant: about 17.5 billion tons of oil and 60 trillion cubic meters
of gas, or about a quarter of all Russian stocks.
The economic
effect of oil and gas exploration can significantly develop the economy of the
Eastern regions of the country and the Russian economy as a whole.
In addition,
oil and gas pipelines that will be built in the East of the country will be
connected with existing pipeline infrastructure, which means that Russia will
be able to choose directions of export of hydrocarbons. Alternatively, taking
into account the “problem” of the West, Russia can access
fast-growing and promising markets of the Asia-Pacific region, mainly the
market of the PRC, thereby diversify export destination and, again, develop the
national economy in general and the economy of the regions of Eastern Siberia
and the Far East in particular.
Therefore,
based on mutually beneficial prospects for Russian-Chinese cooperation in the
oil and gas sector, the topic of this research is extremely relevant.
Thus, today
China is a promising market with huge potential, which is sought by many
countries and large companies, Russia is also ready to cooperate with China,
However, despite repeated discussion of the prospects for the total supply of
Russian energy to China it remains unclear, and the possibility of implementing
cooperation on the basis of partnership in the fuel and energy complexes in the
countries is not used.
However, the
boom in the energy industry caused serious damage for both economies. China is
the world’s largest emitter of greenhouse gases, its energy consumption has
ballooned generating the environmental crisis which, as a result, affected the
economic growth and the quality of human capital. At the same time, China is
one of the biggest investors in developing renewable energy technologies.
In fact,
there are a lot of different ways for the cooperation between the two
countries. According to the 2016 data, the economic ties became even stronger
making Russia the biggest oil exporter in Chinese market. What problems do
these countries face in reaching mutual agreements and maintaining economic
growth? How their energy cooperation influences the world oil market?
When it
comes to energy in Russian-Chinese bilateral relations, the complexities and
contradictions in this sphere increase many times crossing any boundaries. At
first glance, these countries are obvious energy partners. Russia is one of the
world’s leading countries in energy production: it is the world’s first or
second largest producer of oil and the world’s largest producer of natural gas.
China, which has become a world factory, is hungry for energy materials, trying
to develop its economy and meet the growing needs of the population for
electricity and fuel, in order to delay major changes in their political system
by constantly increasing the people’s welfare. Anders Aslund of the Peterson Institute
characterizes these relations in the following way: “They have a huge
complementarity, because Russia has raw materials, and China has cheap labor
and productive potential.” But despite recent successes in the field of
energy cooperation, public statements by the leadership of the two countries on
the great importance of deepening ties in energy sector, this cooperation is
moving forward very slowly, which is hindered by mutual distrust and different
political goals and tasks. It seems that the “strategic relationship”
between China and Russia is not quite what they are trying to imagine.
There are a
lot of reading materials regarding this topic. Literature review includes
different articles and government reports, as well as statistical data and fundamental
works of the famous economists. Using the most recent data would help to create
a better picture of the modern situation on the world energy market and would
lead to a better understanding of the industrial development of China and
Russia.
The main
sources that would form the basis of the work could be such periodic
publications as BP Statistical Review of World Energy (published every year in
June) that provides high quality objective and globally consistent data on
world energy markets through tables, charts and regional and country
factsheets. Another important publication that takes a lot of attention is the
report made by The Oxford Institute for Energy Studies “Energy Relations
between Russia and China: Playing Chess with the Dragon” (August 2016) that
covers a historical background of China-Russia energy relations from the Soviet
times with its “border disputes delay energy cooperation” (1949-1999) till
nowadays and “Putin period”. Besides, this work gives very complete information
about the oil and gas industry in two countries including brief review of
Russia’s eastern oil and gas assets, Chinese oil import requirements,
development of the ESPO pipeline and some important negotiation issues and
deals.
The
publication of Brussels based internet resource “Bruegel” called “The
China-Russia trade relationship and its impact on Europe” (2016) by Alicia
Garcia Herrero and Jianwei Xu could also be helpful as this paper analyses
empirically how increasingly close trade relationship between China and Russia
might affect the European Union.
The reports
made by U.S.-China Economic and Security Review Commission might also be
interesting in my research. For example, “The China-Russia Gas Deal: Background
and Implications for the Broader Relationship” by Iacob Koch-Weser and Craig
Murray contents the information about the long-term trends in the gas market
and China’s energy needs, benefits and risks for China and impact on global gas
markets.
To get a
better understanding of energy markets of two countries it is also important to
learn each market separately, especially their energy strategies.
For China,
it is necessary to take a look at such works as “The Domestic Natural Gas
Shortage in China” by Ting Guo from Michigan Technological University and “China’s
Energy Diplomacy: Resolving The Malacca Dilemma” by Lili Siklos from Central
European University, as well as to analyze the recent “One belt – One road”
initiative and 13th Five-Year Plan (2016-2020). China is the world’s greatest
energy consumer; therefore, its domestic energy policies play a vital role in
shaping the global energy market. The Chinese Government pays particular
attention in forming energy policies in order to maintain sufficient energy
supply so as to satisfy China’s energy demand and to promote further economic
growth.
For Russia,
it is important to analyze some works of the Russian economists and scholars,
for instance, “Energy Strategy – 2050: Methodology, Challenges, Opportunities”
by V.Bushuev, N.Kurichev, A.Gromov where they talk about the slow-down of
economic growth in Russia and the decrease of external demand on Russian energy
carriers, increase of operating and investment costs in the energy sector and
the potential of new technologies, as well as the Energy Strategy of Russia
itself.
To continue
a further analyses of the China-Energy relations it is also important to get
some information about different oil market models, such as market power models
(cartel behavior models, dominant firm behavior models, target behavior models)
and other models like political models and property rights models.
It is also
important to focus particularly on oil industry as I believe this specific
market plays a vital role in recent China-Russia energy cooperation. Thus, some
materials on oil statistics and theory might be very useful while writing this
thesis. For example, the websites of Russian and Chinese oil companies where
they publish recent news regarding their activities.
Summarizing
the literature review, it is clear that there is a lot of information regarding
the chosen topic that can be used in the further research, including
statistical data about China-Russia economic cooperation, however there are a
lot of gaps and misunderstandings regarding the energy sector, especially after
2014, when Russia and China made some important agreements about oil and gas
trade and when the economic situation in the world (sanctions and oil crisis)
turned Russia into the East with the main focus on China.
It is no
doubt that Russian-Chinese relations are very difficult. They have a long, and
sometimes a joint history with common interests. In 2009, the two countries
celebrated the 60th anniversary of the establishment of diplomatic relations
that survived the Cold War, the transformation of China into an economic power
and the collapse of the Soviet Union. These relations also experienced an
important transfer of power from Putin to Medvedev, the closure of the market
in Moscow where Chinese traders worked, the incident in Russian waters in 2009
when Russian sailors sank a Chinese ship, and the development of their
bilateral ties with Washington.
To fully
understand current relationships between the two countries, it is important to
look through their historical experience as it might give some reasons and
explain why Russia and China are where they are in their cooperation. Having
common historical paths, China and Russia became close after 1949 – the year of
the establishment of the People’s Republic of China and its Communist Party.
The Soviet Union offered its help to the new member of Communism by supporting
it with different industrial equipment and skilled labor which was aimed at
modernizing China. However, everything changed after the Soviet leader’s
(Stalin) death which led to ideological miscommunication between the two countries
that lasted for over two decades and brought up the military border conflict in
1969 in the eastern part of Zhenbao Island on the Ussuri River and in the
western part in Xinjiang. The relationships remained cold even after Mao
Zedong’s death in 1976, in addition influenced by Vietnam and Afghanistan wars.
In 1982
Russia and China finally found the ways to compromise on their issues and
rebuilt diplomatic relationships. As a result, the Soviet Union initiated oil
and gas pipeline constructions, however there was not mutual understanding from
the Beijing side as they did not take those energy projects serious due to low
oil prices around $20/barrel and oversupply at the market[1].
Sino-Russian
relationships came to the new level after the collapse of the Soviet Union in
1991. The Chinese Government supported the new political elite that took power
after the putsch, and the new Russian President paid a visit to China that
resulted in restoring friendship, intensifying trade and solving border issues[2]. Both countries described
their relationships as “good-neighborly and mutually beneficial” which also
gave a start to their military cooperation.
Few years
later in 1994 the two countries created a Sino-Russian Border Management
System, under which they reached an agreement on a border trade and related to
it issues, calling the relationships “strategic partnership of coordination[3]”. Later, in 1998
negotiations between Russia and China made the two sides a joint agreement
which became one of the first strategic partnership agreements ever made by the
Chinese Government.
However,
China-Russia relationships were not as perfect as it seems. Russia was more
focused on the European countries and the US, which played the first role in
Russian foreign policy. At the same time, the Asian direction was placed as a
second priority and China was even seen as a threat to Russian relations with
the West.
Despite all
the good and bad sides of negotiations between the two countries, the energy
relations showed significant improvement bringing oil and gas pipeline projects
and agreements, such as an agreement on joint development of cooperation in the
energy sphere 1996 and an agreement between the Energy Ministry of the Russian
Federation and CNPC on organization of cooperation on oil and gas projects in
1997. However, those oil and gas projects mainly stayed on paper, and only
almost two decades later they finally began to come into the real life.
After Putin
came to power, the relationships between China and Russia turned into even closer
cooperation aiming at building a balance to the Western countries. Despite the
concerns of the new president regarding Chinese excessive influence in the far
east of Russia, the Russian government decided to focus on the Asian vector as
it played a crucial role in geopolitics. An article called “Russia: New Eastern
Perspectives” confirmed that the Asian direction is as important for Russia as
the European one, and China was named an important strategic partner. In 2001
both sides signed a document “Treaty of Good-Neighborly and Friendly
Cooperation” gave an official start to a 20-years project of economic, military
and cultural cooperation that had been blocked in the past by different
misunderstandings and goals of the foreign policies. In fact, the signed
documents did not cause any specific big changes to happen but it opened the
way to mutual understanding and future collaborations. At the same time, China
and Russia became the members of Shanghai Cooperation Organization along with
other Eurasian countries, such as Kazakhstan, Uzbekistan, Tajikistan and
Kyrgyzstan empowering the Central Asian region.
Later, in
2003 China and Russia made another agreement, under which the two sides
promised to maintain friendly relationship no matter what the situation is on
the world arena. It was followed by signing another document that resolved
longstanding border issues. According to that agreement, China received Yinlong
(Tarabarov) and Zhenbao Islands and also half of Heixiazi (Bolshoy Ussuriysky)
Island.
However, the
political improvements between the two countries did not come along with
intensified cooperation in energy sector which still was at a low level. In
2001 Russian privately owned oil company Yukos came up with the project of
Eastern Siberia-Pacific Ocean (ESPO) Oil Pipeline which was aimed at linking
Russian Angarsk and Chinese Daqing. 3 years later, in 2004, Yukos faced some
serious financial problems and was taken over by partly state-owned Russian oil
company Rosneft, the director of which made a very important step towards the
Chinese side, and as a result Rosneft and Chinese CNPC made a 5-year oil
agreement worth 48,8 million tones of oil, which also included receiving 25,1%
of shares in one of the blocks of Rosneft’s Sakhalin-3 project by CNPC.
That became
a turning point for Sino-Russian energy cooperation. In 2006 the two parties
sign other agreements during Putin’s visit to China concerning not only oil and
gas projects, but also electricity ones. According to those agreements, another
big oil Russian company Transneft made a deal with CNPC about reviving the old
Yukos contract and building an oil pipeline from Russian Skovorodino to the
Chinese border. At the same time, Russian gas company Gazprom offered a
construction of a gas pipeline. For the Electricity side, Russian Eastern
Energy company and the Chinese State Grid Company SGCC agreed on trading
electric energy between the two countries. Moreover, a year later Rosneft and
CNPC created a joint venture for the oil project in Tianjin.
In 2008
Russia’s relationships with the US and EU became more confrontational caused by
the war in Georgia which made the Russian side turn even more to the Asian
direction and particularly to China which was called the most important partner
in Russia’s Asian foreign policy. The Russian Government prepared a lot of
important documents[4]
aiming at developing the energy sector of its economy with the focus on
Siberian and Far Eastern regions and building strategic relationships with
China and other East Asia countries in the energy perspective. That Energy
Strategy was aimed at guiding Russian private and state owned energy companies
until the year of 2030 proclaiming China the main future consumer of Russian
energy resources in the Eastern direction. Following those agreements, the year
of 2009 showed a significant improvement in the energy trade between Russia and
China with an impressive growth in coal and electricity exports to China, as
well as another oil deal between Rosneft and CNPC of 15 million tones per year
to 2030 through mentioned above Skovorodino – Daqing pipeline.
Russia was
so determined about the Eastern direction that in 2012 it created a special
Ministry of the Development of the Far East[5] which however made some
visible progress a few years later due to some corruption and bureaucratic
issues within the country. Finally, the Ministry came up with an idea of
Special Economic Zones and Advanced Development Territories in Siberia and Far
East of Russian that was aimed at bringing more investment (especially from the
Chinese side) into the country by offering low tax rates and and as a result
developing poor regions. Following some of those changes and improvements, in
2013 Rosneft signed a deal with CNPC doubling the 2009-year contract for 25
years, as well as making another oil agreement worth 10 million tones for 10
years with Chinese Sinopec with the starting date of 2014.
If we look
closer to the statistical data for the first decade of the 21st
century, we can see an increased growth in economic cooperation between the two
countries. According to Russian customs statistics, the volume of
Russian-Chinese trade increased more than 5 times for the period from 2003 to
2013 (Table 1. Trade turnover between
Russia and China 2003 – 2013, million dollars). By the end of 2013, Russia
ranked 10th among China’s foreign trade partners. China took the first place
among Russia’s foreign trade partners, including 6th for exports and 1st for
imports.
Besides, the
volume of trade between Russia and the border regions of China (Heilongjiang,
Jilin, Liaoning, ARVM, XUAR) increased by 40.56% and amounted to 16.65 billion
dollars. However, the most significant was the growth of Russia’s foreign trade
with Heilongjiang province (+57,32%), for a long time, occupying the first
place on this index among all regions of China.
It is also
remarkable that by the end of 2013 in the structure of Russian exports to
China, mineral products (mainly fuel and energy products) reached 67,89% in
total share of exports[6].
Table 1. Share of oil products in Russian exports to China in 2013, million dollars.
To sum up,
China-Russian relationships have experienced a lot of fluctuations in their history,
which however made them strategic economic and political partners in the first
decade of the 21st century. The underlying cause that drives the
Chinese energy strategy as a whole, and its energy relations with Russia in
particular, is China’s inability to adequately provide itself with energy to
meet domestic needs. Over the past twenty years, Beijing has turned from a net
oil exporter to a net oil importer. This fact underlies China’s energy
expansionism, the objects of which are Latin America, Africa and the Middle
East. Russia and the former Soviet republics of Central Asia are playing an
increasingly important role in ensuring China’s energy security, and China,
respectively, in ensuring their long-term economic security. Recent events
confirm the reliability of this observation. China has been seeking for access
to Russia’s commodities for a long time; Russia has sought to strengthen the
Asian vector of its foreign policy in order to create a counterweight to
American power, and also to strengthen its foreign policy and economic impact
on Europe.
Economic
sanctions are defined as the withdrawal of customary trade and financial
relations for foreign and security policy purposes[7]. With the decline of oil
prices Russian economy experienced a significant damage from Western sanctions
which caused an overall economic crisis in the country.
Due to
political confrontations and different points of view on solving the Ukrainian
problem, in March 2014 Western countries imposed sanctions against Russia with
the main focus on energy, military, aviaconstruction and financial sectors. In
terms of oil and gas industry, it is important to note that the total number of
38 countries joined the sanctions against Russian companies producing oil and
gas. All those measures made Russia turn its focus on the Eastern direction
that was called “Pivot to Asia” not only because there were no other options
but also because it was a great chance to strengthen cooperation with Asian
countries and develop Siberian and Far Eastern regions of Russia. Mentioned
events led to the $400 billion gas contract between Russia and China in 2014.
The Russian side was very optimistic about getting Chinese equipment supplies,
technologies and financing. However, technological investment from the Chinese
side was limited, as well as the financial part of the contract due to the fact
that the “Big Four” Chinese banks had big US assets. It was not only
politically caused but also economically as Chinese banks had to choose between
high risks on declining Russian markets and stability on huge American and
European markets. The only commercial bank that agreed to participate in oil
and gas deals with Russia was Bank of China that provided Russian gas producing
company Gazprom with a $2 billion dollars’ loan for 5 years which became a
largest loan in the history. Eventually, the main financial institutions that
have signed the agreements with Russia were China Development Bank (CDB),
Export-Import Bank of China and the Silk Road Fund which are not too much
dependent on international financial system.
It is also
interesting to note that from the political point of view, the desire to
achieve the goal of closer cooperation was not only left to oil and gas
companies in the period after the introduction of the sanctions and crisis in
Ukraine but was also reinforced by the strengthening of state interaction,
emphasizing the geostrategic nature of relations with China. When relations
with the West deteriorated sharply after the entry of Crimea into Russia in
2014, the number of meetings with China rose dramatically, and Putin’s
participation became more important. Indeed, in May 2014, Presidents Xi and
Putin met for the seventh time for 14 months in Shanghai, ending with a joint
statement confirming the desire to expand cooperation in all areas and coordinate
diplomatic efforts to strengthen the China-Russia partnership in the field of
strategic cooperation. Clearly, although the commercial drivers of the eastern
strategy are important, since Asia provides significant opportunities for
generating new revenue, political dynamics are also vital and attract a large
amount of time and resources from the Russian government.
However, these
additional political efforts have led to some visible results in the energy
sector. In May 2014, the long-awaited gas agreement between Gazprom and CNPC
was signed, and also a deal on strategic cooperation between CNPC and Rosneft.
Rosseti (Russian Grid Company) and SGCC signed a long-term contract for the
supply of electricity worth 100 billion kWh for the period until 2036, and
RusHydro signed two cooperation agreements with PowerChina and Dongfang Electric.
In addition, in October 2014, Russia and China signed a “road map for
cooperation in the coal industry,” which goal was to intensify
participation of Chinese companies in Russian coal projects. The final and the
most important deal, however, was about CNPC that took a 20% stake in Yamal LNG
and made a 20-year contract of 3 million tones per year.
Unfortunately,
statistics show that in fact the trade turnover between the two countries fell
dramatically. After growing by 6,8% in 2014, it declined to almost 30% in 2015
which moved Russia from top ten China’s trading partners to the 16th
place (Table 3). It was caused by the overall negative trends in the world
economy, as well as slow negotiations process about the physical
implementations of the agreements between Russia and China.
According to
the data of the Main Customs Administration of the People’s Republic of China,
Russia’s trade with China in 2015 amounted to 68,065.15 million dollars
(-28,6%), including Russia’s exports to the PRC – 33,263.76 million dollars
(-20,0%), imports from China – 34,801.39 million dollars (-35,2%). Negative
trade balance in 2015 decreased by 87,3% to $1,537.63 million (2,26% of total
turnover) against $12,070.83 million in 2014[8].
Russia
ranked 16th in the rating of 20 major trading partners of China.
The slowdown
in the dynamics of mutual trade in 2015 was due to a number of objective
factors that emerged in 2014, but the delayed effect of which was fully
manifested in 2015.
First, the general geopolitical tension, the complication of
the situation in Ukraine, the introduction of economic sanctions against Russia
by Western countries, the worsening of the world’s foreign trade conditions,
including the reduction in demand in foreign commodity markets, the volatility
of the global financial market, and the debt problems of the eurozone and the
United States.
Secondly, the slowdown in economic growth rates both in Russia
and in China.
Thirdly, the fall in world prices for energy and raw
materials, which account for more than 70% of Russian exports to China.
Fourth, the decrease in the purchasing power of Russian
consumers of Chinese products due to sharp exchange rate fluctuations of the
ruble to major world currencies, including the Chinese yuan.
Fifthly, the increasing pressure of the downward trend that began
in 2014 in China’s foreign trade. Thus, according to customs statistics,
China’s foreign trade turnover in 2015 decreased by 8,0% to $3,958.64 billion,
including exports – by 2,8% to $2,276.57 billion, imports – by 14,1% to $1
682.09 billion. Negative dynamics is noted not only in trade with Russia, but
also with China’s main foreign trade partners. In particular, trade with the EU
declined by 8,2% to $564.85 billion, with ASEAN – by 1,7% to $472.16 billion,
with Japan – by 10,8% to $278.64 Billion. A slight increase (+ 0.6%) was
recorded in trade with the US (558.38 billion dollars)[9].
If we take a
look at the statistics of Russian export of oil to China in 2016, we can also
notice a negative trend.
In 2017, in
the trade turnover between Russia and China, a new positive trend has emerged.
According to the recently published data by the main customs administration of
the People’s Republic of China, this year in January the trade turnover between
Russia and China reached 6.55 billion dollars, which is 34% higher compared to
the same period last year. Analysts believe that in the context of the global
economic recovery, trade turnover reflects the positive development dynamics of
the two countries.
This is not
only the start of new successes, but also a hint that this situation will be
observed throughout the year. In January, the amount of export of Russian
products to China reached 3.14 billion dollars, Chinese products to Russia –
3.41 billion. China continues to be a major trade and economic partner for
Russia. It is estimated that this year, in the context of rising energy prices,
bilateral trade between our countries will also expand.
To sum up,
due to the implementation of sanctions and taking into account current trends
on the global market of energy, the main goals and interests of Russia in terms
of developing its energy sector within the cooperation with China are the
following:
At the same
time China is increasingly facing serious limitations in terms of the growth of
man-caused environmental pressures, which is largely due to the expansion of
coal mining and utilization systems. More than 80% of all freight traffic in
China is coal. All these factors force China’s leadership to stimulate the
development of the oil and gas industry, organize supplies from various regions
of the world. In conditions of changing technological level of energy supply,
further motorization of the economy and population, transformation of the
structure of the fuel and energy balance, the demand for oil and gas will grow
most rapidly. The most preferable option for Chinese companies is the option of
direct access to oil and gas assets (resources and hydrocarbon reserves,
infrastructure facilities) through obtaining licenses for geological
exploration, exploration and production of hydrocarbons and participation in
the capital of oil and gas companies.
Overall good
relationships between Russia and China and its intensified cooperation and
sanctions and countersanctions policies have a significant effect on Europe.
Both Russia and China are considered to be key strategic partners for Europe.
For Russia, Europe has always been the main trading partner. And China is the
world’s largest economy that is impossible not to take into account. After the
implementation of sanctions, commodity exports from Europe to Russia fell by
28,4% in the period of 2014-2015[10]. So, the question is: can
China substitute Europe in terms of trade for the Russian economy?
To answer
this question, it is important to take a look at Allen-Hicks model of
elasticity that shows the ratio to what degree two goods
or services can be substitutes for one another[11]. It is a very useful
model to analyze the relations between multiple countries. We can assume that a
market can import from three different countries (in our case, it’s Russia,
China and European Union taken as one dimension). As a result, comparing to the
two-factors model, this might cause a “domino effect” of substitutions for the
other factors which will impact the demand for the original two factors.
Generally speaking, the price effect on the demand will be in dependence with
all of the factors. According to the research made by Alicia Garcia Herrero and
Jianwei at Bruegel[12], Europe and Russia
complementary on the Chinese market as the calculated coefficient is less than
zero or negative. This can be explained by the fact that the main commodity
that Russia exports to China is energy resources, like oil and gas. And at the
same time Russia’s exports do not cross with European exports to China that
mainly provide it with consumer products, so they complement each other while
trading with China. However, for the Russian market the elasticity coefficient,
which is positive or higher than zero, proves that Europe and China are
substitutes so they compete on the Russian market. Moreover, since the
elasticity is higher than 1, Europe and China become two major competitors for
the Russian market, and a reduction in the price of exports between China and
Europe benefits China as it might increase the demand for Chinese imports.
Table 4. Elasticity.
For these
calculation they assumed that the elasticity of substitution is symmetrical and
used a translog function (Diewert (1979) and Feenstra(2003)):
ln(Ei)=ln(Ui)+α0i
+∑αj ln(pji)+∑∑λj ln(pji)ln(pki)
In this
function:
Then, we can
take the other function (Freenstra (2003)):
Smj =αm+∑λkmln(pkj),
where:
smj is
the market share of country m in
country j;
pkj –
price of import from country k in
country j;
μi–
product dummies;
λt –
year dummies;
Finally, we get:
MarketShareEU−Russia,it=β0a+β1aln(pEU−Russia,it)+β2aln(pChina−Russia,it)+β3aln(pROW−Russia,it)+μi +λt +εit
MarketShareEU −China,it = β0b + β1b ln( pEU
−China,it ) + β2b ln( pRussia−China,it
) + β3b ln( pROW
−China,it ) + μi + λt + εit
We assume that β1a
and β1b estimated impacts
on European Union exports and get the function where Allen-Hicks’ two-factors
elasticity is proportional to β1a
and β1b:
Generally
speaking, Chinese energy strategy can be described by the words of President Hu
Jintao, that he mentioned in 2006 at the G8 Summit in Saint Petersburg: “to ensure global energy security, we
need to develop and implement a new energy security concept that calls for
mutually beneficial cooperation, diversified forms of development and common
energy security through coordination”.
The Chinese
energy strategy and Chinese-Russian energy cooperation are based on an
assessment of the situation of supply and demand for energy in the PRC.
China is the
largest country in the world for the production and consumption of energy. In
terms of production and consumption, China ranks second in the world. The
provision of own energy resources exceeds 90%. In terms of oil production,
China rose to the fourth place, following Russia, Saudi Arabia and the United
States, however, it takes the second place in terms of oil consumption,
importing over 50% of the oil consumed in the country from abroad.
The
structure of China’s fuel and energy balance is characterized by a high
proportion of coal, a small share of oil and a small amount of natural gas. In
1952 coal in the total volume of energy consumption reached 95%. With the
development of industrialization and urbanization, the share of coal gradually
decreased: in 2007 this figure was 69.4%, the share of oil – 20.0%, natural gas
– 3.4%, hydropower, nuclear and renewable energy – only 7.2%. In the future,
despite the fact that the share of coal will decrease, the volume of its
consumption will grow. In 2009, the volume of coal consumption was 3.2 billion
tons, in 2020 it will increase to 3.8 billion tons, but the share of coal in
the total consumption of energy resources will decrease to 57%. Therefore,
increasing the share of clean energy in the consumption pattern is an urgent
problem for China’s energy security.
China is
rich in energy resources, mostly it is coal, and oil and gas reserves are
relatively small. In explored reserves of primary energy, the share of coal is
87,4%, oil – 2,8%, natural gas – 0,3%, hydropower – 9,5%. By the end of 2007,
China’s share in world oil and natural gas reserves was estimated at only 1,3%.
According to the Ministry of Land and Natural Resources of the People’s
Republic of China, oil reserves in China at the 2007 level were estimated at
0.82-1 billion tones, with a slight upward trend. According to the Government’s
forecast, by the year of 2020, the oil production in China will reach its
maximum and will then decline steadily. Prospects for natural gas production
due to limited reserves are similar to oil. Despite the significant steps taken
in China, the production of oil and gas is unlikely to have much growth. In
2009, natural gas production was 80 billion m3. The extraction of
natural gas in China is characterized by a high cost, and its increase is
associated with great difficulties.
Most of the
largest oil fields in China are located in the north-eastern and northern
central regions of the country and are the basis of domestic production.
However, these deposits are mature and are prone to cut production. The Daqinq
deposit of CNPC, located in the northeast region, is one of the oldest fields
in China, accounting for 19% of the total oil production in China. Sinopec’s
Shengli oil field near the Bohai Bay is the second larges oil field. And
finally, Changqing, China’s third-largest producing oil field is situated at
Changqing in the north central Ordos basin.
Due to the
rapid development of the economy and the continuous increase in the degree of
modernization in all sectors, the demand for energy in China is increasing in a
huge pace. Over the past ten years, there has been a significant increase in
demand for all types of energy, but the demand for oil and natural gas is
growing at the fastest rate. The growth in oil consumption for the period from
2001 to 2009 reached 161 million tones with an annual increase of 20 million
tones.
In the
period 2016-2020 the growth rate of demand for gas will be at the level of up
to 8%, at the same time this indicator for oil will be in the range of 4-5%.
In the long
term, the demand for energy resources in China will grow at a rapid pace, but
the production of these resources will lag far behind. In the next ten years,
oil production can reach 200 million tons, and the gap between supply and
demand will be constantly increasing. In the structure of oil consumption, the
share of imports in 2020 will exceed 60%, and by 2035 can reach 79%. The share
of gas imports from abroad will exceed 50%. Solving the problem of a continuous
increase in the gap between supply and demand for energy resources is an
important task to improve China’s energy security.
The energy
situation in China is characterized by the following main points: the percentage
of own energy resources is now quite high, but the structure of the fuel and
energy balance is irrational with a high share of coal; reserves and oil and
gas production are inadequate, the gap between supply and demand is great, with
a trend of continuous growth in the future.
In
accordance with this provision, China has developed its energy strategy, the
main direction of which is to change the irrational structure of the fuel and
energy balance in the direction of increasing oil and gas production in order
to ensure a continuous increase in demand for these types of resources. The
Chinese energy strategy includes two parts: internal and external. The main
argument of the strategy: the use of two resources and two markets involves the
use of own and imported fuel and energy resources, the development of domestic
and foreign markets, and contributes to improving the energy security of the
state.
The Chinese
internal energy strategy includes, mainly, the following:
In 2012,
coal accounted for the majority (about 66%) of total energy consumption in
China. The second largest source is oil and other liquids, which account for
almost 20% of the total energy consumption in the country. Despite the fact
that China made efforts to diversify energy supplies, the share of
hydroelectric power stations (8%), natural gas (5%), nuclear power (about 1%)
and other renewable energy sources (more than 1%) accounted for a relatively
small share of China’s consumption of energy. The Chinese government plans to
limit coal consumption to 62% of total primary energy consumption by 2020 in an
effort to reduce the intense air pollution that has swept through parts of the
country in recent years. China’s national energy agency claims that coal
consumption fell to 64.2% of energy consumption in 2014. The Chinese government
set a goal to increase energy consumption not related to fossil fuels to 15% of
overall energy consumption by 2020 and up to 20% by 2030 in order to ease the
country’s dependence on coal. In addition, China is currently increasing the
use of natural gas to replace some coal and oil as cleaner fossil fuels and
plans to use natural gas for 10% of its energy consumption by 2020. Although
absolute coal consumption is expected to increase in the long term, as well as total
energy consumption, energy efficiency and China’s efforts are aimed at improving
environmental sustainability and reducing the share of coal.
As a result
of high consumption of coal, China is also the world’s leading emitter of CO2. The
Chinese government plans to reduce its total CO2 emissions by at least 40%
between 2005 and 2020. The current climate change plan, issued in late 2014,
has strengthened China’s commitment to reducing carbon emissions mainly in
energy-intensive industries and construction by 2020. Recently, China predicts
that its carbon emissions will grow by more than one-third of current levels
and reach the peak in 2030. These goals suggest that China can reduce its
dependence on coal and become a more energy-efficient economy in the long term.
In recent
years, China has made great strides in this area. Thus, China takes the first
place in the world in investment in the development of the use of renewable and
secondary energy resources. In terms of the development of wind energy, China
also occupies the first place in the world.
The goal of
China’s external energy strategy is to create a reliable energy supply system
that can fill the ever-widening gap between demand and supply and ensure the
energy security of the state. Import of energy resources from abroad must meet
the requirements: “stability, economy, cleanliness and safety”.
“Stability” means long-term stable supply of energy resources, which
is sufficient to meet growing internal needs. “Savings” means that
the price of resources should be rational. “Cleanliness” means
engaging as much of the energy as possible, such as oil, gas, etc., in the
balance sheet; The introduction of measures to improve energy efficiency, the
development of renewable and nuclear energy. “Safety” means ensuring
the safe and uninterrupted transportation of energy resources.
Summarizing,
the most important points of the Chinese foreign strategy are the following:
The
Sino-Russian negotiations in the energy sector have been going on for more than
15 years and have been rather difficult. Only recently, progress has been made
in this area. This is due mainly to the existing long-term factors between the
two countries and also to changes in the international political and economic
situation. What are these long term factors?
First of
all, good political relations between China and Russia. China and Russia agreed
on the relationship of the partnership for strategy and cooperation in 1996,
and since then the relations between the two countries have been continuously
deepening. Both sides concluded a “Sino-Russian agreement on good
neighborly relations and cooperation”, finally solved the historically
abandoned question of borders, and political mutual trust between the two
countries is continuously improving. In such fundamental issues as state
sovereignty, territory, etc., the countries are mutually consistent, and
mutually coordinated in broad international issues. Sino-Russian relations are
at a historically best time, representing political support for the development
of energy cooperation between China and Russia.
Secondly, China
and Russia have quite a strong complementarity. Russia is rich in energy
resources. Demand for energy resources in China is continuously growing, and
China has the world’s most stable oil and gas, as well as coal and electricity
market, with the most evolving potential. China and Russia are close neighbors.
The mutual complementarity of the Chinese and Russian energy industries is the
material basis for the development of cooperation in this field.
Finally, the
development of the Russian Far East and Eastern Siberia will require the
development of China-Russia cooperation. Russia developed a plan for the
development on a large scale of the Far East and Eastern Siberia, in which oil
and natural gas occupy an important place. In accordance with this plan, the
“Russian Energy Strategy for the period until 2030” determines that
the policy of exporting oil and natural gas is directed to the east. Oil
production in Russia in 2030 will reach its maximum value, and after that it
will start to decline. Oil exports to Europe will decrease, and the share of
exports to the east will increase to 22-25% in 2030. The share of exports of
natural gas to the east will rise to 19-20% in 2030.
In 2016, the
level of daily oil consumption in China was 10.46 million barrels per day,
while production in August 2016 was fixed at 3.9 million barrels per day[13]. In recent years, there
has been an increase in demand for oil and petroleum products in China, which
is due to extensive economic development and population growth.
In 2016
China became the second largest importer of Russian oil after Netherlands. Even
export of oil in value terms to China has a tendency to decrease, the share of
Russian exports of oil going to China is continuously increasing, from 9,5% in
2014 to 13% in 2016.
Russian oil
resources are geographically close to China, therefore China in the long term
is interested in expanding cooperation with Russia in the energy sector. Today,
as never before, it is obvious that the prospects for this cooperation are
considerable.
The negotiation
process on deliveries of Russian oil and gas is actively going on. In June
2013, Rosneft and the Chinese National Oil and Gas Corporation (CNPC) signed a
long-term contract for the delivery of Russian oil with a volume of 365 million
tones for the 25-year period. The estimated volume of the deal was 270 billion
dollars. The contract provided the supply of 325 million tones of oil with the
East Siberia – Pacific Ocean (ESPO) oil pipeline Skovorodino – Mohe. In
addition, the same route will deliver 35 million tons of oil to the Tianjin
refinery.
In 2014, due
to the economic sanctions of the European Union, the Russian Federation began
to pursue more actively the eastern gas policy. In May 2014 in Shanghai, the
Chairman of Gazprom Miller and President of the Chinese National Oil and Gas
Corporation Zhou Jiping in the presence of Russian President V.V. Putin and
President Xi Jinping of China signed a contract for the supply of Russian
pipeline gas to China along the “eastern” route.
The contract
for a period of 30 years provides for the export of 38 billion cubic meters of
Russian gas per year to China on mutually beneficial terms, with reference to
the oil basket and the “take or pay” condition. This is the largest
gas supply contract for the entire history of Gazprom, for which more than 1
trillion m3 will be shipped during the validity of the agreement.
Specially for this project, the “Siberia Power” gas pipeline is being
built, which was started in September 2014, and the launch is planned in
2018-2020.
Later in
2014 in Beijing, the Russian and Chinese sides concluded a number of agreements
in the fuel and energy sector, including a memorandum between Gazprom and CNPC
on the supply of 30 billion cubic meters of gas on the western route
“Altai” for 30 years. The document reflects the time and amount of
fuel transportation, the point of its transfer at the border and the “take
or pay” condition. The document determines the conditions for
transportation of fuel from the fields of Western Siberia. The contract can be
signed already this year, and gas exports to China, it is possible, will exceed
the volume of its sales to Europe [27]. Supplies via the “Altai” gas
pipeline will be carried out from the same fields, the resources of which are
used for raw materials sales to European countries and, possibly, will exceed
the current export to Europe in the future.
Among other
documents, there is a Memorandum of Understanding between Gazprom and CNOOC
(confidential) signed in 2014, as well as framework agreements between Rosneft
and CNOOC on Chinese purchases of more than 10% in Vankorneft. In addition, in
November 2014, Russia and the PRC agreed on an additional oil supply of 5
million tons.
Russia is
increasing the volume of supplies on the Russian-Chinese oil pipeline, the
implementation of the project for the construction of the Tianjin oil refinery
and the “Siberia Power” gas pipeline, which should be fully
operational in 2020, continues. In addition, the parties are working to agree
on the terms of supply of Russian gas to the PRC along the western route. China
has increased its participation in the largest in Russia project for the
production of liquefied natural gas Yamal LNG.
In 2016 Rosneft
entered into a new annual oil supply contract with China National Chemical
Corporation and an agreement that provides for ChemChina to invest 40% in the
capital of the Eastern Petrochemical Company (BHPK) with proportional
participation in financing. The deal on entering ChemChina in VNKhK will be
closed as soon as possible Months. The project worth 1.313 trillion rubles
provides for the construction of three lines with a total processing capacity
of 24 million tons of oil and 6.8 million tons of petrochemical raw materials
per year. The construction of the third stage is planned to be completed in
2028.
With
Sinopec, Rosneft concluded a framework agreement on the preparation of a
feasibility study for the construction and operation of a gas processing and
petrochemical complex in Eastern Siberia. In the future, it is planned to
create three oil and gas chemical complexes in Western Siberia and in the
Novokuibyshevsk area.
In addition,
the Russian company sold 20% in Verkhnechonskneftegaz to China’s Beijing Gas,
the deal is also expected to close in the near future.
The large
oil and gas agreements signed between Russia and China in recent years are
beneficial for Russian companies participating in them, as they provide them
with opportunities for growth and access to new sources of financing with the
prospect of expanding these relations. At the same time, the agency’s analysts
point to certain problems related to the turn of Russia to the east: the possible
increase in pressure on prices from China, as well as the scale of necessary
investments may negatively affect the profitability of the Russian oil and gas
sector in the future.
Considering
oil and gas contracts with Russia through the prism of China’s economic
development, it can be argued that the supply of Russian oil and gas will
create the necessary conditions for:
These
agreements will also reduce Russia’s dependence on European energy markets,
threatening sanctions and competitive risks.
Since the
nineteenth century, four main stages of the development of the oil market can
be distinguished.
The first
stage (until 1973) is usually called the stage of leadership of oil companies,
which are called the “Seven Sisters.” The world oil industry at the
first stage of its existence developed under conditions of monopolization and
monopoly prices. This stage is characterized by the dependence of oil prices on
the seven largest international oil companies – oil producers (American Exsop,
Gulf, Mobil, Royal Dutch / Shell, Texaco, British Petroleum, Standard Oil of
California. The monopolization of these companies made it possible to keep oil
prices at a stable level, regardless of the growth in oil consumption – this,
in turn, provided low but stable profits to all exporters. Moreover, since oil
prices were kept at a rather low level – at about $3, oil production was
considered cost-effective only in countries with production costs, as well as
subsequent transportation below this level, that is, most often in the countries
of the Arab region (73%). Nevertheless, the main consumers were developed
countries (72%) which obviously were dependent on oil imports. Moreover,
analyzing this period, it can be seen that the exporters’ incomes from oil
sales were not significant, which ultimately led to discontent about the
existing order of income distribution and the formation in 1960 of OPEC that
included 13 developing countries – the main exporters of oil.
The second
stage (from 1973 to 1986) is characterized by a sharp increase in the influence
of OPEC on the world oil market. Developing countries organized OPEC in order
to defend their own interests and in 1973 nationalized oil production on their
territories, which led to a huge “oil crisis”. As a result, oil
prices soared in the next two years more than 5 times, which coincided (and to
some extent was the cause) with the general raw material and monetary and financial
crises that affected the whole world economy during this period. In addition, developed
industrial countries could not immediately reduce oil consumption, and this
contributed to a price increase until the beginning of the 1980s ($35 per
barrel).
Analyzing
the above, it is possible to distinguish the feature of the second stage of
development of the world oil market. It consists in the establishment of a
specifically new, higher, level of world oil prices. It also manifests itself
in the transition of the leading position to the 13 developing oil producing
countries – OPEC members (Saudi Arabia, Iran, Iraq, Kuwait, Qatar, United Arab
Emirates, Libya, Algeria, Nigeria, Ecuador, Gabon, Indonesia, Venezuela).
Another
feature is the change in the nature of competition in the oil market. Vertical
competition between the national (mostly state-owned) companies of the OPEC
countries and independent companies from the industrialized countries operating
in the sphere of processing and marketing of oil began to dominate.
High oil
demand allowed specific countries with a higher cost of oil (for example, Great
Britain, Mexico, Russia) to significantly increase production levels and start
their own oil exports, which was impossible in the first period. That led to decrease
of the share of OPEC countries in the supply of oil to the world markets and
the transition to the third period.
The third
period (from 1986 to 2001) is characterized by the following:
It should be
noted that by the end of the 1980s, a global system of exchange trade in oil
and oil products was formed, serviced mainly by 3 centers (New York – NYMEX,
London – IPE, Singapore – SIMEX) and operating in a 24-hour mode. The existence
of 3 geographical trade exchange centers, together with the massive development
of computerization, telecommunications and information technologies, provided
real globalization of the world oil market, its functioning in the present-day
regime, interdependence and subordination of oil prices in various regions of
the globe.
The fourth
stage (from 2001 to the present) should be called a period of acceleration of
the liberalization of the world oil market. In this stage, two main
circumstances are highlighted. Firstly, the oil flows are changing for the
implementation of stable supplies, which is connected with the diversification
of oil supplies by the largest exporters. Secondly, the role of exchange trade
increases and the turnover of “paper” oil increases. At the same
time, hedging and speculative transactions begin to have a big impact on the
price dynamics.
International
analysts today increasingly say that the West is required to reduce its
importance from oil supplies from the Middle East as much as possible, and vice
versa, to increase Russian supplies and African countries. Nowadays, we can see
the same tendency in China where it is noticeable that the government is
decreasing oil imports from Saudi Arabia and increasing imports from Russia.
China’s
petroleum industry consists of three main companies: CNPC (China National
Petroleum Corporation), Sinopec (Chine Petroleum and Chemical Corporation) and CNOOC
(China National Offshore Oil Corporation). CNPC was originally aimed at making
its business independent by putting its production, marketing and exploration
into PetroChina with only 10% of shares belonging to the parent company. The
main area of interests of CNPC is the country’s onshore upstream assets. On the
other hand, Sinopec was created as a joint stock entity with 80% of state-owned
shares divided between the China Petrochemical Corporation Group and Bank of
China (53% and 27% respectively) with the responsibilities focused on refining,
distribution and petrochemicals. And finally, the last major oil company,
CNOOC, which was formed in 2001, received special rights in overseas
transaction from the Chinese State Council and got to do business with foreign
partners in exploration and development sectors.
As China
expands its economic influence by steadily increasing its foreign direct
foreign investment, the government recognizes the need to create a powerful
diplomatic relationships that would effectively implement its foreign policy
and ultimately pursue the interests of the state. NOCs are increasingly
expanding abroad through mergers and acquisitions, loan agreements and joint
project cooperation not only with other oil companies, but also with
resource-rich countries directly. Along with this, the Chinese government has
updated and refurbished its diplomatic body to establish closer relations with
oil-rich countries, such as Russia and Saudi Arabia. Stability, security and
security of supply of China’s energy resources are the main objectives of
China’s energy diplomacy. This government support of the NOCs through
diplomatic channels is called “oil diplomacy”.
Since 2008,
NOCs have acquired assets in the Middle East, North America, Latin America,
Africa and Asia and invested about $ 73 billion in foreign oil and gas assets
between 2011 and 2013, according to the International Energy Agency (IEA). The
Middle East (mainly Saudi Arabia) has always been China’s largest source of
oil, followed by some African countries, especially oil-rich Angola.
Historically, Iran was China’s third largest oil trade partner, however after
US and European sanction caused by Iran nuclear program, China changed its
focus on the US and Europe. Similar situation happened to such countries as Sudan
and South Sudan which became significant oil exporters to China until
production was shut in at the beginning of 2012, following political conflicts
between the two African nations over their oil resources.
As a result,
China had to replace the share of oil lost from Iran, Sudan and South Sudan,
and Libya with imports from other Middle Eastern countries (United Arab
Emirates, Oman and Iraq), Angola, Venezuela and Russia. China and Russia signed
agreements on the supply of China to Russia up to 800 thousand barrels per day
by 2018, mainly through a pipeline. At present, Russia sends oil to China via
pipelines, ships and railways, mainly from Russian fields in Eastern Siberia.
China also
dramatically increased imports from Iraq, although future import growth will
probably depend much on infrastructure and the political situation in Iraq.
As China is
in urgent need of oil suppliers since its oil consumption grows in a high pace
every year, it is also important to diversify its oil imports and rely on
different options. Russia as a strategic partner of China seems to be a better
perspective for the Chinese oil market.
In 2016, Russia
became the largest oil supplier to China, for the first time bypassing Saudi
Arabia, according to the data by the Main Customs Administration of China.
Deliveries
of Russian oil to China in 2016 increased by an annualized rate of almost 25
percent to about 1.05 million barrels per day. The growth of imports ensured
the demand from independent private refineries that considered Russia to be the
most acceptable supplier. Those private refineries were the first to receive an
oil import license at the end of 2015, are easier to process Russian raw
materials due to smaller volumes and proximity of ports.
Saudi Arabia
became the second largest exporter of oil to China. China increased oil imports
from Saudi Arabia in annual comparison by 0.9 percent to 1.02 million barrels
per day in 2016.
In December
2016, fuel supplies from Russia reached 1.19 million barrels per day, which is
4.8% more than in December 2015. At the same time, Saudi Arabia’s oil supplies
fell by almost 20%, to 841,820 barrels a day.
The third
place among oil exporters in China was occupied by Angola, which increased
shipments by 13%, and the fourth place – Iraq, which showed about the same
growth.
In addition,
China increased imports from South America: supplies from Brazil increased by
37.6%, from Venezuela – by 26%. Simultaneously, imports from Iran increased
exports to China by almost 18% last year, to a record 624,260 barrels per day[14].
Russia can
maintain the status of China’s largest oil supplier and in 2017, thanks to the
growth of supplies via the ESPO pipeline against the background of the planned
reduction in oil production in Saudi Arabia. The reduction in production of
OPEC means that oil producers from the Gulf countries will lose some of their
shares in the market, although the majority of their supplies will fall to
Europe and the US. Russia is planning to expand the ESPO, as well as supply to
China through the territory of Kazakhstan. According to the CEO of Rosneft Igor
Sechin, the company’s intention is to increase oil supplies to China to 31
million tons in 2017.
After 2015,
oil refineries in China obtained the right to use imported oil. Russia has
become a supplier of raw materials for refineries, since imported oil from the
eastern ports of Russia is much easier to handle, the size of the vessels is
small, and the distance is much closer. However, Saudi Arabia very much
appreciates the arrangements for long-term oil supplies with such a precious
client as China.
After many
years, Russia hopes to become a reliable supplier of oil, especially after
sanctions imposed on it. China and Russia are expanding their calculations in
national currencies, avoiding the dollar, and are also implementing
billion-dollar projects, Chinese companies are getting shares in Russia’s
largest oilfields. Beijing, by increasing purchases of Russian oil, wants to be
sure that the Russian economy will not deteriorate and will not threaten
stability on the borders of China. In addition, buying more oil from Russia, China
reduces dependence on offshore oil supplies from countries in the Middle East
that are prone to weather interruptions. The situation of Saudi Arabia is now
becoming unclear, as the US, the geopolitical partner of the Saudi Arabia, has
reduced dependence on oil imports through the shale boom in the country.
However, Saudi Arabia still has the Asian market, which gets about 70% of Saudi
oil.
SWOT-analysis
of Russian oil industry shows that there are many more advantages of using
Russian oil instead of Saudi Arabian oil. Despite of some serious threats and
weaknesses which are in many ways are similar to Saudi Arabian ones, the
overall analysis shows that Russia has significant benefits over the OPEC
country, especially due to trade in local currencies, common border and close
distance, as well as friendly good economic and political relationships and
similar views on the world order and strategy.
Besides,
Saudi Arabia and Russia have a lot of political misunderstandings regarding
Syria and Iran, which make the relationship between the two countries quite
tense, even though they call them “strategic”. Thus, on September 5th
in 2016 during G20 Summit in Hangzhou, Russia and Saudi Arabia have agreed to
maintain stability in the oil market and ensure a sustainable level of
investment in the long term.
The
long-term challenges for supplying countries in the world oil market, including
a significant reduction in the world’s capital expenditure on oil production,
in particular, in geological exploration; mass cancellation and postponement of
investment projects, which in general has already led to a more volatile and,
therefore, unstable situation in the oil market in the long run for both
producers and consumers. Russia and Saudi Arabia have also agreed that they
will develop cooperation in the oil and gas industry to introduce new
technologies and will create a joint database of promising technologies in the
energy sector. After this agreement, in mid-December, oil prices rose sharply
($58/barrel), which was a new record for the previous 18 months.
In its oil
strategy, China is not going to choose one particular oil supplier as the
Chinese government realizes that it is important to diversify oil imports and
rely on different sources of oil – from Russia, Central Asia, Africa and OPEC
countries.
By the
beginning of the 20th century, Russia accounted for 30% of the world’s oil.
After the revolution in 1917 and the subsequent nationalization of deposits,
oil production in the country fell. But foreign capital did not leave Russia.
Companies such as Vacuum and Standard Oil, to which the Rothschilds sold their
assets, cooperated with the Soviet government. As a result, since 1923 the
level of exports has returned to its previous values.
Before the
Second World War, most of the oil was extracted in the Caspian region and in
the North Caucasus. Therefore, control over those most valuable raw materials
areas was one of the main tasks of Germany during the war. After the war, oil
production in the Caspian Sea began to grow again, but it was decided to actively
develop the search and development of deposits in the Volga-Ural region, where
in 1975 the output reached a peak of 4.5 million barrels per day.
The USSR
made large-scale investments in oil-producing complexes, and this contributed
to the rapid growth of oil production in the region. Open fields were not
difficult to develop. In addition, they were located near the transport
arteries, which was another major factor contributing to the development of the
industry. In the 1950s, the Volga-Ural deposits accounted for about 45% of all
oil produced in the USSR. As oil production increased, oil exports continued to
grow. In the 1960s, the volume of hydrocarbons produced by the USSR was the
second largest in the world, which caused a drop in prices for Middle Eastern
oil and served as one of the reasons for the creation of OPEC.
In the early
1960s, the discovery of the first large deposits of Western Siberia was
announced. This happened when the question arose in the country: how to keep a
high level of production after the spoil of prey on the deposits of the
Volga-Ural. The opening gave a powerful incentive for the development of the
region – thousands of people moved to the harsh land, cities and towns of oil
workers grew quickly. The West Siberian Basin became the largest oil and oil
producing region in the USSR. Despite the difficult climatic conditions, oil
production grew at a record pace. An important feature of the region’s raw
materials base was a high concentration of explored reserves in large and large
deposits. In 1965, a giant Samotlor field was discovered, containing 14 billion
barrels of available oil.
Owing to the
development of the oil industry in Western Siberia, the USSR quickly increased
production: from 7.6 million barrels per day in 1971 to 9.9 million barrels per
day in 1975. And to this day the region remains Russia’s main “oil trump
card”: in the Khanty-Mansiysk Autonomous Okrug, about 60% of the annual
oil production in our country is mined.
After this
tremendous success in the industry, a decline gradually began, caused by the
desire to get as much as possible without worrying about the long term. The
lack of investments in exploration was compensated by intensive drilling. In
1988, the Soviet Union reached a record – 11.4 million barrels per day, with
the largest part being in the fields of Western Siberia. But from that moment
technological flaws made themselves felt – it was impossible to restrain the
drop in volumes for a long time.
The collapse
of the Soviet Union had a major impact on the crisis in the industry. Domestic
demand fell, there was not enough export capacity. Due to financial
difficulties, drilling was reduced, wells were not properly serviced, no
repairs were made. The fall in oil production ceased only in 1997.
Demonopolization
and privatization of the industry led to the creation of large vertically
integrated oil companies, each of which is engaged in a full cycle of oil
production and processing – from exploration of deposits to the sale of
petroleum products to the end consumer. These companies today determine the
face of the industry, which plays a crucial role in the country’s economy.
According to the results of 2007, the largest of them are Rosneft, Lukoil and
TNK-BP.
Today in
Russia, oil companies are often forced to work in very difficult conditions:
they have to extract oil from deposits that were barbarously exploited in
Soviet times, from flooded layers, from difficult fields to develop. Therefore,
the development of new technologies is one of the priority areas of the
industry.
In 2007, before
world economic crisis, Russia produced 492 million tons of oil and condensate.
It is oil that accounts for about 30% of the total volume of Russian exports.
At the current rate of extraction of proven reserves, this liquid hydrocarbon
should be sufficient for 50 years. However, many experts believe that the
future is due to the development of new technologies that will allow producing
oil where it was previously impossible.
To evaluate
the current situation in the Russian economy in general and its challenges on
the global market of energy particularly, it’s important to take a look at the
overall economic growth of the country and the factors that made it happen. It
goes without saying that the Russian economy showed an impressive growth in the
first decade of the 21st century including the pre sanctions period
2011-2013. Especially impressive were periods between two financial crises in
1998 and 2009. According to the statistics, between 2000 and 2008, GDP was
increased by 83% with the productivity growth of 70%. By 2008 per capita GDP
(PPP) had grown to $21600 comparing to only $9300 in the end of 1999, and the
country’s share in the world economy increased from from 0,6% to 2,7%. At the
same time, there was an impressive upsurge in terms of the welfare of the
population showing the growth in real wages (by 3,4 times) and real pensions
(by 2,8 times). In fact, in the period from 2000 to 2008, average annual GDP
growth was 6,9%, which dramatically declined after the crisis to only 1,0%.
What were
the reasons of that significant growth during that period? Analysis showed that
the main factors that drove Russian economy before the crisis of 2008 became
the following:
Concluding,
all GDP components showed an increase and as a result contributed into the
overall GDP growth. Consumer demand became a result of government expenditures
and the growth in wages in the public sector, while government procurements
pushed forward the demand for industrial products.
As was
mentioned above, one of the main factors of GDP growth in Russia were high
prices for oil and gas and as a result their revenues. However, after reaching
its maximum in oil prices in 2011, the world oil prices became to continuously
decline due to shale oil production in the United States and overall economic
decrease in developed and developing countries. This is a situation where the
whole world is experiencing an economic crisis (following the peak) which, as
predicted by some economists, might last for 15 years and which is one of the
steps of normal economic cycle. Declining oil prices, western sanctions and the
capital outflow prove that it is going to be a long period of recession for the
Russian economy.
With the
overall stagnation of the economy, exports of oil in value terms fell
dramatically for the last two years, moreover it fell to the lows of the last
five years due to the devaluation of the ruble, the reduction in production and
the current food embargo. The graph below shows that comparing to 2013, export
of oil fell more than 2 times by the end of 2016, from 304,8 billion dollars to
only 132 billion dollars respectively.
Graph 9. Export of oil in value terms, billion
dollars. Source: Russian Federation Federal State Statistics Service.
The
devaluation of the ruble played a decisive role in reducing the indices, which
followed the strongest fall in oil prices in early 2016. In January 2016,
quotes for Brent crude oil fell below $30 per barrel due to excess supply in
the market, as well as a reduction in demand from China.
The rate of
the dollar to the ruble at the same time skyrocketed to 78 rubles. This
coincided with a seasonal decline in business activity in January, which is
observed in Russia annually, as well as with a reduction in production in many
manufacturing industries. As a result, January volumes of trade became record
low – exports fell by one third, and imports – by 20%.
However,
since February, volumes of trade, together with the ruble exchange rate, have
begun to recover. The largest oil exporting countries – Venezuela, Canada,
Nigeria, Libya, for political and economic reasons, were forced to reduce the production
and supply of black gold. As a result, excess production decreased, and prices
began to return to normal. In the autumn, quotations continued to grow, and
together with them the ruble exchange rate. Despite the pessimistic forecasts,
after several years of negotiations, the OPEC member countries finally agreed
on a reduction in oil production. In addition, the election of Donald Trump as
president of the US has provided additional support to the ruble – many expect
a change in policy and the possibility of lifting sanctions for Russia.
Graph 10. Export of Russian oil in 2015, billion
dollars. Source: Russian Federation Federal State Statistics Service.
It is
interesting to note that in terms of the quantity, Russian exports of oil
increased which is connected to the overall Energy strategy of Russia and the
growth of oil production.
Graph 11. Export of oil in weight terms, thousand
tones. Source: Russian Federation Federal State Statistics Service.
The difficult situation
in foreign policy forces Russia to direct all its forces to regulate the
economy, which is excessively dependent on oil prices; Implement the import
substitution plan; Promote the development of other industries and at the same
time expand economic cooperation in the Asia-Pacific region. Now China is busy
raising and re-profiling production, and with it, the trade of the two
countries is developing.
As Russia
and China are working close together to intensify their mutually beneficial oil
trade, it is necessary to take an important step towards building an
infrastructure that would help reach all the goals, including pipelines – the
main mean of oil transportation.
Oil
transportation in Russia uses three different ways:
By the
number of pipelines, Russia ranks second after the United States. But, unlike
the American ones, the pipelines in Russia are more extensive, and the diameter
of pipes used in Russia is more than in the USA. Experts also say that the
length of the welded seam of Russian oil pipelines is 30% higher than in the rest
of the world. At present, in Russia the length of the main gas pipelines is
161.7 thousand km, and the oil pipelines – 70 thousand kilometers.
The
popularity of oil pipelines is explained by its efficiency (it can serve a long
time at a one-time cost of construction), as well as cheap transportation.
Today,
Russia’s oil transportation system has to solve two global problems of the 21st
century. And both of them are about diversification. This is an acquisition of
alternative routes that allow to reduce dependence on the Belarusian section of
the “Druzhba” (Friendship) oil pipeline and (more importantly) the most
unstable Ukrainian sector.
Export of
oil from Russia is carried out in three main directions. First of all, this is
Europe. There, Russia exports oil to several routes. Two of them, transit ones,
have already been mentioned – these are directions through Belarus and Ukraine.
Also, oil is
exported through seaports: Tuapse and Novorossiysk in the Black Sea and
Primorsk and Ust-Luga in the Baltic Sea. The last direction to Ust-Luga is only
now being mastered, for this purpose the Baltic Pipeline System II (BPS-2) is
being built. It is the BTS-2 that will make it possible to bypass Ukraine and
reduce the load on the Belarusian section.
The second
direction, now becoming increasingly important, is Asia. In this direction, oil
is exported through Kazakhstan.
Recently, a
third direction was opened. Perhaps, for today – the most promising: the
eastern direction. The first stage of the East Siberia-Pacific Ocean oil
pipeline allows oil to be exported to China, as well as to supply to the
markets of the Asia-Pacific Region.
Concluding,
the main pipelines of the Russian Federation are:
1) The
Baltic Pipeline System (BPS). For transportation of oil from Western Siberia,
the Timan-Pechora region, the Ural-Volga region to the Western Europe.
2) The East
Siberia – Pacific Ocean oil pipeline (ESPO). For oil delivery to the Far East
of Russia and to the countries of the Asia-Pacific region, including China.
3)
International oil pipeline “Tengiz – Novorossiysk” (CPC oil
pipeline). For the transportation of Kazakh oil through the territory of
Russia.
4) The
“Friendship” pipeline. To deliver oil from Russia to Eastern Europe.
Pipeline
system “Eastern Siberia – Pacific Ocean” has no analogues in the
world in its length. The distance from the starting point (Taishet) to the
final point (Kozmino) is 4,166 km. Thus, the ESPO pipeline broke the Guinness
book record – the North American oil pipeline Edmonton – Chicago – Montreal
with a length of 3787.2 km.
The Eastern
Siberia-Pacific Ocean pipeline system (ESPO) is built to transport oil to the
Russian Far East and the markets of the Asia-Pacific region. The system is
technologically connected to the existing trunk pipelines of Transneft and is
included in a unified network that ensures the operational distribution of oil
flows across Russia in the western and eastern directions.
Supplies of
Russian oil to the People’s Republic of China via the Skovorodino – Mohe oil
pipeline began in 2011 after agreements have been reached between Rosneft,
Transneft and CNPC.
In 2013, the
parties agreed to increase oil supplies and bring them to the peak to 30
million tons. According to the intergovernmental agreement of March 22, 2013,
for the period 2015-2017, the increase in supplies for the diversion from the
ESPO Skovorodino – Mohe should be 5 million tons per year. Due to the technical
unpreparedness of the pipeline system in China, oil supplies for 2015-2017 can
be carried out in other areas, including through the port of Kozmino. At present,
16.5 million tons of oil from Russia are being delivered to China.
CNPC is
building an extension of the diversion from the ESPO oil pipeline with a length
of 940 km, with a capacity of 15 million tons of oil per year. The work is
planned to be completed by October 2017, commissioning is scheduled for January
1, 2018.
It is
planned that in 2018, China should take 30 million tons of oil for the
withdrawal of Skovorodino-Mohe from the ESPO system.
Table 11. Potential ESPO capacity.
Source:
Transneft.
To sum up, at
present, the importance of energy in the world is growing. Energy resources
play a significant role for the development of each country. The growing
dynamics of energy consumption in the world creates colossal opportunities for
countries, the largest exporters of raw materials, to supply resources to the
markets of foreign countries, to implement large-scale projects in order to
strengthen their positions not only on the national territory, but also beyond.
Today,
Russia occupies strong positions in the world arena. The current energy policy
of the country, the further development of the oil, gas, coal industry and the
electric power industry contributes to the further strengthening of Russia’s
positions in the energy markets of foreign countries, as well as the strengthening
of Russia’s role as a global energy partner.
Recently,
Russia has shown an increased interest in the Asia-Pacific region. The export
of traditional energy sources to the region grows annually, the largest oil
companies of Russia are carrying out a number of projects to support this
region. For Russia, cooperation with China promotes the sale of energy
resources in a region with a high potential for growth and development. In the
last decade, Russia is implementing measures to raise the regions of Western
Siberia and the Far East. China, from this point of view is seen as a key
investment partner.
China, as a
strategic partner of Russia, needs to diversify its energy resources and
suppliers of oil and gas. There is a new vector of the development of oil
supplies to the country – the priority of pipeline transport over the sea. For
a long time, the oil was supplied to China by tankers, but this route will be
vulnerable in case of any conflict between China and the US, due to the
overwhelming advantage of the American fleet in this region. Singapore, which
does not have warm feelings for China, with the help of the US military
threatens to clog the bottle neck of the already insecure Malacca Strait,
connecting the Pacific Ocean with the Indian (through which about 80% of
China’s imported oil is delivered).
Energy
cooperation between Russia and China is mainly based on the development of
their gas and oil sectors. Oil industry is becoming a very important direction
of trade between the two countries which can be explained by many factors,
including western sanctions against Russia that made Russia change its foreign
politics and turn to China, overall good Sino-Russian relationships, China’s
need to diversify its energy resources and suppliers, common border and similar
strategic interests. China and Russia are the largest consumer and exporter of
raw materials and energy. The countries are neighbors, which makes the delivery
of products quick and economically beneficial. Russia became the first country the
Chinese leader Xi Jinping visited after the election in March 2013. This fact
confirms the special nature of the strategic partnership between Russia and
China.
China and
Russia share common interests in many areas. Both sides are actively striving
to maintain stability, they object to the creation of a unipolar world, adhere
to the principle of “non-interference in the internal affairs of other
countries”. China is one of the world’s largest consumers and importers of
oil, has large reserves and developed oil industry.
Russia and
China have made great progress in bilateral cooperation, which is particularly
conducive to their strategic partnership. The supply of oil, natural gas, coal,
cooperation in nuclear energy, and many other areas are developing. The long-term
partnership between our countries in the fuel and energy complex is
comprehensive and is constantly enriched with new constructive content. At the
current stage of cooperation between Russia and China, energy cooperation on
such components as energy efficiency and renewable energy sources is
significantly strengthened.
China is
currently in the decisive stage of urbanization and industrialization. In the
future, it will maintain a high level of demand in traditional energy sources.
The export of oil, gas and the development of energy in general are important
elements for Russia for the modernization and development of the state.
Russia has
been fighting for the Chinese market with Saudi Arabia for more than one year,
but only in 2016 it managed to come out on top for the first time. High demand
for oil in China is considered a key condition in the gradual recovery of
prices for oil. In 2016, China was buying oil at the fastest pace in the last
six years, after 2010.
Russia has
an extensive border with China, one of the world’s largest regions of oil
consumption. Now the center of demand in Eurasia is rapidly shifting to the
east. In Europe, the demand for oil is declining, while in Asia it is growing,
However, new
eastern supplies, despite their profitability, hardly occupy a significant
share in Russia’s oil exports. According to the Ministry of Energy of the
Russian Federation, 203 million tons of oil were exported to Europe last year
and 51 million tons to China. Raw materials are supplied via three routes: East
Siberia-Pacific Ocean (ESPO) pipe to Chinese Mohe (15 million tons), through
the sea port of Kozmino (30 million tons) and transit through Kazakhstan (7
million tons). But the supplies will constantly grow, and by 2040, the share of
Chinese oil in the Russian export portfolio may be the same or even higher than
the European one. Deliveries to the EU, which is logical, will decline due to
falling demand.
As China is
one of the fastest growing energy markets in Asia, the total pumping capacity
will be increased to 99.5 million tons by 2030 and to 120 million tons by 2040,
requiring the construction of new pipelines. The current capacity of the ESPO
pipeline, as well as the port through which oil enters China, will not be
enough to increase exports after 2030. At this point, Russia will have to
increase its pipeline’s capacity to meet the needs of the growing Chinese
market.
To sum up,
nowadays oil is an important energy source that still cannot be replaced by
other types of energy.
In the next
decade, oil will remain the leading energy source, providing about 40% of
energy consumption. It is followed by natural gas (28%), coal (20%), renewable
sources (7%) and nuclear energy (5%). The shares of natural gas and oil will
grow, while the share of coal and nuclear energy will decline. It is possible
that by the end of the decade the level of nuclear energy consumption will
stabilize and the scope of alternative sources will expand, but this will not
affect the basic trends for at least the next 15-25 years.
In the
longer term (until 2067), the structure of the world energy balance is likely
to seek transformation mainly in two scenarios.
The first
involves a gradual transition from oil to gas, about the same way that oil
replaced coal back in time. Then a shift to renewable sources and, obviously,
to atomic energy is expected. At the same time, oil will retain its position as
an important source of energy in any case until the middle of the 21st century.
According to
the second scenario scenario, if in the next decade progress is made in the
field of hydrogen technologies that help to quickly displace gasoline engines,
then the reduction in oil consumption will begin much earlier – by about 2025.
But this is still unlikely.
The energy
intensity of the world economy (mainly at the expense of the developed
countries) will gradually decrease, but a linear relationship between GDP
growth and increased energy consumption will remain. The continuing rise of the
global economy will continue to drag the demand for energy for a while.
However, consumption is slowing and lags more and more behind GDP. This means
that world economies begin to adapt to high prices through a reduction in
energy intensity and resort to the use of alternative and renewable energy
sources.
[1] Poussenkova N.
(2013) “Russia’s Eastern Energy Policy: A Chinese Puzzle for Rosneft.” IFRI,
Paris, France. April 2013.
http://www.ifri.org/?page=contribution-detail&id=7634&id_provenance=97
[2] New York Times,
18 Dec 1992, “Yeltsin starting 3-day China visit”
[3] Xia, Yishan.
“China-Russia Energy Cooperation: Impetus, Prospects and Impacts.”
James A. Baker III Institute for Public Policy, Rice University. May 2000. pg.
5–6.
[4] Documents such as
“Energy Strategy of Russia until 2030”, “Program for Creation in
East Siberia and the Far East of a Unified System of Gas Production, Transport
and Supply with Potential Gas Export to the Markets of China and other APR Countries”
(Eastern Gas Program),“ Strategy of Socioeconomic Development of the Far East
and the Baikal region until 2025″, ”Strategy of Socioeconomic Development
of Siberia until 2020″, ”Energy Development Strategy of East Siberia and
the Far East until 2030”,”Program for Development of Oil Refining
Capacities in East Siberia and the Far East”
[5] Постановление от 30 июня 2012 г. N 664 О МИНИСТЕРСТВЕ РОССИЙСКОЙ ФЕДЕРАЦИИ ПО РАЗВИТИЮ ДАЛЬНЕГО ВОСТОКА. http://minvostokrazvitia.ru/images/downloaded/pprf664.pdf
[6] The Federal
Customs Service. http://www.ved.gov.ru/_tes_rus_chi_2010_2011/
[7] Jonathan Masters
/ Council on Foreign Relations / cfr.com
[8] The Federal
Customs Service. http://www.ved.gov.ru/exportcountries/cn/cn_ru_relations/cn_ru_trade/
[9] The Federal
Customs Service. http://www.ved.gov.ru/exportcountries/cn/cn_ru_relations/cn_ru_trade/
[10] European Union,
trade in goods with Russia. http://trade.ec.europa.eu/doclib/docs/2006/september/tradoc_113440.pdf
[11]
http://www.businessdictionary.com/definition/elasticity-of-substitution.html
[12] The China-Russia
Trade Relationship and its Impact on Europe. Working Paper, Issue 4, 2016.
http://bruegel.org/wp-content/uploads/2016/07/WP-2016_04-180716.pdf
[13] Пылёва А. О., Бычкова Л. В. Зависимость экономики Китая от внешних
поставщиков энергоресурсов // Молодой ученый. — 2017. — №2. — С. 490-494.
[14] http://www.forbes.ru/biznes/337759-rossiya-vpervye-stala-krupneyshim-postavshchikom-nefti-v-kitay
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