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China's Hu Heads to Russia Urgently Seeking Fuel - ASHARQ AL-AWSAT English Archive
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BEIJING (Reuters) -Chinese President Hu Jintao goes to Moscow on Monday, confidently offering trade deals with an economy roaring back home, but urgently seeking oil, gas and assurance as the two countries eye each other’s resurgent power.

Hu’s three-day state visit to Russia will be his third as president, showing how seriously Beijing is courting its neighbor and President Vladimir Putin. Above all, Russia has the energy supplies China needs to fuel its growth.

“At present, Chinese-Russian relations are developing vigorously and have reached unprecedented levels,” Hu told Russian journalists ahead of his visit. He is expected to unveil business deals worth over $4 billion, Chinese officials said.

China is the world’s number two oil consumer, and Russia the second-largest exporter. But their potential partnership has been hobbled by both nations’ desire to keep a grip on the strategic energy sector and maximize their oil majors’ profits.

Previous plans for key crude and gas pipelines have languished after initial agreements were trumpeted by both sides, underscoring the brittleness of the two countries’ friendship.

“Chinese-Russian ties are in a phase of improvement that is no mean feat, but undercurrents persist and mutual confidence still urgently needs upgrading,” stated an overview of relations in a recent Chinese oil policy journal.

China wants lower prices for the gas and it is unclear whether Russia has enough crude to satisfy China and Japan — who have been vying for supplies. Moscow has flip-flopped over which of these Asian rivals should get the first pipeline connection.

“People might have the goodwill, but the relationship seems to move ahead of the actual projects, the goodwill doesn’t deliver,” said Kang Wu, at the East-West Center in Hawaii.

But Beijing may be getting ready to swallow — or make its firms swallow — higher prices to restart the gas deal, said Keun-Wook Paik, an energy specialist at Chatham House think tank.

“My understanding is that a team has been in Moscow already,” he told Reuters, adding that the visit could yield a formal deal.

“The Chinese side understands how contentious the Russians are over price issues,” he added.

Beijing and Moscow often align against Western nations on international issues, and have used their veto-holding permanent seats on the U.N. Security Council to blunt censure of Iran’s nuclear ambitions, a topic Hu and Putin are likely to discuss.

But the two sides’ history of rivalry and distrust that culminated in border battles in 1969 has not been entirely erased despite surging bilateral trade, which the two plan to boost to $80 billion by 2010, and could hinder efforts to move economic cooperation beyond cross-border sales.

Moscow is keen to diversify buyers for its fuel amid rising tension with major European customers over everything from its management of the energy sector to human rights.

But Russian officials are as reluctant as their Chinese counterparts to let foreigners take a substantial stake in the lucrative industry, after clawing back many assets sold off during the headlong privatization rush of the 1990s.

Earlier talk of investment in refineries, or Chinese firms buying into the Russian upstream, appears to have cooled, although Hu will make a stopover in Tatarstan, home to Tatneft, a top-10 oil firm controlled by the local government.

“Both sides know they need to keep control of their energy resources, and new (Russian) rules to enhance state control are the same as what China is doing,” said Wenran Jiang, an energy expert at the University of Alberta in Canada.

They are also jostling for influence in Central Asia, once Moscow’s backyard and now an increasingly important market and resource supplier for China. Moscow has been reasserting influence over the former Soviet states, said Li Yongquan, a Russia expert in a Chinese government think tank.

“This is presenting fresh challenges to our country developing energy cooperation with Central Asian states,” Li told a Chinese energy journal.

Asharq Al-Awsat

Asharq Al-Awsat

Asharq Al-Awsat is the world’s premier pan-Arab daily newspaper, printed simultaneously each day on four continents in 14 cities. Launched in London in 1978, Asharq Al-Awsat has established itself as the decisive publication on pan-Arab and international affairs, offering its readers in-depth analysis and exclusive editorials, as well as the most comprehensive coverage of the entire Arab world.

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