Sechin steps in Khodorkovsky’s shoes or 'ironiya sudby'

The past several  weeks have been marked with the acceleration of the once denounced Russo-Chinese energy co-operation.

On 24 June, the Russian state-owned energy giant, Rosneft and the Chinese National Petroleum Corporation (CNPC) concluded a deal that provides for another breakthrough in energy trade between the two states.

Rosneft agreed to supply the CNPC with 30 million tons of oil per year. What this means in practice is the doubling – by 2018 – of the amount of oil that is currently sent to China via the East Siberia-Pacific Ocean pipeline. This oil pipeline is by no means the only way of transporting Russian ‘black gold’ to Chinese customers. Starting in 2014, Rosneft will send an additional 7 million tons via another route – the Kazakhstan-China pipeline. Moreover, in 2012 the Russian energy behemoth agreed to supply the planned (though still not constructed) Russian-Chinese refinery in Tianjin with another 9 million tons of oil. Taken together, by the end of the decade Rosneft can be expected to send 46 million tons to China – almost 20% of Russian oil export (about 240 million tons).

On 21 June, the aforementioned CNPC entered into another ground-breaking agreement. It secured a 20% stake in the Yamal-LNG project. The project, led by the independent Russian gas producer Novatek, will enable Russia’s entry into the increasingly competitive LNG market.

The Russo-Chinese energy deals go far beyond their market value and are bound to have far-reaching consequences in the strategic and domestic realms of the two states.

Moscow continues to adapt to China’s rise, strengthening its ties with Beijing whilst allowing possible options for hedging in the case of a political setback between the two powers to disappear one after another. The actions undertaken by Rosneft, and its curator in Putin’s inner circle, Igor Sechin, have effectively undermined the Kremlin’s strategy of diversification of oil exports to Asia. They have led to the dependence on one customer – China. One cannot avoid a sense of the irony of fate – Igor Sechin as the chairman of Rosneft is pursuing a policy for which Mikhail Khodorkovsky has so far spent 10 years in jail. Back in 2002, Khodorkovsky proposed to build an oil pipeline exclusively to China. His idea went contrary to the then Russian strategy aimed at hedging against China: The Kremlin had planned to incite Sino-Japanese rivalry over access to Russian resources and oil transportation routes. The economic crisis of 2008-2009 forced Russia to give up this idea; although it still strived not to become reliant on one sole client in Asia. Sechin’s current behaviour almost completely undermines this.

With regard to the domestic scene, China has unintentionally become a shaping force of Russia’s domestic power relations. Sechin and Rosneft both thrive on deals with China, gaining easy money and additional influence through bargaining over further assets (such as TNK-BP which has just been taken over, while other oil firms like Bashneft are threatened with takeover). The CNPC’s deal with Novatek strengthens the latter against Gazprom and weakens this Russian gas behemoth in its continuous fight to keep its export monopoly. In the meantime, Gazprom has still not struck the expected deal with China, which was supposed to pave the way for the first gas pipeline in Asia and open the Chinese market. In June yet another publicly set deadline passed.