A view of a construction site of China-Russia East-Route Natural Gas Pipeline in Heihe, Northeast China's Heilongjiang Province in October. Photo: IC

China and Russia stand a unique chance to boost their energy trade as well as total trade by adding natural gas as the second wheel on their energy cooperation wagon - in addition to oil - amid the escalating China-US trade war, Chinese analysts pointed out on Monday.

The comments were made days before the Second Russian-Chinese Energy Business Forum, which will be held in St Petersburg later this week. Media reports said that Russian state-owned energy giant Gazprom's natural gas shipments will come to China via the Power of Siberia pipeline this December. 

The forum will be convened as the trade war between China and the US, the world's two largest economies, entered a white hot phase with China going ahead with its retaliatory tariffs on $60 billion in US goods in response to US tariffs on almost half of its imports from China. 

US liquefied natural gas (LNG) was hit with a tariff of 25 percent, the highest rate in the Chinese countermeasures. 

Zhang Hong, a research fellow at the Institute of Russian, Eastern European & Central Asian Studies of the Chinese Academy of Social Sciences, said that overland energy cooperation between China and Russia would be a security-boosting move for China, which is experiencing external risks brought by the trade war. 

"The piping of Russian natural gas due in December will also add a whole new wheel to the Sino-Russian energy trade wagon, which up to now has been dominated by trade in oil," Zhang said. "The wagon will be driven by two wheels."

Russia has surpassed Saudi Arabia as China's leading oil supplier for the past three years.

Moreover, pipeline natural gas trade will prove to be a powerful vehicle to help the two countries reach their ambitious target of boosting bilateral trade to $200 billion by 2024. Bilateral trade just passed the $100 billion threshold in 2018, according to data from China's Ministry of Commerce. 

"There are bottlenecks for hitting the $200 billion target, as the economic size of Russia may not be able to absorb much in terms of Chinese exports," Zhang said. 

"The massive scale of natural gas exports from Russia to China will inject stability into the momentum of achieving such an ambitious target." 

Gazprom, the world's largest natural gas exporter, is rushing to complete its 4,000-kilometer Power of Siberia pipeline project by the end of 2019 to deliver up to 38 billion cubic meters of gas per year to China by 2025.

Gazprom will start pipeline shipments to China on December 1, Alexei Miller, head of Gazprom, said at an event in Beijing in March. "2019 is a significant year for both Russia and China. A new era of our cooperation in the energy sector begins this year," Miller said.

Zhang said given that China may turn to US energy purchases when the trade conflicts are resolved, the time to nail down deals between China and Russia is precious.

"Now is a window of opportunity for signing deals that is too dear to be wasted by Russia," Zhang told the Global Times on Monday. 

China is the world's foremost energy consumer and it is poised to stay in this position until 2040, according to a report by BP. In 2018, China was the world's largest crude oil and natural gas importer.

Impact on US

Jin Lei, an associate professor at the China University of Petroleum, said the escalating trade war means that the forum at St Petersburg is an opportunity for China and Russia to foster mutual understanding, generate specific models of cooperation and speed up projects that were previously on a slow track. "[The trade war] can effectively jumpstart Sino-Russian projects that were originally shelved or not given priority," Jin told the Global Times. 

"There are high expectations for the forum, as both tentative agreements and concrete deals are expected to be signed," Jin said, adding that issues such as increasing Russian oil imports to China might also be discussed and deals signed given the current situation in Iran, which is facing sanctions by the US.

China considered US a viable import source for its energy security, right before the trade war which was started in 2018. Then the trade war kicked in, and Chinese importers have largely shunned US natural gas and crude oil.

"Natural gas imports from Russia will fill the vacuum left by US natural gas exporters from their 2017 level in just one or two years," Jin said, predicting Russian pipeline gas shipments will hit 5 bcm per year initially and grow to 38 bcm in about five years."This trend will seriously affect the US energy dominance plan, as the US has just turned from being a net energy importer to a net energy exporter and is making efforts to explore new markets," Jin said.
Newspaper headline: Forum an opportunity for Russia, China