Indo–Russian Energy Cooperation

Russia, under President Vladimir Putin, is well aware of the shifting global economic balance of power in favour of Asia, and understands that economic integration with this region is the key to Russia’s successful long-term economic growth and geopolitical clout. Its pursuit of closer integration with Asia hinges on its energy export goals, its desire to become a major supplier of hydrocarbon to the fast-growing economies of the Asian and Asia–Pacific regions. Likewise, Asian investment is crucial for Russia’s ability to explore and tap hydrocarbon resources in its territories (CSIS 2014; Mankoff 2015) under the pursuit of “strategic energy alliance” and “Asia pivot.”¹ Engaging with Asian countries bilaterally and multilaterally, Russian oil and gas giants such as Gazprom and Rosneft have radically strengthened their positions in the Russian Far East (Poussenkova 2010: 141). In congruence with this, Russia has speeded up its plans to expand the East Siberia–Pacific Ocean oil pipeline’s annual capacity to 80 million tonnes (1.6 million barrels per day [mbd]) by 2020, from its current capacity of about 1 mbd (Moscow Times 2014). The intention is very clear: to increase the share of total Russian oil and gas products going to Asia—that of oil, from 12% to 23%, and that of gas from 6% to 31.5% by 2035, which would mean a rise of slightly over 27% rise from the existing level (Bradshaw 2014; Schwartz 2014).

There are multiple Asian stakeholders and aspirants in Russia’s Asia pivot strategy. For Russia, China is a major export destination, and the 30-year gas deal between Gazprom and China National Petroleum Corporation (CNPC) marks the culmination of decade-long negotiations between the two countries, whereby Russia has offered 10% of its Vankor oilfield, worth $1 billion, to CNPC (Bradshaw 2014). In the midst of fierce competition, Japan too made some attractive proposals when Russia was debating the relative merits of constructing a pipeline from East Siberia to the Pacific coast (Angarsk–Daqing); it offered to pay Russia $5 billion for the pipeline construction and $2 billion towards the oilfield development. In 2014, the Russian Parliament wrote off 90% of North Korea’s debts to Russia, estimated at $10 billion, in exchange for Pyongyang’s agreement to build a pipeline that would run from Sakhalin via North Korea to South Korea (Luft 2014). At the same time, Rosneft is working with South Korea by allowing the Korea National Oil Corporation (KNOC) to participate with a 40% stake in exploration of the West Kamchatka shelf. As sanctions gradually lift off Iran, Russia is moving to invest billions of dollars towards upgrading and expanding the Iranian energy infrastructure. Moreover, in 2015, Russia signed a 10-year liquefied natural gas (LNG) agreement with Singapore’s state-owned Pavilion Gas to enhance gas supply (Brown 2015). The visit of Igor Sechin, the chief executive officer of Rosneft, to Japan, India, South Korea, the Philippines, and Vietnam towards the end of 2014 was undertaken to streamline trade in the hydrocarbon sector in these regions.