The New York Times is reporting today that, notwithstanding an official visit by President Putin, China and Russia (through Gazprom) have so far failed to reach an agreement on pricing of natural gas exports from Russia (See Jane Perlez, "China and Russia fail to reach agreement on gas plan," New York Times, 20 May 2014, at: http://www.nytimes.com/2014/05/21/world/asia/china-russia.html?_r=0). Apparently, negotiators from Gazprom have failed to sufficiently reduce their offer price of gas to the China National Petroleum Corporation to secure a long term supply contract with its erstwhile Chinese partners. The article rightly situates the negotiation of a supply agreement within the context of the Ukrainian crisis and the limited application of sanctions by the U.S. and EU against Russian individuals and corporate entities in response to alleged Russian interference with the internal politics of Ukraine.
Several lessons for American foreign policy, in relation to China, Russia, and Ukraine, make themselves apparent here. First, the potential threat for a long term reallignment of energy consumption by Europe, arising strategically in response to overly aggressive Russian regional policy maneuvers, seems to be taken seriously in Moscow (even to the extent that European, and especially German, policy makers have shown no willingness to contemplate long term changes in energy consumption) if Gazprom is actually moving closer to an agreement with China. If this is the case, we might conjecture that such a deal is inevitable. As Perlez notes in the Times article, quoting a Chinese international relations expert, any deal would amount to "a Chinese financial assistance contract with Russia in the guise of commercial payment." That is to say, Chinese policy makers are increasingly identifying a community of interests with Russia in preventing the West from flexing its muscle in Russia's Ukrainian backyard. What we have here is a joint effort by Russia and the PRC to constrain or otherwise undermine American foreign policy influence in Eurasia. Pointedly, it is succeeding even if a deal has not yet manifest itself. The reticence of the EU to undertake more aggressive action in support of Kiev is evocative of the diminished capacity of the U.S. to exercise a Russophobic policy regime with the help of our Western European friends.
A deal between Gazprom and the China National Petroleum Corporation would be apt to manifest a range of effects on international markets, particularly markets for liquified natural gas. Critically, the present political crisis in Ukraine (and previous crises, resulting in stoppages of gas flow toward Europe), reveal the extent to which natural gas and, especially, capacities to produce and export liquified natural gas are becoming important geopolitical levers in the tripartite relationship of the U.S., Russia, and China. Thus, it might be possible, over the course of a decade or more, for the U.S. to develop its capacity to produce and export substantial quantities of liquified natural gas for the EU market and even to meet some quantity of East Asian demand. However, in addition to the potentially pernicious effects from diverting large quantities of inexpensive natural gas from the domestic U.S. market, any politically motivated effort to supplant Russian exports of natural gas where Russia currently has a foothold must, at least, be met with an aggressive effort by Russia to counter American efforts by securing new markets, especially in China. In sum, the idea of deal between Gazprom and China threatens the potential for a well-regulated long term strategic American energy policy to achieve strategic objectives relative to Moscow, especially if China is consciously committed to play Moscow off against Washington, at least in the short run, in its own self interests. Under the present circumstances of toxic partisanship in Washington (with petty, short-sighted partisan debates over old news like the attack on the U.S. Consulate in Benghazi), it is, moreover, improbable that the U.S. could devise and commit to a long term strategic energy policy.
Taking these issues into account, in addition to other relevant concerns like the effects of a Russo-Chinese deal on stagnating Russian and slowing Chinese economic growth, it would seem pertinent for the U.S. to reconsider the manner in which we are boxing ourselves into a corner on Ukraine, siding with liberal and no-so-liberal nationalists in Kiev against the possibilities of rapprochement between pro-European and pro-Russian entities through negotiation. If the possibilities for a gas deal between Russia and China reflect, at least in part, the effects of the crisis in Ukraine, then the ability of Russia to leverage Chinese support is liable to enable Putin to act more aggressively in his dealings in the eastern Ukrainian oblasts. Translation: if the U.S. maintains its current line of uncritical support for Kiev, then Kiev will lose Donetsk, Lugansk, and Kharkiiv and Washington will end up with an embarrassing quantity of egg in its face because our erstwhile Ukrainian allies pushed pro-Russian forces in the eastern oblasts too hard under conditions where Putin was positioned to gain the upper hand!
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