Did China Bankroll Russia’s Annexation of Crimea? The Role of Sino-Russian Energy Relations

Abstract

This chapter analyses bilateral Chinese–Russian energy rela-tions, pre-and post Crimea. The signing of the Power of Siberia megapro-ject in May 2014, only two months after Russia's annexation of Crimea, created the impression that China bankrolled Russia out of the crisis. To assess the veracity of this impression, the authors draw a longer timeline of Russian–Chinese cooperation, examining general economic data as well as Chinese involvement in four concrete energy projects managed by leading Russian energy companies. They find that, in general, deals made from 2014 onwards are in line with trends that originated well before the cur-rent crisis in Russia's relations with the West, and that Chinese financial contributions to the sector are not as large as they sometimes appear. In the years leading up to the conflict over Ukraine, oil prices were high, Western countries open to cooperation and foreign companies eager to invest in Russia—especially in the petroleum sector. Many Russian compa-nies, including state-controlled oil and gas corporations, took on high levels of debt, based on the assumption that oil prices would remain high. After Crimea, Russia faced not only international sanctions but also a col-lapse in the price of oil. The combination of the lower oil price and sanc-tions left Russia economically and politically vulnerable, and potentially dependent on its biggest non-Western trading partner: China. After the introduction of Western sanctions, several major develop-ments took place in Sino-Russian energy cooperation. In May 2014, the two countries reached a deal on the Power of Siberia natural gas pipeline, with an estimated value of USD 400 billion (Overland et al. 2015, p.42). During the same year, imports of oil from Russia to China increased by 36 per cent, reaching 30 million tons (Cunningham 2015b). Oil exports from Russia even displaced other suppliers: in 2014, Chinese oil imports from Saudi Arabia fell by 8 per cent and from Venezuela by 11 per cent (Cunningham 2015a; see Fig. 6.1 for further details). This development was one important motivation behind Saudi Arabia's unexpected decision to raise oil production and lower the price of oil in 2014, despite the nega-tive impact on Saudi revenues and on intra-OPEC solidarity. These developments create the impression that China was discreetly providing the financial backing for Russia's annexation of Crimea. While