Russia Direct presents the latest in its series of monthly roundups from U.S.-based think tanks focused on Russia and Eurasia.

It remains to be seen to what extent Russia-China energy alliance will be effective. Photo: ITAR TASS

In October, U.S-based think tanks focused on several key geopolitical challenges confronting Russia: the changing dynamics of global energy markets, possible EU integration with Ukraine and Moldova, Russia’s waning political influence in Georgia and a possible new role for Russia on the world stage after brokering the Syrian chemical weapons deal.

The Russia-China energy alliance

From Russia’s perspective, the shale gas revolution in the U.S. is expected to fundamentally alter the global energy market. This may compel Russia to forge a new energy alliance with China, a partner which Moscow has traditionally downplayed in favor of the EU.

In a China Daily op-ed of Oct. 25, “Energy Alliance for Better Future,” Dmitri Trenin, Director, Moscow Carnegie Center, discusses the evolving Russia-China energy alliance. Trenin underscores the impact of “developments in the global energy market and in non-energy geopolitics,” both of which are forcing Russia to make new choices. Several important factors, related to energy and geopolitics, are driving this bilateral relationship, which Trenin terms “an energy alliance.”

Two factors comprise the principal elements of this alliance. The shale gas revolution in the U.S. has “caused serious changes in international energy flows,” and the EU’s energy diversification policies have reduced Gazprom’s share of the EU market. However, pricing is the main factor that is preventing Gazprom from clinching a long-term deal with China, which refuses to pay EU or Asian prices.

Two examples of lucrative energy deals include the agreement between Novatek, Russia’s largest gas producer, and the China National Petroleum Corporation (CNPC). This represents a new milestone: for the first time, it gives a Chinese company a direct stake in a Russian gas field (on the Yamal Peninsula). The second project involves Rosneft, which signed a series of agreements, initially with CNPC, and now with the China Petroleum and Chemical Corporation. These are moves aimed at diversifying its partners in China.

On the geopolitical front, non-energy geopolitics is also playing a role. Today Putin’s vision is focused on Eurasian integration, which he views as a counterpoint to the EU. Putin also wants Russia to participate in the economic dynamism of the Asia-Pacific region, which he regards “as economically more important than Europe,” Trenin writes. His “entry point” is the development the Russian Far East and Siberia. China is a key partner in this enterprise, “an ally in implementing Putin's vision of a world order based on big-power consensus, without an obvious hegemony,” the author notes.

In “Russia's Shrinking Leverage with China on Oil and Gas Issues,” published on Oct. 23 by Matthew Philips, Associate Editor, Bloomberg Businessweek, the author notes that the prospect of cheap U.S. gas flooding global markets in the next five years is making Russia nervous. Despite the signing of many lucrative deals, the most important agreement that Gazprom has been after for a decade, namely “a long-term agreement to sell China natural gas through a dedicated pipeline” continues to evade Moscow, writes Philips. Russia is “eager to lock in a price before the U.S. begins flooding the market with cheap LNG exports in the next few years,” writes Philips. 

EU expansion and the Vilnius Summit

Russia is also facing the prospect of greater European influence in its “Near Abroad.” The EU’s expected offer of Association Agreements to Ukraine and Moldova at the forthcoming EU Summit in Vilnius at the end of November has evoked the Kremlin’s ire. Despite trying to maintain equidistance between the EU and Russia, Ukraine is eager to join the EU, a move that undermines Russian plans for it to join the Eurasian Union.

In “Russia on a Collision Course with the European Union,” published on Oct. 10, Pavel Felgenhauer, senior Jamestown analyst at its Eurasia Daily Monitor (EDM), focuses on the forthcoming EU Vilnius Summit between the EU and its Eastern Partnership countries on Nov. 28-29. This is a watershed moment as the EU prepares to put another stone in the edifice of its Eastern Partnership. The EU is set to offer Association Agreements, including a free trade zone, to Ukraine, Georgia and Moldova, countries Moscow regards as being in its “exclusive spheres of influence,” according to the author. Prospects of EU membership raise alarm bells in Moscow, which believes such policies “are aimed at undermining Putin’s efforts to reintegrate the post-Soviet space by forming a Eurasian Union.”

Moscow has retaliated with sanctions or embargoes, for example, by slowing clearance of Ukrainian goods entering Russia, and banning imports of Moldovan wine and Lithuanian dairy products. Moscow is also in a row with the Netherlands over the arrest of 30 Greenpeace protesters from the “Arctic Sunrise” during the oil rig protest in the Barents Sea in September on trumped up charges – all of which appears to be taking Russia and the EU on a collision course, Felgenhauer notes.

In “Ukraine’s Yanukovych Caught between Russia and the European Union,” published in World Politics Review on Oct. 23, Steven Pifer, Brookings Senior Fellow and former U.S. ambassador to Ukraine, discusses Ukraine’s current conundrum – having to choose between the European Union and Moscow. Since his election in 2010, President Yanukovych has pursued EU integration whilst also maintaining a positive relations with Moscow. Kiev is clearly intent on signing an Association Agreement given that EU trade exceeds trade with Russia, and the “combined GDP of the EU is six times that of the Moscow-led union,” writes Pifer. Pifer notes that if Ukraine “integrates EU norms and standards” and draws close to Europe, this would represent “a major loss for Russia, which is striving to rebuild its influence in the post-Soviet space.”

Georgian political implications

Another concern for Russia is its ability to influence events in Georgia. In the recent presidential elections in Georgia, the pro-Kremlin candidate Nino Burjanadze came in a distant third. The results show that Moscow’s influence is waning in Georgia, despite longstanding historical ties. The electorate is not kindly disposed to Moscow for its failure to reach a “strategic compromise” with Georgia over South Ossetia and Abkhazia.

In “Georgia Elects its Fourth President,” published in EDM on Oct. 30, journalist and EDM contributor Giorgi Menabde concludes that an important outcome of the recent October presidential elections in Georgia is that Nino Burjanadze, deemed the “pro-Russian candidate,” suffered a considerable defeat coming in third place with just over ten percent of the vote. During her campaign she had criticized both President Saakashvili and Prime Minister Bidzina Ivanishvili for their “unwillingness to reach a strategic compromise with Russia,” writes Menabde.

A second important development is that a new milestone was reached in Georgia – the beginning of a stable two party-system: David Bakradze’s “second-place finish in the presidential race means that the United National Movement (UNM) is turning into an influential opposition force.” Saakashvili, who will remain nominal head of the UNM, is expected to remain a political player, although not the dominant figure, or “Superman,” of his  early career.