Although energy security is an important issue for states at all times, it has become a much more discussed issue since the energy crisis created by the Russia-Ukraine War that broke out in 2022. During the energy crisis, China has come to the fore as the world’s largest energy consuming country.
From this point of view, Ankara Center for Crisis and Policy Studies (ANKASAM) presents the views of Ewelina Kochanek, an assistant professor at the University of Szczecin, about China’s moves towards energy security.
- Russia, which has begun to lose its place in the European energy market, has tended to deepen its relations with China in the field of energy. Can China replace Europe at this point?
Russian-Chinese energy cooperation, which began at the beginning of the 21st century with the construction of two lines of the Eastern Siberia-Pacific Ocean (ESPO) oil pipeline, has resulted in closer cooperation in the oil sector. In 2013 – 2016, Russia doubled its exports to China, thus becoming the main oil supplier to China. Further tightening of energy cooperation concerned gas. In 2014, a contract was concluded for the construction of the first Russian-Chinese gas pipeline Power of Siberia, which was completed in 2019.
Until recently, it seemed that China would become the largest Russian recipient of oil and gas, slowly replacing Europe in this place, but recent events show a change in the strategic thinking of the Chinese authorities. Most likely China, being aware of the current Russian difficulties regarding the implementation of many investments in the energy sector, including the launch of the second branch of the Power of Siberia, ensuring the full capacity of the pipeline of 38 billion m3, the launch of which has already been postponed by 2027, decided to find another serious alternative for their economy, without waiting for further negative consequences for Russia in the face of the ongoing war in Ukraine.
2.China alone consumes 26,5% of the world’s energy. Since it is a country highly dependent on energy, it makes various agreements with many countries from different regions. How do you evaluate China’s establishment of energy partnerships from almost all parts of the world?
The extensive diversification of the structure of gas supplies undertaken by China ensures the most effective protection of its interests in the energy sector, giving the possibility of compensating for the possible negative effects of interruptions in supplies or attempts to manipulate the markets of energy resources. At the same time, the diversity of gas suppliers secures the interests of various business entities, enabling the economic development of the country. Therefore, it is important for China to increase its energy partners.
3.The world’s longest energy deal was signed between Qatar and China several months ago. Qatar has committed to send natural gas to China for 27 years. What do you think about this?
At a time of increasing international competition for LNG supplies, the long-term Qatari gas deal provides China with energy security and thus control over energy supplies for its economy. Energy security gives China an advantage in the economy because ensuring a constant supply of gas at a fixed price for such a long time eliminates the impact of price fluctuations on production costs, translating into product competitiveness.
Moreover, this contract dispels Putin’s hopes for further tightening of energy cooperation with China. Russia hoped that China would replace Europe as the largest gas consumer. The agreement with Qatar calls into question the sense of China’s involvement in constructing the second branch of the Power of Siberia gas pipeline. It significantly weakens Russia’s negotiating position, and the sanctions and the deteriorating condition of the Russian economy will prevent Russia from implementing many investments in the energy sector, which were supposed to lead to a change in the direction of gas transport from the West to the Far East.
China is meticulously striving to expand its economic and geopolitical reach, as evidenced by the strengthening of its presence in the Persian Gulf, and especially entrenching itself as a significant stakeholder in the world’s largest natural gas field.
4.China has offered to buy oil and natural gas in yuan to the Gulf countries. How do we understand this move by China? If this situation occurs, what effects might it have on the global market?
China, as announced by Xi Jinping, wants to increase the use of its currency in oil and gas transactions with the Middle East. To this end, they intend to make full use of the Shanghai Oil Exchange and the National Gas Exchange as a platform for yuan settlements in oil and gas trading. For now, it is unclear whether any Gulf Cooperation Council country is interested in settlements in Chinese currency. Currently, the yuan is not a big threat to the dollar, which covers 41% of trade settlements in the global market. Experts believe that the opening of the Chinese capital market could cause the Chinese yuan to weaken further as the People’s Bank of China allows greater market forces to interfere in determining the value of the Chinese currency, therefore the yuan is likely to become more volatile. I don’t think the yuan will be able to outclass the petrodollar.
Dr. Ewelina Kochanek
Ewelina Kochanek holds a Ph.D. in military sciences and currently works as an assistant professor at the Institute of Political and Security Sciences at the University of Szczecin in Poland. Dr. Kochanek has practical experience in the field of national security gained during several years of work in the National Security Bureau (2005-2012). Since 2020, she has been the chairperson of the Energy Security Committee at the Polish Geopolitical Society. Her entire research activity focuses on energy security issues. She is the author of 3 monographs and over 40 publications in energy geopolitics and energy security.