GT Voice: Russia’s energy pivot toward East injects new vitality to regional economy

Illustration: Chen Xia/GT

Illustration: Chen Xia/GT

Russia’s sovereign wealth fund has struck an agreement with Chinese petrochemical company Haiwei to invest about 7 billion rubles ($76.5 million) in a marine terminal project in Russia’s Far East for the shipment of liquefied petroleum gas (LPG), Russian news agency Sputnik reported on Wednesday. 

With the total project cost estimated at about 30 billion rubles, it will be Russia’s first LPG maritime terminal in the Far East.

While the specific details of the project have not been disclosed, the economic and strategic importance of the project cannot be underestimated, whether viewed through the lens of the global energy market or geopolitical implications. 

This project serves as a milestone, showcasing Russia’s increased involvement in the development of the Far East and economic partnerships in the Asia-Pacific region. Not only does it exemplify the collaboration between China and Russia in the energy sector, but it also highlights Russia’s shift toward expanding its export opportunities.

The LPG project comes as Russia is seeking to strengthen economic ties with the Asia-Pacific region, a move that aims to lessen its reliance on Europe, which has been placing mounting pressure on its economy in recent years. Apparently, through the expansion of infrastructure construction, the focus of Russia’s external economic partnerships and regional growth is gradually shifting toward the East, with the goal of tapping into diverse export markets in the Asia-Pacific region. 

The construction of the first LPG terminal in the Far East could be a pivotal move in this strategic shift. 

Based on the trajectory of the global LPG market, the establishment of the Far East terminal is poised to significantly expand Russia’s market presence in Asia. LPG is a widely utilized resource worldwide, particularly in Asia, where it accounts for approximately 40 percent of the global consumption. With major economies like China, Japan and South Korea demonstrating robust demand for LPG, the potential for growth in this region is substantial.

For a long time, energy trade with Europe was an important foundation for Russia’s economic development and trade relations. However, due to the Russia-Ukraine conflict, the EU in 2022 unveiled a plan to end the bloc’s reliance on Russian fossil fuels by 2027. According to Russia’s customs agency, Russian exports to Europe dropped by more than two-thirds in 2023, as the EU drastically cut its purchases of Russian oil and gas. Russian exports to Europe dropped 68 percent in 2023 to $84.9 billion, while exports to Asia, which has replaced Europe as the country’s main energy client, rose 5.6 percent to $306.6 billion. 

In this context, the development of the Asia-Pacific market, particularly the East Asian market, has emerged as a crucial component in Russia’s energy export strategy transformation. By collaborating with regional economies, Russia can not only discover new market opportunities for its energy products and enhance its global energy presence but also drive the diversification of its economy.

It is important to note that due to China’s status as one of the world’s largest energy consumers, diversified energy import channels are essential for ensuring its energy security. Despite criticism from the West, energy cooperation has consistently played a significant role in the economic and trade relationship between China and Russia, with potential for further growth. 

Ongoing projects and various advances serve as evidence of the deepening energy collaboration between the two nations.

For instance, last year, the two countries signed an agreement that defines the terms of cooperation for the supply of gas from Russia to China via the Far Eastern route, including the cross-border section of the gas pipeline.

Russia’s pivot toward the East in external energy cooperation is well-founded, aligning with regional needs, especially in the natural gas sector, which holds significant economic and strategic importance for regional energy security and global low-carbon development. 

We genuinely hope that energy collaboration in the Far East will progress smoothly and successfully, contributing to regional economic prosperity and development.

GT Voice: Russian Far East holds potential to cooperate with Heilongjiang

Illustration: Tang Tengfei/GT

Illustration: Tang Tengfei/GT

The eighth China-Russia Expo is scheduled to take place from May 16 to 21 in Harbin, the capital of Northeast China’s Heilongjiang Province. 

As the highest-level and largest exhibition hosted by the two countries, the expo serves as a significant platform for fostering economic and cultural exchanges between the two nations. In particular, leveraging the China-Russia Expo cooperation mechanism has the potential to breathe new life into Heilongjiang’s economic and trade collaboration with Russia’s Far East.

A closer connection with Heilongjiang will bring more development opportunities for Russia’s Far East, a prospect that offers strong certainty and has high expectations from both China and Russia.

The development potential in Russia’s Far East is vast, and with the deepening of China-Russia relations, many believe that the region is poised to emerge as a new bright spot in their cooperation. Not only is the Far East abundant in mineral, forest and agricultural resources, but its superior geographical location, adjacent to the East Asian economic circle, also makes it conducive to economic exchanges with China.

Heilongjiang, which shares a 2,981-kilometer border with Russia, also benefits from a unique geographical advantage, fostering close people-to-people exchanges and strong economic complementarity with Russia’s Far East. 

Economic and trade cooperation between Russia’s Far East and Heilongjiang encompasses various sectors including energy, agriculture, manufacturing and infrastructure. In terms of agricultural cooperation, Heilongjiang’s grain production has been combined with the agricultural development of the Far East to enhance regional food security and agricultural modernization. 

Moreover, the ongoing enhancement of infrastructure, such as the construction of cross-border railways and roads, has led to a substantial reduction in logistics costs and a significant improvement in trade facilitation levels.

Some Western public opinion has been critical of economic cooperation between China and Russia, often associating it with the Russia-Ukraine conflict. However, the rapid growth of the Asia-Pacific economy has prompted Russia to focus on developing its Far East region. For example, in 2015, Vladivostok was designated as a free port. With significant geopolitical shifts occurring globally, it is clear that the rise of the Far East is an inevitable trend. Therefore, business collaboration between China and Russia in the Far East not only demonstrates the mutual trust and friendship between the two nations but also aligns with economic rules and business sense.

It should be noted that cooperation between China and Russia in the Far East is greatly underestimated, with immense potential waiting to be unlocked. Russia’s economic structure, centered around resources, remains relatively straightforward. Also, some development commitments and plans for the Far East have yet to be fully realized, which has led to uncertainty among Chinese investors.

Clearly, the Far East’s development necessitates increased external support and collaboration, with China poised to play a significant role. Further opening-up efforts from Russia are essential in various areas to facilitate progress.

First, Russia could further simplify the investment approval procedures, lower the threshold for investment and provide more preferential policies and support for foreign investors.

Second, it could increase investment in infrastructure construction to improve the transportation, logistics, telecommunications and other infrastructure systems in the Far East.

Third, it could encourage in-depth cooperation with China in agriculture, forestry, energy, technology and other areas to promote industrial complementarity.

If China and Russia can jointly accelerate development and cooperation in the Far East, it will be an asset for the stability of the global supply chain and economic development in the Asia-Pacific region and even the world.