Cold War Reminders: Russia and China Gas Deal Highlights U.S. Tensions

Source: Thinkstock

Source: Thinkstock

China and Russia agreed on an enormous $400 billion gas deal Wednesday, adding fuel to international tensions with an all too familiar combination of faces in conflict with the U.S. The contract is for 30 years worth of Russia’s gas-export business, which will be moved to China via the pipeline in Siberia, a plan confirmed by the state-owned China National Petroleum Corporation, according to USA TODAY. “The political requirements on both sides are so powerful they can overcome the concerns on price. This is a political action by both sides,” said international relations expert Shi Yinhong — of the People’s University of China — to USA TODAY. He called the gas contract “good news for both countries,” which is likely true, but certainly isn’t good news for the U.S., which has been in confrontations with both over the last few days and months.

International disagreement with Russia over interference both militarily and politically in Ukraine has had both Europe and the U.S. placing economic and political sanctions on Russia. Russian actions include troop movement claimed to be part of a training exercise, as well as the illegal annexation of Ukraine’s Crimean region, and a number of other condemned activities regarding espionage and fostering unrest.

The U.S. has been working to support Ukraine both diplomatically and financially with $1 billion worth of aid to slightly alleviate Ukrainian debt and infrastructure needs, as well as discussing ways to route more of the U.S. gas industry to Europe to help combat EU dependence on Russian energy. This latest deal with China allows Russia to circumvent some of the impact that economic sanctions might have, and it’s acting as a ringing reminder of historical global divisions and enemies. Yinhong noted that while China has started “tilting” more in favor of Russia regarding Ukraine, this isn’t what he’d call “an alliance,” but rather more “a convenient coalition.”

In a press conference earlier this week, White House Press Secretary Jay Carney addressed relations with Russia, admitting that measures promised by Russia’s President, Vladimir Putin, were not being executed — specifically troop withdrawal from the Ukrainian border. “At this point, we see no indication of any movement, which has been the case, as you noted, several times before. I think it’s fair to say that we would know and would be able to confirm for you if the Russian military had, in fact, moved back, deployed away form the Ukrainian border, but we have not yet seen any indication that that’s the case.”

With activity indicating sanctions against Russia could be prolonged, it makes sense that Russia is looking to branch trade in other directions. But while China and Russia have a shared history of hostility for the United States that doesn’t change the fact that, as Yinhong points out, they continue to have discordant positions over certain matters. Still, the commonality might be what proves most important at least for the moment, with China seeing similarly unfriendly interchanges with the U.S. in recent days. Five members of the Chinese military were accused of targeting American companies using cyber espionage, with economically detrimental effects to U.S. business. Perpetrators are accused of stealing information on intellectual property, blueprints that could be used to cut research and development costs for competing companies, business plans, pricing, and other key informational items.

U.S. accusations and condemnation from Attorney General Eric Holder were met with return accusations from the Chinese Foreign Ministry, which claimed the U.S. was had “deliberately fabricated facts” and had committed its own cyber attacks on China. Carney spoke on China at a press conference Monday, saying the U.S. isn’t “going to sugarcoat our disagreements with any other nation on these [cyber security] issues, nor are we going to forego opportunities where we can find ground for cooperation and coordination.”

Russian conflict with the west — and the U.S. specifically — has a way of forcing a degree of loyalty when it comes to economic matters, as is shown in the case of Japan as well. While the East Asian country is closely allied with the U.S., failing to commit to Russia on energy interests would put it in a considerably less adventitious position in the industry. “Russia is looking even more to Asia than before. If Japanese companies hesitate to do business, it would be China that picks up the windfall gains,” said Nobuo Tanaka, former executive director of International Energy Agency, to The Wall Street Journal. Russia’s importance in the energy market is considerably more important to Japan than other interests have been in the past. Sergey Milanov, a law firm partner with K&L Gates who advises on Japan/Russia energy, discussed the example of Iran with The Wall Street Journal. In 2010, Japan’s Inpex Corp., which was 19 percent government-owned, chose to extract itself from an oil project in Iran as a result of U.S. sanctions.

But Milanov says this likely cannot be the same for relations with Russia. “This is different from Iran. The volume of energy Russia produces is much bigger. [It’s] hard to imagine … comprehensive sanctions,” he said. On top of that, Reuters reports that European and Russian energy experts don’t foresee interruptions to exchanges. “We think there are incentives on both sides not to interrupt supply. In Europe, because it is dependent on gas deliveries from Russia, and Russia, because it’s an important source of income,” said Rune Bjornson, senior vice president at Statoil in Norway, to Reuters. With enough continued trade with Europe, a new deal with China, and unlikely sanctions from Japan, it’s hardly surprising that troop withdrawal has not been observed on the Ukrainian border.

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