"Romanticism is over": China uses Russia's problems to its advantage

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"Romanticism is over": China uses Russia's problems to its advantage 18.04.2018 14:20

Excessive expectations for cooperation with China, which prevailed during the introduction of the first anti-Russian sanctions in 2014, were not justified. As the correspondent of IA REGNUM reports, this was stated on April 17 by the President of the National Energy Security Fund Konstantin Simonov at the Second Sochi Eurasian Integration Forum "Prospects for the Development and Strengthening of the Shanghai Cooperation Organization".

"Now we are looking more pragmatically at this story, because in 2014, probably, there was more romanticism about the partnership with China. And despite the fact that there are obvious successes and results, the list of problems is also quite extensive", Simonov said.

In the case of China in favor of mutually beneficial cooperation, there are many factors at once: this is Russia's general strategic movement to the East, and the growth of China's economy, which has been the largest importer of oil in the world for several years, but at the same time it has a very small share of gas for such an economy energy balance due to "large distortions in the direction of coal".

In this regard, the level of gas consumption will grow objectively for environmental, economic and logistical reasons. And the export of oil to China has already exceeded 50 million tons, which represents a decent figure with total exports for the previous year of 267 million - in the end, by 2017, the share of the Asian market in Russian supplies was already 29%, the expert said.

"It would seem that here we could objectively find common interests. We have a big border; we are able to organize deliveries without intermediaries. We know from our own experience and whether China guesses, which can happen with the supply, if the transit risks are quite strong. Russia is ready to carry out such supplies, bypassing all these problems - all that we have with the West today in the form of Ukraine, here even the prerequisites are not present", - said Simonov

“In this regard, we have something to report. But we cannot say that everything is unproblematic. This, in general, reflects the situation that we have in this complex world", he continued.

According to him, China has made it clear that it is going to "get certain advantages" from the current international situation.

"For us, this may be expected, but perhaps not fully understood when we expected that the difficulties with the West would be compensated for by a more rapid dialogue with China. Instead, it is perceived by China as an opportunity to additionally receive some benefits from the difficulties that we face", the expert said.

First of all, this concerns the availability of financial resources.

"It's no secret that China has a surplus of finance, and we have a certain deficit. When the first sanctions were imposed on the financial sector, there were expectations in 2014 that there are no problems, and China will definitely give us this money, we will now get these credit resources. However, although China, of course, was willing to give this money, interest policy was not very humane. And many oil companies honestly admit that even in conditions of sanctions they are cheaper to borrow in the West, because all opportunities for this are still not blocked", explained Simonov.

"In this regard, look, where Gazprom places its bonds. Just recently, after the story with Scripal, they were placed in London, and the demand for Gazprom's bonds was three times higher than the offer. In this regard, the interest rate was still quite low, and no Eurobonds were replaced by any of the chip bonds in reality", he cited.

However, no less difficulty arises with the payment of already received loans. The most famous example is the "Chinese prepayment" of Transneft and Rosneft (on account of previous deliveries).

"These are large sums, and interesting news of recent days is that Transneft signed an agreement with Sberbank on obtaining a credit line that will cover the loan that was received by China," Simonov pointed out.

"This means that Transneft has received from the Russian bank the money that allows it to finance the loan that they gave to China. This despite the fact that, Transneft and Sberbank recently had a court, and they have complicated complex relationships. However, it turned out that it is easier for our state-owned companies to negotiate and get money in conditions when our banks cannot receive cheap money at a low rate in the West", he explained.

Finally, expectations of Chinese investment activity also fell short.

"There are, of course, major positive examples. I would have seen stories with Yamal-LNG and Rosneft. But it's not necessary to say that we have a mass procession of Chinese investors on Russian projects", the economist said.

The most telling story was with the sale of Vankorneft to the Chinese - Rosneft offered to buy a share of the almost finished project, but even so, China did not enter the project anyway. The story with Rosneft also turned out to be quite unexpected. A deal to sell the stake in a 14% stake in Rosneft to the Chinese oil company CEFC has not yet been accomplished.

"I think that if in the end the Chinese enter into the share capital of Rosneft, this will be arranged with a number of conditions, because many have forgotten that when negotiations were initially conducted and China was considered a potential buyer, even then he advanced additional conditions for a special status in the board of directors, on additional places. And this already then caused a cautious attitude", the expert believes.

Finally, there were many expectations from the joint cooperation in the service business with China. When the sanctions were only introduced, Russian industrialists were particularly worried about the service - in this industry, American companies and companies with US shareholders dominate, while the agenda included the development of fields with absolutely different technologies of oil production.

However, cooperation has not developed - on the contrary; China unilaterally lobbies the interests of its own producers, which is contrary to the interests of the national industry of Russia. The same applies to other branches of the manufacturing industry, pipeline construction and mechanical engineering, he stated.

"China is pleased to be ready to supply oil and gas equipment ... but many Russian manufacturers complain about it. They say that in mechanical engineering, pipes - import substitution occurs one import to another", - said Simonov.

On 17 and 18 April, the Second Sochi Eurasian Integration Forum "Prospects for the Development and Strengthening of the Shanghai Cooperation Organization" is held. About 200 representatives of 17 countries took part in it. As a result of the events, the forum participants adopted a final resolution in which the basic principles of the SCO's work were confirmed, the aggression of the United States, Britain and France against Syria was condemned on April 14, 2018, and calls for a comprehensive and joint struggle against international terrorism were voiced.