On Wednesday, after wee-hours bargaining that capped more than a decade of negotiations, Gazprom and China National Petroleum Corporation announced the signing of a 30-year gs-supply contract, estimated by the parties to be worth $400 billion. Pursuant to the deal between the two state-owned giants, CNPC will buy up to 38 billion cubic meters of gas annually starting 2018.
Russia sells substantial quantities of gas to Western Europe, but no one thinks Moscow is a strategic partner to nations there. But when the purchaser is China, the assessment changes, and observers see the fate of the deal as a barometer of the relationship between Beijing and Moscow and an indication of the future of the world. “Mr. Putin’s ambition of creating a ‘Eurasian Economic Union’ stretching from Crimea to Harbin has come closer to fruition,” the Wall Street Journal wrote in an editorial Thursday. “The echoes of the non-aggression pacts of the 1930s get louder in this age of American retreat.”
So is the just-announced energy deal this century’s version of the infamous 1939 Molotov-Ribbentrop pact? If the Journal is correct, the Gazprom-CNPC contract is of immense significance.
At first glance, it appears unlikely that any arrangement to supply gas could be so important, and in this particular case there are some reasons to think the signing has been invested with too much significance. For one thing, it is not entirely clear just what the parties agreed to. They did not disclose prices or even details of their pricing formulas on Wednesday, and key terms were also kept secret. Alexey Miller, Gazprom’s chief executive, admits some elements of the arrangement are not fully agreed. One might argue, therefore, that we should worry more about the durability of the contract than the formation of this century’s version of the Axis.
Yet outsiders are investing the deal with significance because Beijing and Moscow have done so. According to reports, China’s Xi Jinping and Russia’s Vladimir Putin made a decision at the Sochi Winter Olympics to go ahead with this deal, a clear indication of the political nature of the contract.
Moreover, the circumstances of the signing suggest that the contract was concluded Wednesday morning because the Chinese and Russian leaders made a decision to do so. As the Financial Times reported hours before the Wednesday announcement, the parties could not come to terms and had given up reaching a deal while Putin was still in Shanghai. Yet it looks as if Xi intervened to make sure the two sides reached an agreement. China’s supremo, it seems, wanted a signing ceremony with the Russian president on Chinese soil.
Of course, the Gazprom-CNPC contract takes on added significance because of context. The signing came just a day after Xi called for a “new regional security cooperation architecture” based on the Conference on Interaction and Confidence Building Measures in Asia, a grouping including Russia and Iran and excluding the United States. The gas deal, therefore, looks like a knitting together of China and Russia in, if not in an alliance then at least a working relationship.
Last October, Xi referred to the “uniqueness of China-Russia relations.” A case can be made that he was right. The two states, after all, view themselves in the same terms, see their interests converging, and often work together. They are, in short, like-minded. As a result of common perceptions, the Russians and the Chinese are closer than they have been for over a half century.
And together, the Chinese and Russians are challenging the Post-Cold War international system led by America. They are, in deeply troubling ways, changing the world, shaking the foundations of an order that has ensured the absence of major conflict and paved the way for unprecedented prosperity. Their growing cooperation is bound to aggravate their already tense relationships with the United States, and as each of them perceive their future tied to the other, they are bound to see less reason to cooperate with others.
Many argue—correctly—that China and Russia have differing interests, some of which look irreconcilable. In fact, they have quarreled more than they have cooperated since the end of the Second World War. Yet the fact remains that, especially in the last several years, they have closely cooperated, often in opposition to America and the rest of the West.
This is not to say that Beijing and Moscow could never part ways and that old antagonisms will never flare, but the Gazprom-CNPC tie-up means that both capitals see closer economic relations over the course of decades and now have more reasons to cooperate. As Kang Wu of FG Energy told Reuters, “This will really cement their relationship in a big way, and the political implications are huge.”
This one deal is thought to open up the way to other energy arrangements and perhaps cooperation across the board. They could, for instance, work more closely in the military realm, including more joint exercises and renewed arms sales by Russia to China. The Putin visit to Shanghai coincided with China-Russia naval drills in the East China Sea.
The irony is that these two nations, which have historically found it hard to partner with others, are coming to terms with each other. If they do in fact form an enduring partnership, it could mean the end of the Post-Cold War era. What follows next, for better or worse, will surely be momentous.
Gordon G. Chang is a writer. Follow him on Twitter @GordonGChang and on Forbes.com.
