Russia’s Energy Pivot to Asia

Russia’s Energy Pivot to AsiaRussia’s Energy Pivot to Asia

In response to US and EU sanctions, Russia has embarked upon a heavily publicized “pivot” to Asia over the last 18 months, seeking new strategic and economic partners to mitigate the effects of Moscow’s rift with the west over Ukraine.

In keeping with Russia’s status as a major hydrocarbon exporter, natural gas has figured prominently in this attempted reorientation.

Partly in response to European efforts to diversify its gas supplies away from reliance on Russia, the Kremlin has sought to carry out a “gas pivot”, publicly asserting that any market share lost in Europe can easily be replaced in Asia’s rapidly growing energy markets, Asia Times reported.

However, Moscow’s efforts to reorient its gas exports toward Asia have faltered in recent months. The centerpieces of this effort, two massive deals for state-owned company Gazprom to export gas through pipelines to China, have encountered well-publicized difficulties, including the failure of Moscow and Beijing to agree on pricing and a dispute over who should pay for the construction of the pipelines required.

Accordingly, Gazprom’s shipments to China, originally slated to begin in 2018, are now likely to be delayed.

Russia’s efforts to become a major supplier of liquefied natural gas to Asia have also stumbled. Moscow has been slow to recognize the growing importance of LNG in world energy markets.

In a recent interview, former deputy energy minister, Vladimir Milov, lamented, "We have completely overslept during major market trends. We are so lagging behind in LNG."

Efforts to correct this lag, however, have been hampered by difficulties stemming from western sanctions on the Russian energy industry and by a long-running feud between two of the most senior energy officials in President Vladimir Putin’s inner circle, Igor Sechin (the chairman of state-owned Rosneft) and Alexey Miller (the CEO of Gazprom).

A little-noticed dispute over pipeline access on Russia’s Sakhalin Island, the latest iteration of the Sechin-Miller grudge match, has improbably emerged as a stumbling block for Moscow’s LNG ambitions.