Gas deal shows centre of gravity has shifted from the West

Charles K. Ebinger and Tim Boersma of the Brookings Institution have written an opinion piece in which they outline their belief that the Sino-Russia gas deal shows that the centre of gravity has shifted from the West.

The fact that Russia and China have ‘found each other’ emphasises that the gravity of energy demand no longer lies in the transatlantic space. Asia is the new locus of global energy demand, according to the authors.

The deal is a ‘master stroke’ for Russia as well as China, the agreement fits in a long term Russia strategy to find alternative growth markets in Europe.

Furthermore, the timing could not have been better: As the US and EU anxiously wait to see whether sanctions imposed on Putin’s inner circle have any effect, Europe remained essentially unwilling to respond to Putin’s aggression out of understandable concern of substantial economic harm. This created a context in which China and Russia could overcome the last hurdles in what had been tough negotiations.

Furthermore, the authors highlight, in late May most major international oil companies were present for the St. Petersburg International Economic Forum, where new exploration contracts with Russian firm Rosneft were signed, because it is believed that sometime after the turmoil in Ukraine is over, exploration for Arctic resources will continue.

Hence, the authors hold that the US and Europe have been reminded that they are part of increasingly global markets. As energy demand shifts, so does political clout: ‘In an economy that unfortunately continues to depend overly on fossil fuels, the idea that one could isolate the world’s largest hydrocarbon producer was never realistic’.

Adapted from a report by Emma McAleavey.

Read the article online at: https://www.worldpipelines.com/business-news/10072014/sino-russian_gas_deal_895/