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Dec 10, 2013 | 22:21 GMT

4 mins read

Russia's East Asian Pivot

Russia is turning to the Far East as it looks for energy export markets and seeks to reposition itself in a region of intensifying strategic competition, in which China is increasingly in need of counterweights.

Russia exports about 76 percent of its natural gas and 84 percent of its oil to Western Europe through a network of pipelines, but even as Russian exports reach their highest level in a decade, its confidence in European growth is diminishing.

Hence, Russia has turned to East Asia, where energy-hungry economies like China, Japan and South Korea offer large markets, and where Southeast Asia promises future growth. The Russian Far East — more than 70 percent of its landmass east of the Ural Mountains — provides access to the Pacific as well as land routes to China and the Korean Peninsula.

Russia has already shifted oil and natural gas exports eastward via the Eastern Siberia-Pacific Ocean oil pipeline, Sakhalin Island and its planned Power of Siberia natural gas pipeline, which it hopes to begin building soon. But in order to access markets beyond China, Russia needs to increase its liquefied natural gas capacity, which now stands just above 7 percent of its exports.

Russia's main goal is to lock down long-term agreements with China, Japan and South Korea — the main consumers — especially at a time when LNG is becoming more competitive. Russia is also drawing closer to Vietnam and India and looking at other opportunities in the region to diversify further.

However, in a broader sense, Russia is facing the challenge of building up and solidifying its interests in a region that brings strategic challenges as well as the promise of growth. China is the biggest energy consumer, but its emergence as a great power — rivaling Russian interests in Central Asia and possibly the Pacific — has prompted Moscow to revive other relations to limit its dependencies and increase regional competition. The warming relationship with its old rival Japan marks the change. This includes holding talks on contentious territorial and diplomatic topics while opening new doors to investment and trade. As long as Japanese nuclear power remains offline and politically noxious, the prospects of selling hydrocarbons are even better than otherwise.

South Korea also cannot be counted out. It is the 10th largest consumer of energy worldwide and the second largest importer of LNG. Russia first agreed to export LNG to South Korea in 2005, and agreements this year include South Korean support for modernizing the LNG fleet and investing in Russian Far East development. Seoul is especially interested in partnering with Russia as an alternative to nearby China and Japan. Russia is ideally positioned to export to South Korea because of the proximity of the two. Russia also sees the potential, eventually, to push railway and pipeline connections through North Korea.

Russia also has signed deals with Vietnam this year to help with hydrocarbon extraction, and possibly sell LNG to Vietnam, along with its ongoing support for the Vietnamese navy and nuclear power. Vietnam is a natural partner; the Communist Party has old ties with the former Soviet Union. Russia's energy projects in Vietnam may focus on extraction in disputed waters of the South China Sea, claimed by China, where other powers have been reluctant to tread. Thus, Vietnam is not only a customer but a gateway to the rest of Southeast Asia and a strategic hedge against China.

Russia and India also maintained good relations during the Cold War. India was the Soviet Union's closest partner among non-aligned states and a major recipient of Soviet military and heavy industrial aid. Russia still provides India with military hardware, recently delivering India's first aircraft carrier since 1961 and will be conducting joint air force exercises next year. India, too, may buy Russian LNG. Like Vietnam, India is another regional power that can complicate the strategic environment for China.  

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