The different levels to Russia's relationship with China have become increasingly evident in the past few years. Russia has sought to exploit its position as the world's top gas producer to demonstrate China's needs for its supplies, but also to establish a closer bond to balance the international influence of the United States.
Challenges remain within this relationship, however. The saga of Russia and China's disputes over gas pricing is symbolic of these challenges, and their one-sided nature. In April, during the visit of Chinese Vice Premier Le Keqiang to Moscow, government officials were forced to counter ideas that the Far East and Siberia were turning into resource basins for the Chinese economy.
"Russia is trying to gradually change the trade structure with China," said Lilit Gevorgyan, a Russia and CIS analyst at IHS Global Insight and Jane's Information Group in London. "The goal is to focus on more technology transfers or joint collaborative ventures."
The gas saga
One of the biggest areas of Russian- Chinese cooperation is energy, with electricity assuming importance through Chinese investment in infrastructure. The main energy issue between the two countries, though, remains gas: how to transport it and how much it will cost.
Pipeline infrastructure is a significant issue in the Russian Far East, affecting the price China will ultimately pay when agreement is reached. Trying to avoid transit through Mongolia or Kazakhstan, Gazprom is looking for two routes: one around Mongolia into northeast China, and one through Russia's Altai republic.
This last route has come in for severe criticism from environmental groups due to potential damage to the Ukok Plateau, part of a UNESCO World Heritage site.
No immediate agreement
Vyacheslav Bunkov, an oil and gas analyst at Aton investment bank, said that he didn't expect a Gazprom-China deal to be struck at the St. Petersburg International Economic Forum this week. Talks on oil and gas prices have been on the agenda at meetings of Russian and Chinese leaders for several years, most recently during Putin's visit to Beijing earlier this month. But there remains a large gap between the prices Russia says it wants, and what China is prepared to pay.
"I have a deja vu feeling," Bunkov wrote in an e-mailed response to questions. "Last year everybody was also excited that the Russian- Chinese gas contract will be signed during this forum, but it wasn't."
Still, there is a significant difference between 2012's forum and last year's event: Gazprom's negotiating position is now weaker, Bunkov said.
"The company has serious problems related to the declining gas demand from its key customers in Europe," he said. "In this environment, Gazprom has only two options: Either to sit and wait until the crisis is over, reducing its supplies to Europe, or seek new export markets. China is the most obvious and the most perceptive choice in this case, in my view."
Increasing discoveries of shale gas, especially in the United States, are also threatening Russia's position as top gas producer. While Putin was in Beijing, the International Energy Agency published a report predicting that the United States would supplant Russia as top producer by 2017. This, Bunkov said, could force Russia's hand.
Doubts over shale gas
Other analysts, meanwhile, expressed doubts that shale gas production would have such an immediate effect. The same IEA report says that the United States will itself absorb most extra production, rather than produce for export.
Mikhail Rotaev, an analyst at Renaissance Capital, said that production would have little impact on potential Russian gas supplies, simply because of distance and the difficulty American producers would have in distributing gas to China.
Here Russia undoubtedly has the upper hand compared to the United States, with the possibility of overland supply to China. But significant investment in gas transportation infrastructure is also required in the Russian Far East, Rotaev said.
Another liability is a lack of diversity in Russia's economic relationship with China. Some agreements reached during Putin's state visit reflect efforts to overcome concerns, such as a collaboration agreement between the Skolkovo Foundation and China's Z-Park high-tech center.
Regional security
The importance of energy is not merely economic, but also significant in security, with Putin having called it a "strategic asset" in a pre-visit article in the Chinese newspaper Zhenmin Jibao.
Ongoing tensions in the South China Sea over the Spratly Islands and nearby potential for oil and gas exploration, especially between the Philippines and China, have demonstrated the strategic value of energy supplies.
Stoking the fires is a refocus of the U.S. military from Europe to Asia, with Defense Secretary Leon Panetta visiting Vietnam to try to secure greater naval access to the port at Cam Ranh Bay.
Russia and China participated in anti-piracy war games in late April, the week before Li's visit to Moscow, and Russian state arms exporter Rosoboronexport agreed during Putin's Beijing visit to supply aircraft engines in a deal amounting to $700 million.
Meanwhile, the Shanghai Cooperation Organization, whose largest members are Russia and China, adopted Afghanistan as an observer member at a meeting on the heels of Putin's visit.
Gevorgyan said that the SCO, established in 2002 and including Kazakhstan, Kyrgyzstan, Tajikistan and Uzbekistan, has shared interests with NATO in Afghan stability. Instead of trying to rival NATO, the organization could simply be anticipating the Western alliance's withdrawal in 2014, and the risk of a resulting power vacuum.
"In the face of a potential resurgence of Islamic militancy in the region, SCO members do not have many choices but to cooperate more closely," Gevorgyan said in a research note. "This anti-militant effort could be also a focal point for the two alliances to cooperate. After all, NATO has significant experience in the country that the SCO members would certainly benefit from."
