EconoMatters, Global HotSpots

First China, Now India: Putin’s Tilt to Asia

President Putin puts on the hard sell in Asia.

Credit: ID1974 - Shutterstock.com)

Takeaways


  • When it comes to the much debated tilt to Asia, it seems that President Putin is winning the game.
  • Mr. Putin goes to New Delhi not as a leader of a superpower, but as a salesman.
  • Putin knows the global energy market better than any Western leader.
  • Putin is making energy trade part of much bigger bilateral relationships.
  • The US has difficulty accepting that the world as a whole has not become a U.S. sphere of influence.
  • Putin has snapped up at least 20% of the Chinese gas market for the next two decades.

When it comes to the much debated and much promised tilt to Asia, it seems that President Vladimir Putin is winning the game.

In the last six months, he has signed two major long-term gas supply deals with China. Major new pipelines are to be built from East Siberia – funded by the Chinese. In total, Mr. Putin has snapped up at least 20% of the Chinese market for the next two decades.

His next stop is New Delhi to meet the new Indian Prime Minister Narendra Modi. Another major energy deal will be signed, which will involve both Rosneft, Russia’s main oil producer, and Gazprom.

While the details are not yet public, it seems that Mr. Putin will be signing a deal which gives Russia a key strategic role in meeting India’s energy requirements for many years to come.

Mr. Putin starts with a weak hand

Without a doubt, Russia’s economy has been much damaged by the fall in oil prices. There also is the risk of further damage from the creeping impact of sanctions designed to punish Russian behavior in Ukraine. The ruble falls day by day and there has been a large exodus of capital from Russia.

The Russian economy remains dependent on oil and gas production and exports. The state budget is just beginning to be adjusted downwards, as it becomes clear that revenues in 2015 will not match the planned figures – all of which were based on world oil prices of $90 a barrel or higher.

This is a weak hand – but President Putin is playing it well. He knows the global energy market better than any western leader and has seized the opportunity. That is why he is signing large-scale, long-term deals with two of the very few countries in the world that are anticipating rising demand and hence an increasing import requirement.

From Russia’s perspective, the deals sacrifice price to market share. Mr. Putin is more interested in securing export volumes than in the price paid. As the Chinese and the Indians well understand, the world has moved into a buyers’ market.

There is more supply than demand. With the added ingredients of political support and, certainly in the case of India, the added bonus of sales of defense equipment, Mr. Putin is moving to secure his objective by making energy trade part of much bigger bilateral relationships.

In neither the Chinese or Russian case are the buyers frightened by the prospect of dependence on Moscow. They will have other supply lines and must be well aware that in a market of surplus gas, Russia cannot afford to risk its future by using supply as a political tool.

Asia is the market of the future

However, at a moment of strategic weakness, Moscow is in no position to impose political terms – a fact which makes the deals all the more attractive to the buyers.

Mr. Putin’s tilt to Asia is rational for a resource-dependent economy. With North America soon to be effectively self-sufficient, Asia is the market of the future.

Mr. Putin’s approach – cool and logical, reflecting the realities of the new global economy – contrasts with the complexities of the U.S. position. That position remains mired in past commitments to old allies such as Taiwan and in domestic political concerns over issues such as human rights. That is a topic one can bet President Putin never raises on his foreign trips.

More serious, though, is the continuing American reluctance to accept that the world as a whole has not become a U.S. sphere of influence. China, and now India, are significant powers which have to be treated as such. Lecturing to others is not a good basis for an effective foreign policy.

Mr. Putin goes to New Delhi not as a leader of a superpower, but as a salesman. As a salesman, you have to start by using what the customer wants and working to provide whatever is required.

To succeed in the tilt to Asia, the United States would do well to start by listening and by treating others as sovereign powers with interests of their own. If it doesn’t, it may find that the world is starting to organize itself without the United States.

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About Nick Butler

Nick Butler is a visiting professor and chair of the King's Policy Institute at Kings College London.

Responses to “First China, Now India: Putin’s Tilt to Asia”

Archived Comments.

  1. On December 11, 2014 at 11:59 am shiva iyer responded with... #

    Well said..

  2. On December 11, 2014 at 3:03 pm slightly optimistic responded with... #

    Resource sharing in the Shanghai Cooperation Organisation? In return for Russia’s long-term deals with China and India, President Putin is also ensuring that both these countries have a big stake in Russia’s reserves – call it more energy security for the Kremlin.

    Another customer for Russian gas, the EU, is hopelessly split: An essay in ‘Foreign Affairs’ explains that there is no common practice: some say the EU should buy as little gas from Russia as possible; some say the priority is to restrict carbon emissions; others say the national economy comes first.

    The background is that a few members of the EU get all their gas from Russia, Germany gets half, and Poland gets only a quarter as much as Germany – partly because its coal mines provide 54% of total consumption.

    Poland is more concerned about competitiveness than climate change.

  3. On December 11, 2014 at 9:23 pm Real Truth responded with... #

    First sensible article in the Western world on this subject. It is disappointing to see the amount of ignorance and jingoism that misinforms most American and some British discourse on matters related to the rest of the world. Let’s hope this wont be the last.

  4. On December 12, 2014 at 10:17 am slightly optimistic responded with... #

    It seems that territorial disputes have been around forever. In the offing is the ownership of resources in the Arctic, especially now that there is the possibility of an SCO energy partnership.
    The Arctic holds vast undiscovered hydrocarbon reserves, another essay in this week’s ‘Foreign Affairs’ tells us. In order to ensure fairness of distribution it is recommending that the US commissions more icebreakers to enable its fleet to travel quickly to the theatre of operations.

  5. On December 14, 2014 at 7:59 am Paul from Jersey responded with... #

    This isn’t a horse race. It’s difficult to discern who’s “winning” and who’s “losing” at any point in time. Perhaps this piece simply needed a lead and the editor opted for the most obviously conventional one. But just as perhaps, we ought not to confuse “activity” with “advance,” particularly given the parlous state of Putin’s economy and his genuine risk of overreach as, to the rear of his imperial grasp, his third-world, extraction-based economy is cratering out.

    Moreover, one can have little idea of what Professor Butler speaks of when he writes of “the continuing American reluctance to accept that the world as a whole has not become a U.S. sphere of influence.” No US administration since the 19th century has been more aware – or has acted in mindfulness of – the limitations of American power than Obama’s. What can those words possibly mean? Or are you simply listening to Obama’s jingoist opposition and taking that for national sentiment?

  6. On December 14, 2014 at 8:27 am Paul from Jersey responded with... #

    This isn’t a horse race. It’s difficult to discern who’s “winning” and who’s “losing” at any point in time. Perhaps this piece simply needed a lead and the editor opted for the most obviously conventional one. But just as perhaps, we ought not to confuse “activity” with “advance,” particularly given the parlous state of Putin’s economy and his genuine risk of overreach as, to the rear of his imperial grasp, his third-world, extraction-based economy is cratering out.

    Moreover, one can have little idea of what Professor Butler speaks of when he writes of “the continuing American reluctance to accept that the world as a whole has not become a U.S. sphere of influence.” No US administration since the 19th century has been more aware – or has acted in mindfulness of – the limitations of American power than Obama’s. What can those words possibly mean? Or are you simply listening to Obama’s jingoist opposition and taking that for national sentiment?

    A much more sensible and measured analysis appears on the same page, in Sanjeev S. Ahluwalia’s piece.

  7. On December 16, 2014 at 12:21 pm slightly optimistic responded with... #

    Ownership of resources in the Arctic?

    Arctic Studies is a department of Iceland University. A recent essay from there suggests discord in the SCO on energy. China is now an Observer in the Arctic Council; however Russia was opposed to giving Beijing a say in the division of Arctic resources; Russia took a regional view, whereas China regards the oil, gas etc as global property.

    Pity that Beijing’s attitude isn’t consistent – in the China Seas for example.