Imagine a country that holds 20 percent of the global population spread out over 20 percent of the Earth’s landmass that stretches around 20 percent of the planet. You do not have to imagine it. Those numbers measure China combined with the Russia.
During the period from 1960 and 1989, relations between the two countries were extremely bad. At the height of the Sino-Soviet split, a seven-month long undeclared war was fought between the two over areas of their common border that was not fully resolved until 1991. Part of the battle was ideological as to the “best” form of communism. Since both systems failed, no winner was declared. Conspiracy theorists claim that the United States produced some incidents that created deep suspicions between China and the USSR.
By the end of 1991, the Soviet Union ceased to exist. Deng Xiaoping was firmly in power over China as he instituted market reforms. By 1995 both countries had at least fledgling stock markets up and running.
The past 10 years has marked a striking increase in positive relations between the two nations. This has accelerated since the global financial crisis began in 2008. There are still of course differing national interests between China and Russia that are sometimes in conflict. However, Russia has benefited from China’s financial and political backing in its disputes with both the US and Europe. China needs Russia to fulfill its “One Belt One Road Initiative”.
This has been a clear example of “the whole is greater than the sum of the parts”, meaning the two nations combining forces and working together can wield more power and influence than they can separately.
Rosneft is an integrated oil company majority owned by the government of Russia. As of 2016, Rosneft was the 51st-largest company in the world and effectively controls Russia’s oil production and refining. Rosneft also operates shipping pipeline and marketing companies.
Essar Oil is an India-based company engaged in the exploration and production of oil and natural gas, refining of crude oil and marketing of petroleum products. In October 2016 Rosneft bought a 49-percent stake in Essar Oil and with Russian investment fund United Capital holding 24 percent of Essar, Rosneft effectively has complete control over Essar and ownership of India’s second-largest oil refinery. This gives Rosneft strong participation in India’s oil industry. This $13- billion deal was the largest foreign investment in India.
Enter the Chinese. Last week Rosneft announce the sale of 14 percent of the company to CEFC China Energy, a private Chinese conglomerate, for $9 billion. This is the first major buy-in of a Chinese company into the Russian oil and gas business. Rosneft and CEFC have a strong relationship, signing a huge deal for China to be able to buy Russian oil for several decades in the future. And China now has a direct foothold in the Indian oil market. India, that’s the country that China is engaged in with a fierce border dispute.
These interlocking deals are a critical development in the worlds’ energy picture. But more than that is the continuing and increasing cooperation and union of the Russian Bear and the Chinese Dragon. We are probably seeing the greatest shift of geopolitical and economic power since the beginning of the 20th “American Century”.