The rise of Asian oil demand over the last 20 years has prompted the Russian Federation to seek opportunities to export to the People’s Republic of China and other growing markets. Since 2013, this trend has been branded alternately as part of a Russian “pivot to Asia,” as part of a deepening alignment between Russia and China and as a source of market competition between Russia and the Kingdom of Saudi Arabia. Concern over the growing ties between Russia and China has concerned many policymakers.
Yet, even amid strengthening economic relations, Russia’s energy provision to China has not been a resounding success story. True, oil exports to China have grown consistently since 2010, but a broader view of Russia’s oil sector since 2000 tells a different story. Russia has struggled to keep pace with shifting supply and demand balances because of high tax rates on the oil sector; policy chaos; compromise between budgetary, sector, and foreign policy needs; and market forces. Though Moscow has become China’s leading source of oil, the structural domestic and market challenges facing its oil sector threaten the long-term sustainability of Russia’s export gains in China and the Asia-Pacific.