Russia Looks East

Russia’s status as the world’s largest producer of hydrocarbons (oil and natural gas) today is principally the result of massive Soviet investments in western Siberian oil and gas fields dating back to the 1950s. These fields are past their peak, and in order for the Russian Federation to maintain, let alone increase, oil and gas production, new greenfields in eastern Siberia and the Far East, the Arctic, and elsewhere must be developed. These projects will be among the most expensive and technologically complicated in the history of the energy industry. The development of these projects will also increase the role of Asian investment and markets in Russia’s energy portfolio.

This study by Shoichi Itoh illustrates the challenges that Russia faces in this regard and the very mixed picture of results to date. It also sets forth a set of recommendations for the Russian government, the energy industry, and key Asian states, including the United States, to enhance Russian production in as efficient a manner as possible that benefits not only Northeast Asian energy markets but the global energy market as well. For much of the past decade, Russia has overestimated its leverage as an Asian energy supplier and engaged in geopolitical games that have undercut its potential role. Unlike in Europe—Russia’s traditional energy export market for decades—leading Asian countries like China, Japan, South Korea, and others have not relied significantly on Russian supplies of oil and gas. Itoh concludes that we should welcome the deepening of Asian-Russian energy interdependence to help reduce the volatility of international oil and gas prices. And the United States, Itoh suggests, should develop a less Eurocentric approach to Russia and more of a transpacific strategy to help promote greater Northeast Asian energy cooperation.