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Russia-China Gas Pact Stirs Dream of Bridge Across Amur

By Bloomberg News
June 05, 2014 9:21 PM EDT 73 Comments
Russian President Vladimir Putin, left, is greeted by Chinese President Xi Jinping before the opening ceremony at the fourth Conference on Interaction and Confidence Building Measures in Asia (CICA) summit, in Shanghai, China. (AP Photo/Mark Ralston, Pool)
Russian President Vladimir Putin, left, is greeted by Chinese President Xi Jinping before the opening ceremony at the fourth Conference on Interaction and Confidence Building Measures in Asia (CICA) summit, in Shanghai, China. (AP Photo/Mark Ralston, Pool)

In winter, Russian shoppers drive cars across the frozen Amur River to buy knock-off Nike sneakers from Wu Haiou’s stall in the Chinese city of Heihe. In warmer months, they come by hovercraft and ferry.

Russia’s $400 billion deal to pipe natural gas across the border to China has rekindled Wu’s hope that the two nations will finally build a bridge across the frontier to bring a steady stream of customers to her door.

Border towns in China’s northeast have been largely bypassed as commerce with Russia rose 80 percent in the past five years to about $68 billion in 2013. The merchants in Heihe say they want a bigger piece of trade that the Chinese government predicts will grow to $200 billion by 2020.

“They’ve been talking about a bridge for so many years,” said Wu, a 40-year-old mother of two who’s worked along the frontier for more than 20 years. “If the border trade is developed properly, we can prosper.”

The May 21 conclusion of gas-pact talks that started a decade ago reflects President Vladimir Putin’s tilt toward Asia as relations sour with the U.S. and Europe over Russia’s annexation of Ukraine’s Crimea region. They also show China, the world’s biggest commodities consumer, looking past a historical conflict to engage Russia amid territorial disputes with neighbors including Japan and Vietnam.

“They had a very difficult breakup in the early 1960s -- they had a border war in 1969,” said Joerg Wuttke, president of the Beijing-based European Union Chamber of Commerce in China. “It’s amazing how much they’ve fixed that up.”

Border War

On the Heihe side of the river, there’s no sign of the bunkers and lookout posts that housed soldiers during the conflict. To the north, across the Amur, sits the Russian city of Blagoveshchensk with its power plant chimneys, low-rise concrete buildings and onion-domed churches.

Wu’s stall is located in the Big Black River Island Mall, a 30,000-square-meter building that sells everything from mobile phones and car parts to mink coats and inflatable swimming pools. Many shopkeepers in Heihe, a city of 1.7 million people, speak Russian and have signs in both Chinese characters and Cyrillic script.

While no decision has been made on building a link between the cities, Heihe municipal officials and Communist Party representatives have scouted locations for a bridge or a gondola, according a government bulletin published earlier this year. They’ve also contacted Russian officials to discuss increasing economic ties, according to the document.

Trade Figures

China’s imports from Russia in 2013 were $16.6 billion, mostly fossil fuels, mineral ores and other natural resources including timber, according to data tracked by the Ministry of Commerce in Beijing. Exports were $51.7 billion, led by electrical appliances, machinery, automobiles and shoes, the data show. China is Russia’s biggest trading partner, according to the ministry.

The gas agreement will see OAO Gazprom (GAZP) invest $55 billion developing reserves in eastern Siberia and build a pipeline delivering 38 billion cubic meters of gas annually to China over 30 years.

Military ties have also improved. The Russian and Chinese navies last month held joint drills near islands controlled by Japan and claimed by the government in Beijing.

The Russia-China Investment Fund reaffirmed plans on May 19 to construct a railway bridge about 450 kilometers (280 miles) southeast of Heihe, buoying the city’s hopes. It will be the first bridge linking the countries across the Amur.

Investment Vehicle

The fund, which is a partnership of the Russian Direct Investment Fund and China Investment Corp., also plans to create an $800 million vehicle to invest in tourism and senior housing in both countries.

“It’s a clinical fact” that China is on its way to becoming the world’s biggest economy, Putin said on a televised call-in show on April 17. Russia’s ties with China will be a “significant factor” in international relations, he said.

Whether Russia is truly willing to open the gates to Chinese investment in places like the Far East, whose population of 7 million people makes it one of the world’s most sparsely populated regions, remains unclear. Prime Minister Dmitry Medvedev highlighted anxiety over a possible Chinese immigrant influx in 2012 when he said the Far East must be protected “from excessive expansion from neighboring states,” RIA Novosti reported at the time.

Setting Timetables

“The Chinese media is always reporting that an agreement has been reached and setting timetables for building it,” Zhang Shilin, who has sold furs in Heihe for more than 20 years, said of a bridge. “But when you listen to Russian broadcasts, they absolutely deny it, saying that it’s impossible and useless to build a bridge here in Heihe.”

In the meantime, Heihe’s cross-border trade slipped 53 percent in the three months through March from a year earlier as the falling ruble reduced the purchasing power of Russian shoppers, according the city’s local statistics bureau.

Heilongjiang province, where Heihe is located, is ranked last for economic growth among China’s 31 provinces, data from the National Bureau of Statistics show. Its growth rate was 2.9 percent during the first quarter of this year, compared with 7.4 percent nationwide.

Traders including 18-year-old Liang Haitao, who sells wares including cans of salted fish, chocolates and nesting dolls, said a bridge would bring the extra customers needed to reinvigorate their businesses.

“My timing’s been rotten,” said Liang, who started renting his stall in the same mall as Wu last year. “I’ve been eating my inventory while I wait for things to improve.”

To contact Bloomberg News staff for this story: Feiwen Rong in Beijing at frong2@bloomberg.net; Stephen Engle in Beijing at sengle1@bloomberg.net

To contact the editors responsible for this story: Brett Miller at bmiller30@bloomberg.net Nicholas Wadhams

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