China to capture plastics market? How things with the launch of Power of Siberia pan out for Tatarstan?

The Amur Gas Processing Plant, implemented jointly with the project of Russia-China Gas Pipeline, will enable China to produce cheap polymers

Russia’s President Vladimir Putin and China’s President Xi Jinping were to hold a video conference giving the start to the opening of the Power of Siberia gas pipeline on 2 December (later it has been reported that this will happen within a week). Gazprom and CNPC agreed to supply Russian gas to China via the Eastern route in May 2014. The contract for 30 years involves the supply of 38 billion cubic metres of natural gas a year. With the Power of Siberia, Russia will significantly change the balance of power in the world gas markets. However, for Tatarstan, the launch of the project, especially given that its factions (from the Amur GPP) will go to China together with gas, it can turn into unexpected consequences, according to blogger-analyst Albert Bikobv, a columnist of Realnoe Vremya, the author of the Telegram channel Why — the blogger explains in his next op-ed column for our publication.

With Power of Siberia, Russia will gain advantage in world gas wars

Many analysts and political experts will write about the significance of the Power of Siberia for Russia. They will again talk about Russia's realization of the image of the energy superpower. There will be many comments that the project reduces our dependence on supplies to Europe, and Ukraine will feel itself under even greater pressure. The implementation of the Power of Siberia may push Russia to exerting some pressure on Europe because many options with maneuvering gas supplies are appearing for us. There are analysts who say that Russia can now inflate gas prices for Europe, and this is indeed the case.

Now we see with what fierceness, with what difficulties the Nord Stream is being implemented. See the latest reports: the US is turning the sanctions regime on for those European companies that are involved in this project. In fact, the whole history of gas relations with Europe has recently been very badly spoiled by the Ukrainian factor, that is, the transit of gas through Ukraine. Accordingly, Gazprom's projects that want to reduce this dependence on Ukraine, by these endless gas wars, agreements with Ukrainians — of course, this is a very important topic. I think that from the geopolitical point of view, the launch of this powerful project, the Power of Siberia, is certainly a project of an energy superpower.

Thanks to the Amur GPP, China will become the leading producer of plastic

In other words, the Power of Siberia is really a very large project, worthy of the infrastructure projects of the Soviet period. Not to mention that this Moscow-Beijing axis is very important in terms of geopolitics and partnership.

Many political experts, economists, and various analysts will write about all these things. But I would still like to turn the situation in the direction of Tatarstan. There is quite an interesting thing concerning our republic. The thing is that the Power of Siberia project is being implemented together with the Amur GPP project, which is planned to be completed by 2024. This is an extremely powerful project — the plant will use the gas that goes through the Power of Siberia gas pipeline and make different fractions of it, which in the future should go to pyrolysis for the chemical industry.

In this case, the indirect effect for Tatarstan is interesting. First, this is one of the largest gas chemical projects in the world, and so far the progress of work shows that everything is going on schedule and by 2024 they will have made this plant. But the question is that a huge number of fractions will be supplied to China from the Amur GPP: ethane, propane, butane, which will be used for pyrolysis of ethylene, respectively, for the production of plastics. Thus, the production of plastics in China will increase — this is first. Second, this plastic will be extremely cheap, because everything is located nearby. Third, for China, this will be an occasion to reduce its own purchases of these products on the world market.

For Tatarstan, all this will have an indirect effect. The production of plastics on the world market will increase and, although the demand for plastics will continue to grow, the supply will also increase. Therefore, even with great caution, we can talk about the adjustment of world prices in the direction of pressure. Accordingly, when the largest player in the plastics market appears, for which the Amur GPP will supply raw materials, even for Tatarstan, since we have an extremely powerful production of plastics, it will play a part in 5-6 years, it will be tangible.

Besides, the Amur GPP project itself is interesting because it involves TAIF's long-time partner, Linde. We can recall the joint projects of TAIF and Linde at Kazanorgsintez, Nizhnekamskneftekhim, TAIF-NK. Not to mention the new project — the ethylene plant, an agreement on which has been recently signed, and Linde technologies have also been applied there. Now this partner of TAIF is also involved in the Amur GPP project.

To sum up, the Amur GPP is a very large project, really comparable to what we did in the USSR, and the significance of which, believe me, will be discussed for a long time.

Russia and China — quite a powerful tandem

The West's reaction to the launch of the Power of Siberia gas pipeline is predictable. The project takes into account the trade war that the Trump administration is now unleashing, putting pressure on China. There will be also other reactions. When one of the largest energy powers has additional muscles, naturally, the Americans will react to this.

Judging by that now in the administration of Donald Trump there is a real war over China, there may be some costs. But we must understand that the elections are just around the corner in the US, and only the results of these elections will make it clear whether Trump remains or not. Because, as I see it, Trump's opponents have a much more balanced position towards China.

Besides, since the largest consumer of this project Forces of Siberia is still China, so I regard the introduction of new sanctions as an unlikely possibility. Yes, they will try to do something, but I'm sorry, we — Russia and China — are quite a powerful tandem. It is one thing for Russia to dictate something, impose some sanctions, and so on and so forth. But even if you take the relationship of the US with China, as the example of the Trump’s trade war shows, it doesn’t feel like steady, and there are no achievements at all.

By Albert Bikbov