How the Iran Conflict Is Reshaping Russia and China's Energy Security

**Tatiana Mitrova** (0:04)
We are now experiencing the shock that we were testing in many scenarios in energy security discussions for the last 30 years. The oil market has changed, the gas market has changed.

**Erica Downs** (0:19)
The conflict in the Middle East is vindicating China's approach to energy security, this push to electrify everything. I suspect that we are going to see China just continue to bet big on that.

**Sergey Vakulenko** (0:36)
Just a few months of revenues, even at high prices, is a price too small for Mr. Putin, so he's trying to weaponize it at a crucial moment.

**Jason Bordoff** (0:46)
Since the US-Israeli bombing campaign began in Iran, energy markets around the world have been on edge, as the conflict threatens immediate and long-term energy supplies. We've seen major disruptions throughout the Gulf region, with the closure of the Strait of Hormuz, and massive price spikes and swings in oil and in natural gas. This is, of course, exposing serious vulnerabilities across global energy markets, and it's putting a spotlight on what's happening in the deeply integrated markets of Russia and of China. Even before the conflict started, Russia's energy sector was struggling under the weight of infrastructure damage inflicted by Ukrainian forces and by the weight of sanctions. But now Russia has emerged as perhaps an unlikely safety valve for the market, benefiting from the massive supply shortages. Meanwhile, China finds itself in a precarious balancing act. It's being forced to look at alternative markets for relief and is reportedly reviving discussions around major energy projects, such as the Power of Siberia 2 natural gas pipeline with Russia. So how's Russia responding to the current crisis? And how is the crisis impacting China, which is particularly exposed to disruptions in Gulf energy flows? How might this crisis change Russia's approach to the European energy market? And is the conflict accelerating a deeper fragmentation, moving toward a world of competing energy blocks rather than a single global energy market?
This is Columbia Energy Exchange, a weekly podcast from the Center on Global Energy Policy at Columbia University. I'm Jason Bordoff.
Today on the show, I'm sitting down with three experts on the Russian and the Chinese energy sectors, Erica Downs, Tatiana Mitrova, and Sergey Vakulenko. Tatiana and Erica are both research fellows here at the Center on Global Energy Policy. Tatiana has deep expertise in Russian and global energy markets, and Erica focuses on Chinese energy markets and geopolitics. Sergey Vakulenko is a senior fellow at the Carnegie Russia Eurasia Center. Prior to this, he led strategy innovations and sustainability at the Russian oil producer, Gazprom Neft. We talked about how the crisis in the Middle East is impacting Russia and China and what each stands to gain or to lose. We discussed how this conflict is pushing China towards self-sufficiency and its move toward electrification. And we talked about how this might impact the proposed Power of Siberia 2 pipeline. I hope you enjoy our conversation. Tatiana Mitrova, Erica Downs, and Sergey Vakulenko, it's great to have you all on Columbia Energy Exchange. Thanks for making time to be with us.

**Tatiana Mitrova** (3:31)
Thank you for the invitation.

**Sergey Vakulenko** (3:32)
Pleasure to be here.

**Erica Downs** (3:33)
Happy to be here.

**Jason Bordoff** (3:35)
So I wanted to have you all on just because there's been obviously a huge amount of focus on the conflict in the Gulf, the attacks on Iran, the retaliation impacts to the Strait of Hormuz and lots of discussion about how different countries are being impacted by this. Key players in this are Russia and China in particular. I'm sure we'll talk about Europe and many other players too, but few people understand those critically important energy players, China and Russia, the way the three of you do. So I wanted to talk about that. We'll go from there and expand the conversation a little bit. Sergey and Tatiana, you had a great recent piece in Foreign Affairs that I want to come to about how Ukraine is responding to its war and Russia's invasion and degrading, in your view, degrading Russia's long-term structural capacity as an oil and gas producer. But let's start with what is happening in the immediate crisis. You guys wrote, again, you wrote this Foreign Affairs article not long ago, arguing that Russia is having its capacity as an oil and gas producer undermined and degraded. And yet every headline I read is that the big winner from this crisis right now is Russia. So Tatiana, can you start and then I'll come to you, Sergey, just talk a little bit about the role Russia is playing and is in fact Russian oil that's going to make up the difference for what's lost in the Gulf and is it a windfall for Putin?