- The Kimkan open pit mine in Siberia is a muddy square mile surrounded by birch and cedar forests so vast they seem to stretch to the ends of the earth. As with many places in Siberia, it is nearly impossible to drive here. Yet just under the surface, Russian geologists say, lies enough iron ore to build hundreds of millions of cars. That is why Chinese government officials and business executives are interested, despite a decades-old legacy of bilateral distrust along this stretch of Russia-China borderland.
- The Chinese bank whose delegation stood on the lip of the Kimkan pit is in advanced negotiations for a $400 million loan to enable the developer, the Petropavlovsk mining company, to begin excavating ore. The reserves Mr. Ryabov spoke of are in Kimkan and a sister mine to the north, and would require 100 years or so to extract.
- Petropavlovsk, whose shares trade on the London Stock Exchange, plans to transport ore directly south from the Kimkan mine by train to Chinese steel mills that now import iron ore from as far away as Brazil. Mine managers say they will have no trouble beating the Brazilians on price.
- The encounter was emblematic of a business frenzy in this foreboding region, as Russian companies clamor to sign deals over Siberian resources — including iron, coal and timber — to sell into the insatiable Chinese market. Russian oil, too, is an increasingly sought-after commodity passing through Siberia to China.
- For resource-starved China, overland supply of Russian metals and oil is an important diversification away from seaborne shipments. The transborder commerce in this region helped China surpass Germany to become Russia’s largest trading partner early last year, with $39.5 billion in goods and services passing between the two countries in 2009. Last year the Russian Far East was the only region in Russia for which investment grew, rather than contracting.
- “Russia and China make a perfect couple,” Kingsmill Bond, the chief strategist at the Moscow investment bank Troika Dialog, wrote in a research report. “Russia has resources that China needs, while Russia needs capital and China has excess savings.”
- Skeptics of further economic development between the countries also point to deep mistrust dating to border skirmishes fought on Damansky Island in the Ussuri River in 1969 that put the Soviet Union in a defensive crouch along the border and froze all development for decades.
- The Russians have long harbored fears that broadening economic contact with China would lead to a wave of Chinese immigrants taking over the sparsely populated Far East.
- The bigger cross-border event now planned, though, could be the trans-Siberian oil pipeline, which is being laid through the region’s dense forest, or taiga, and is scheduled to reach China in 2012 and begin carrying a million barrels a day. By then, about a quarter of Russia’s crude will be exported to Asia.
- For China, oil now transported overland from Central Asia today, via a pipeline from Kazakhstan, and planned to flow from Russia in two years, is meant to further a policy goal: diversifying petroleum supplies now heavily dependent on the Middle East and shipments through the Malacca Straits chokepoint between the Malay Peninsula and Indonesia.
- Chinese companies, meanwhile, are renting vast swaths of agricultural land in the Russian Far East left fallow by the shrinking population of ethnic Russians, and are encouraging Chinese migrants to work there as seasonal laborers. Chinese companies have rented 850,000 acres so far.
[Feb 16, 2010: India Worries as China Builds Ports in Southeast Asia]
[Dec 15, 2009: China's Economic Power Unsettles Neighbors]
[Nov 11, 2009: China Continues Expanding "Infrastructure for Resources" Policy with Agreement in Malaysia]
[Sep 30, 2009: China Attempting to Secure 1/6th of Nigeria's Proven Oil Reserves]
[Jun 13, 2009: Australia in Perfect Position Aside China, but at a Cost?]