Russia, China Deepen Ties With Construction of Massive Polymer Plant

Russia began began work on one of the world’s largest polymer plants, a facility that will produce plastics components aimed at the Chinese market, in a display of its strengthening economic ties with Beijing.

The $11 billion venture is the latest in a string of major projects between Russia and China, which, after years of rivalry and mutual suspicion, are expanding an economic and political partnership.

Last year, bilateral trade between the two nations reached a record of more than $110 billion. China has invested billions in Russia’s big gas projects in the Arctic, while Russia has become one of China’s top oil suppliers.

Located in Amur, near the border with China in Russia’s Far East, the project is being developed by Russian petrochemical company Sibur Holding in partnership with Chinese state-controlled energy giant Sinopec Group, which is set to take a 40% stake in the complex. U.S. energy company Chevron Phillips, along with Western chemical firms Linde PLC, Univation Technologies LLC and LyondellBasell Industries NV, are joining as technological partners, according to Sibur.

The plant is expected to produce 2.3 million metric tons of polyethylene and 400,000 metric tons of polypropylene, some of the most common polymers found in everything from plastic bottles to car parts.

On Tuesday, Russian Prime Minister Mikhail Mishustin and other officials oversaw the sinking of the first pile in the plant’s foundation via video link from the construction site, a vast sand pit flanked by hills and forests. Around 30,000 people are expected to be employed at the peak of construction, with the plant scheduled to begin production after 2024.".

"This is one of the largest investment projects in Russia, which brings strategic benefits to the gas industry and the country at large,” Mr. Mishustin said.

Russia began delivering natural gas to China through the 1,800-mile Power of Siberia pipeline last year. In March, President Vladimir Putin instructed state-owned energy company Gazprom to start working on designs for Power of Siberia 2. Gazprom plans to more than triple gas deliveries to China, to 130 billion cubic meters, which would amount to nearly half of current Chinese gas demand.

The Russia-China collaboration took off after Moscow was isolated and sanctioned by the West for its annexation of Ukraine’s Crimean Peninsula in 2014, and has since been extended into areas such as the military, technology and finance. Moscow and Beijing have looked to reduce their reliance on the dollar, a process called de-dollarization, with the greenback’s share in their trade falling to a record low below 50% this year from over 90% in 2014.

Despite the closer links, however, frictions between Moscow and Beijing remain.

Russian prosecutors in June charged a Russian scientist with treason after accusing him of passing classified information to China. Earlier this year, when the coronavirus began spreading in Wuhan, Russia was the first country to close its land border with China, imposing restrictions on Chinese citizens already in its territory.

Protests have erupted in recent years against some Russian-Chinese ventures, such as a water-bottling plant on Lake Baikal and logging projects in the Siberian forests. There has also been mounting resentment in parts of Russia toward perceived Chinese expansionism and threats to the environment.

Artyom Lukin, a scholar of China-Russia relations at the Far Eastern Federal University in Vladivostok, said that, despite other concerns, Russia has bet on China as a fast-growing export market, though progress in other areas, including Chinese investment, is slower.

"In less than a decade, we have seen a very significant growth of the trade relationship and Russia now sees China as a huge market for its commodities, materials and goods,” Mr. Lukin said.

The Amur Gas Chemical Complex is set to boost trade further, given China’s growing demand for polymers. Chinese demand for polyethylene and polypropylene is expected to rise around 3% this year despite reduced economic activity because of the pandemic, according to consulting firm Wood Mackenzie.

In plastics production, natural gas are refined into products such as ethane, which get "cracked” in high-temperature furnaces, breaking down organic molecules into simpler molecules such as ethylene and propylene.

Those are converted back to complex molecules, or polymers, which are then melted into small pellets. Bottle makers, pipe manufacturers and other firms mold them into a finished plastic product.

Much of the plant’s work will be automated and operated from a remote control room located more than 3,000 miles away at a Sibur plant in the city of Tobolsk.