With the Chinese gross domestic product (GDP) expected to record an average growth rate of 7 percent by 2020 and its current economy growing at over 10 percent, there is a crucial stress on the demand for energy. Efforts to meet the growing Chinese energy demand include energy cooperation with major suppliers. Chinese energy demand increased manifold since the beginning of the new millennium, mainly due to the investment-driven economic growth, which began after the country’s accession to the World Trade Organization (WTO) in 2001. China’s inspiring economic growth since 2000 has led to increased demand for energy resources, especially oil and gas. The country ranks first in the world with a population of about 1.3 billion; this accelerates the oil consumption, which is about 4 percent of the world’s daily oil output. The growth in the manufacturing and transportation sectors has further increased the demand for oil and petroleum products. These factors have forced China to become the second chief oil importer in the world after the United States. This has been substantiated by China’s oil imports, which have increased from 40 percent in 2004 to 42.9 percent in 2005.

Energy consumption in China was much lower compared to the growth in the 1990s. However, there has been a tremendous increase in energy demand since 2001, which coincided with China’s accession to the WTO. In 2003, China witnessed an increase in the energy demand by 15 percent while the GDP grew by 9.1 percent. The similar trend continued in 2004 where energy consumption increased by 15 percent and the GDP grew by 9.5 percent. This increase could be attributed to factors such as the huge consumer base especially in the urban sector, large number of energy-intensive industries such as chemicals, steel, and cement, and the growth in the transportation sector. However, the year 2005 witnessed a reversal of trend in China wherein the energy consumption slowed down to 9.5 percent. The decrease in energy consumption was due to the government's adoption of energy saving efforts such as energy conservation and efficiency in the use of energy. Moreover, in 2005, the increase in oil prices globally had an impact on the Chinese demand for oil, which in turn decreased its consumption of oil.

The overwhelming gap between the nation's energy production and consumption is forcing China to depend more on imports. Though China is rich in energy resources especially in coal, which amounts to 70 percent of the nation's demand, it is still not sufficient to satisfy the demand. As a result of the lack in supply of energy resources, China is forced to depend on imports to satisfy its energy demand. By 2010, this demand is expected to reach 90 billion cubic meters, which is 6 percent of the total energy demand. China currently imports about 40 percent of the world's energy demand. This figure is expected to double by 2010, wherein China's energy imports are expected to reach 8.8 million barrels per day by 2010.

China imports oil from Saudi Arabia, Iran, Iraq, Venezuela, Sudan, and other Middle East countries. The Middle East has been the largest trading partner of China. China imports nearly 52 percent of its oil from the Middle East. China is now looking forward to divert its import dependency from the Middle East toward Russia. This diversification is due to the increased concern over the unstable political situation in the Middle East. Moreover, China is looking at Russia’s oil and gas resources due to the vast availability energy resources in the country. There have been energy deals prior to 2006 between the two countries, which have not materialized due to Russia’s keen interest on developing partnerships rather than being looked at as a supplier of energy and military equipment to the global market.

Historically, China had limited its access to foreign countries for oil, gas, electricity, and other energy resources. After liberalization in the 1990s, which had a slow impact in the economy, the energy demand has grown forcing China to tap resources internationally for satisfying its domestic demand. In view of strengthening their relationship, the two countries upgraded the Sino-Russian Agreement in March 2006. Trade between the two countries reached around $30 billion in 2005, and both the countries have expressed their desire to increase their trade to between $50 billion and $80 billion by 2010.

The Russia-China energy cooperation is expected to increase oil and gas supplies to China through direct exports and also increase collaboration between the two countries in number of oil and gas projects. During the Russian President Vladimir Putin’s visit to China in 2006, a Memorandum of Understanding (MOU) was signed between China’s Natural Petroleum Corporation and Russia’s Natural Gas Corporation Limited which strengthened the energy cooperation between the two countries. The agreement was based on Russia’s supply of gas to China, wherein Russia is likely to be supplying 30 billion to 40 billion cubic meters of gas through two pipelines. One of the pipelines is likely to be from Siberia to Xinjiang Uygur, whose operation is expected to begin in 2010. The other pipeline, which ends in Heilongjiang Province, is expected to begin operations from 2015. Gazprom is expected to undertake the construction of the two pipelines, which is likely to have a capacity of 68 billion cubic meters. China Natural Petroleum Corporation (CNPC) and Transneft have signed a deal worth $11.5 billion for the construction of the East Siberia – Pacific Ocean oil pipeline. The progress of the deal is now halted to enable a feasibility study to be done on the project for determining its efficiency. China is also investing heavily in Russian energy assets. CNPC has recently announced its investment of $500 million in Rosneft, Russia’s leading Oil Company.

The Sino – Russian energy cooperation is not only limited to oil but also it covers natural gas, electricity, and nuclear energy. As a part of the energy cooperation, the two countries are also looking at expanding cooperation in the nuclear power sector.

The energy agreement is expected to mutually benefit both the countries. From China’s point of view, the advantage factor is that it can shift its dependency on energy imports from the Middle East to Russia, which is much closer geographically. The aggressive energy demand in China could be satisfied by Russia’s huge energy reserves, and this will increase their economic and trade growth. The subscription would enable both the countries to expand and maintain a long-term cooperative relationship. This relationship is expected to strengthen the existing ties between the world's second largest consumer and the world’s second biggest supplier of energy.