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Author Topic: Putin's $400 billion 30 year gas deal with China  (Read 6911 times)

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Offline WestCoast

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Putin's $400 billion 30 year gas deal with China
« on: May 19, 2014, 11:56:11 AM »
Putin's in China and is expected to sign a $400 billion 30 year gas deal with China. The deal has been in development for years with price being the main obstacle. Now with sanctions by the US and EU Putin is likely to sign a deal that will bring Russia much needed long term in flows of cash not influenced by western sanctions. 

If the deal isn't signed this time around it may be lost. Other sources of gas are coming on line and China may have opportunities for more reliable long term ventures.

http://www.bloomberg.com/news/2014-05-19/putin-seeks-400-billion-gas-deal-as-ukraine-speeds-china-pivot.html?cmpid=yhoo
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Offline Manny

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #1 on: May 19, 2014, 04:59:35 PM »
It sometimes takes a little wake up call (as Russia has had with the US/EU recently) to make you realise that too many eggs may be in one basket and highlight to you the need to diversify a little.

Not quite the same scale, but same principle: I had a disagreement with a trade supplier recently and for a week or so they turned off the discount tap on us - which cost me money and much inconvenience (I had to start sourcing some stuff in the US that we normally get down the road for example). Instead of bowing to what they wanted (illegal price controls across selling platforms) I sought out other suppliers across the world and dangled our monthly spend as a carrot. Well, that worked. I had salesmen beating the door down.  :chuckle:

Old supplier had to do an about turn and reduce our prices even further to get us back. But they haven't got it all back, and I am making them work hard now for what they do have.

It helped remind me the need to keep ones eggs spread around so one link in the chain breaking doesnt break the machine. I found it a valuable reminder in some ways; one that will probably pay dividends as we too are now sourcing in China as a result of that episode.

Big companies or big countries. Yes, they have clout but its a big world.  :coffeeread:
Read a trip report from North Korea >>here<< - Read a trip report from South Korea, China and Hong Kong >>here<<

Look what the American media makes some people believe:
Putin often threatens to strike US with nuclear weapons.

Offline Herrie

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #2 on: May 20, 2014, 01:35:09 AM »
Probably the most interesting that isn't often mentioned by the mainstream media (but can be found on sites like www.zerohedge.com for example) is that the deal will be in RUB/CNY instead of USD (petrodollar).

Both Russia and China are putting a lot of pressure on the USD and I wouldn't be surprised if it stops being the world reserve currency in the near future. China would be eager to push the CNY as the new world reserve currency. Seeing the recent efforts to liberalize the CNY and make it available outside of China are clear indicators of this. Having the CNY as an internationally trade-able currency would also allow the Chinese to export their liquidity problems somewhat.

Could be interesting times ahead....



Offline Isthmus

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #3 on: May 20, 2014, 02:02:46 AM »
With the PRC's current very belligerent machinations in the South China Sea any push for the CNY to be the global reserve currency is doomed to failure. Reality is that for all of the USA's current economic weaknesses there is no other option for the global reserve currency and there won't be in the short to medium term and there is very little either Moscow or Beijing can do about that.

And for all the doomsayers about the US,  the inherent flexibility in their economy means that anyone who writes off the US as the dominant global power is relying more on wishful thinking rather that any critical analysis. That and no one will be able to match the global reach of their military for decades to comes (at a minimum).




Offline Herrie

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #4 on: May 20, 2014, 02:49:17 AM »
With the PRC's current very belligerent machinations in the South China Sea any push for the CNY to be the global reserve currency is doomed to failure. Reality is that for all of the USA's current economic weaknesses there is no other option for the global reserve currency and there won't be in the short to medium term and there is very little either Moscow or Beijing can do about that.

And for all the doomsayers about the US,  the inherent flexibility in their economy means that anyone who writes off the US as the dominant global power is relying more on wishful thinking rather that any critical analysis. That and no one will be able to match the global reach of their military for decades to comes (at a minimum).
I personally don't see the CNY becoming the world reserve currency anytime soon either, but there for sure is a push from Russia, China, Iran and others to do less trade in USD. China is big in Africa when it comes to getting various resources. Lots of contracts are NOT conducted in USD anymore.

The US economics are not in a good state at all (unfunded future liabilities that are a multitude of the GDP) and even though the US spends a ton on military, they couldn't fight the "whole world" even if they would want to. I'm not saying it's any better elsewhere, but still....

Online andrewfi

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #5 on: May 20, 2014, 03:06:12 AM »
An argument can be made that much of the bellicosity of the US over the past decade and more has been about the defence of the dollar. There have been too many 'coincidences' and I am not a believer in coincidences.

There is no goal for the renminbi to become a reserve currency nobody with power, not even China, has suggested that should happen. The announced strategy is a move to a basket of currencies including the rouble and yuan (renminbi).

An alternative proposal is to use IMF SDRs as an international trade currency - this is not, at the moment, a currency, more an accounting technique. However as the new Asian led monetary fund rises this option becomes less likely or possible.

The BRICS are engaged in setting up an alternative to the IMF which should be up and running shortly.

These actions are threats to the dollar along with recent agreement between New Zealand and China to settle trade in yuan, other countries are going down the same route. I was reading last night about the decreasing share of international trade being conducted without the use of the dollar, the process has been under way for some years and seems to be reaching a critical mass.

Right now US military activity is paid for by its victims who are forced to trade in dollars, we actually bear the inflation that the US exports, kinda like a tax or tribute to the empire. That will change.

The Chinese management of the dollar (and it is the Chinese at the centre pf the web) controls the effects of the change. If they go for a short sharp shock then we will see a large and profound effect upon global output with a huge shift of wealth away from the US, rendering the US, effectively powerless. Or, we can continue as we have been doing where the decline of the US is managed over time.

I my opinion, the Ukraine thing is an early move in the second phase of the de-emphasis of the US. The next move may be contingent upon US behaviour in areas of close concern to the Chinese. A thing to note now is that China has for some years been encouraging the growth of its home market for the consumption of its manufactures. The US is already de-emphasised in China's accounting. It is easier now than hitherto to turn off the US and force repatriation of exported dollars and hence inflation.

Of course, while a little reading reveals the basics, the factual foundations for what is going on giving confidence in understanding these matters; the path of development can only be speculation because sure as shit the Russians and Chinese are not going to let everyone in on their plans, but also because what happens is going to be contingent upon the behaviour of the US and that is an imponderable.

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Offline mendeleyev

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Offline Danchik

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #7 on: May 21, 2014, 04:23:04 AM »
I have mentioned numerous times about Russia's desire to move eastward for other opportunities to offset any negative fallout from its dealings with the West, and America's increased domestic oil production. This is a deal that has been in the works for years, and it still needs some ironing out.

Now, with what has happened in Ukraine, the deal seems to have received a boost to both China's and Russia's long standing hatred of America's financial hegemony as added incentive to move closer to a deal. India is no doubt in the rear view mirror. Nevertheless, don't be mistaken, this move is about trade not politics.

In the grand scheme of things, this deal is negligible, but it does move future trade parameters between Russia and China into a more positive light. In the past, to say they haven't exactly seen things eye to eye would be an understatement. Their trust level IMO, is about on par with Russia's trust of America.

However, America's over aggressiveness, which has always been seen as antagonistic at best in both countries, as well as in Europe, has once again proved to be more destructive than positive. Something America refuses to consider, much less accept; all to the dismay of its citizens, and to the detriment of a truly global society.

Will the dollar be replaced anytime soon? Probably not, and Russia obviously needs to maintain its trade ties to Europe, but the world has long tired of America's eagerness to "take their ball and go home" when others are not willing to play by its rules. For sure, America will always have its "loyalists' who will follow their lead despite their bratty ways (they do actually have the "ball" BTW), but it was only a matter of time before others starting pushing for a new game with a different "ball". It should come as no surprise to anyone.

Who better to start this game than two of the biggest players in the world who have found common ground against a forever meddling America. Isolation does make for strange bedfellows.
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Online andrewfi

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #8 on: May 21, 2014, 06:55:57 AM »
The deal is signed and so the pipeline from Siberia to China will be built. The pipeline will go live in 3 years time.

It is completely inaccurate to suggest as some bloggers have done that events in Ukraine have forced a change in Sino-Russian relations. Dan is correct to note that the relationship between Russia and China has not been perfect. Trust has been lacking. Even today the leaders of both countries have said there is no alliance,  just the convenience of mutually satisfactory trade and shared interests.

However,  some bloggers who seek to associate events outside Ukraine with the western fomented troubles there have not researched very well. All the current deals are the result of years of preparation and negotiation  and,  in the case of the natural gas deal, build upon existing relationships with regard to oil.

China has been negotiating own currency dealings with many countries including the most recently concluded one with New Zealand.

The BRICS alternative to the IMF is already funded and due to launch in July this year. Again,  nothing to do with events in Ukraine - except in so far as Ukraine has become the US' most recent battleground in respect of enforcing it's hegemony and thus the dollar based commercial system now drawing to a close.

Dan is,  again,  correct to note that the dollar will not disappear but the share of global trade denominated in dollars has fallen off a cliff over the past decade. China is now the second largest consumer of oil and will soon be the largest; the US consumes about 10% of global output. This market wil have the biggest single impact upon the manner in which we trade from here on out.

These are all significant changes and for reasons I have dealt with in other posts all have an effect upon the US economy and ability for the US to control external events globally. What they are NOT though is a result of pressure due to events in Ukraine.
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Offline TomT

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #9 on: May 21, 2014, 08:43:22 AM »
I wonder how the price of gas in the Russia/China deal compares to Ukraine's old discounted rate.

Offline MrMann

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #10 on: May 21, 2014, 08:54:08 AM »
Quote from: Reuters
Gazprom CEO Alexei Miller declined to say what price the deal was struck at, but sources at the companies involved said Gazprom refused to go below $350 per thousand cubic metres.

That compares to a price range of $350-$380 most European utilities pay under discounted long-term contracts signed in the last two years.

Reuters link: As Putin looks east, China and Russia sign huge gas supply deal

Quote from: Russia Today
In December President Putin and his counterpart Viktor Yanukovich signed a series of aid packages for Ukraine, including a gas discount that reduced the price of Russian gas to $268.50 per 1,000 cubic meters down from $400.

Russia Today link: Gazprom won’t extend discount gas price for Ukraine - Putin

Offline Halo

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #11 on: May 21, 2014, 08:54:59 AM »
I wonder how the price of gas in the Russia/China deal compares to Ukraine's old discounted rate.

You do know why that discounted rate was negotiated, don't you?
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Offline TomT

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #12 on: May 21, 2014, 09:10:17 AM »
You do know why that discounted rate was negotiated, don't you?

It isn't clear if "that" refers to Ukraine's old $268.50 rate or to China's undisclosed rate.

Offline WestCoast

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #13 on: May 21, 2014, 09:10:57 AM »
The irony is that the authorized capital for the BRICs new Development Bank and Currency Reserve Pool will be in U.S. dollars, not in rubles or yuan. As they try to move away from US dollars it will be interesting to see how the BRICs decide which currencies to replenish their funds with. It will have to be a mixture of different currencies as I can't see Russia allowing the yuan to dominate or China allowing the ruble to surpass the yuan in international acceptance.

http://rbth.com/business/2014/04/14/brics_countries_to_set_up_their_own_imf_35891.html
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Offline Annushka

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #14 on: May 21, 2014, 09:27:33 AM »
Thank you for your congratulations, gentlemens. Please reference to the first source.

Replies to journalists’ questions following a visit to China.

Vladimir Putin answered journalists’ questions at the end of his official visit to the People’s Republic of China.

http://eng.kremlin.ru/news/7212

Offline Annushka

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #15 on: May 21, 2014, 09:30:34 AM »
The price of gas in the contract with China - a success for Russia, experts say.

RIA Novosti http://ria.ru/economy/20140521/1008724683.html

Offline TomT

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #16 on: May 21, 2014, 09:39:09 AM »
Russia wins round two.

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #17 on: May 21, 2014, 10:07:26 AM »
Tom,  certainly most fortuitous timing. Although the gas will not start flowing for 3 years this is a significant snook being cocked . The new development Bank and fund kicking in during July will be more occasion for a degree of gleeful snook cocking once again.

Westcoast, back to Google for you matey.

While it is correct that initially the funding will be in dollars it is already envisaged that sooner rather than later the funding will move away from the dollar. Don't forget that all the countries taking part in this venture already carry significant dollar reserves and so will not require new ones printing for the purpose. This will not soak up any more dollar debt. Remembering that at least China and Russia have been giving consideration to a reserve currency system based upon a basket of currencies that might well be the manner in which the new development Bank and fund work. There would be a notional currency unit similar to the SDR for accounting purposes and then currency drawn down in the form most appropriate.

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Offline sashathecat

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #18 on: May 21, 2014, 10:36:03 AM »
snook being cocked

I had to look this one up as it is currently snook season in Florida.


Offline mendeleyev

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #19 on: May 21, 2014, 02:16:46 PM »
Quote
It is completely inaccurate to suggest as some bloggers have done that events in Ukraine have forced a change in Sino-Russian relations.


Despite your protestations regarding others, you don't manage reading comprehension very well. Amazingly some of your conclusions mirror what I've published both in the past and more recently. Were you to read the MJ, and I'm comfortable with the certainty that you don't, you'd find many pieces there and especially over the more recent 24 or so months regarding Russia and China.

Rarely do I take headline or content suggestions directly from sources but several in the administration, including Peskov seemed intent that Western readers understand that things were much different a decade or so ago in relations between Russia and the West and in their view Ukraine was the tipping point in how Russia would need to view the world moving forward. Perhaps you'd care to straighten out his inaccurate views.

I've written previously on Russian-Chinese rail deals, military exercises and development agreements, yet can sympathize with the Kremlin view that the typical reader in the West really doesn't understand how those relations have changed. For the record, I often agree with the Russian position on the reasons for those changes. That doesn't make me any different than former Ambassadors Burns and John Beyrle on how I believe the USA has badly mishandled Russian relations and something I've written about many times. There is a reason why in the absence of an Ambassador that Deputy Chief of Mission Sheila Gwaltney has declined the role of representing America’s interests in Moscow and assigned that to John Kerry. It isn't that she doesn't get along with Vladimir Putin for she knows him well from her post as Consul General in St. Petersburg. It has more to do with sheer lunacy in thinking and viewing of Russia from those along the banks of the Potomac.

Therefore I felt it appropriate to take the theme he suggested and shortened it to run as a headline. My colleague Alexei Anishchuk of Reuters used "As Russia looks East" for his headline submissions which includes publications all over the world. This morning I checked the Indian Express for which he strings and "Putin looks East" was the headline their editors chose to run. Kathrin Hille of the Financial Times chose "Russia looks East" to headline. Did Russia suddenly wake up last week and proclaim, "Damn, we need to turn East!" Not in the least and nobody, myself included, has written that. But does the government in Moscow feel that events in Ukraine constitute a tipping point, or point of no return, etc, in how they view relations: Hell yes.




Offline mendeleyev

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #20 on: May 21, 2014, 02:17:48 PM »
Like others I'd have loved to have reported the accomplished deal but facing deadlines for various outlets it wasn't possible. The deal was signed in the wee hours of the morning.

As for the gas deal, I'm happy that it has happened. In particular this will help the economy of Western Siberia. The Irkutsk area holds large reserves but so far there has not been the kind of production that would lift that region's employment and median household incomes which now could be a reality as production will increase as this pipeline is built.

Offline Danchik

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #21 on: May 22, 2014, 02:47:30 AM »
That doesn't make me any different than former Ambassadors Burns and John Beyrle on how I believe the USA has badly mishandled Russian relations and something I've written about many times. There is a reason why in the absence of an Ambassador that Deputy Chief of Mission Sheila Gwaltney has declined the role of representing America’s interests in Moscow and assigned that to John Kerry. It isn't that she doesn't get along with Vladimir Putin for she knows him well from her post as Consul General in St. Petersburg. It has more to do with sheer lunacy in thinking and viewing of Russia from those along the banks of the Potomac.
Boy how I miss Ambassador Beyrle.

I have always thought that China should be viewed with a little more than a suspicious eye from the West, as well as Russia. It has been my hope over the years that those "suspicions" would actually bring America and Russia closer, and which would have eventually resulted in a decidedly more favorable position towards each other.

IOW, China is the real "enemy" here. Doesn't mean one shouldn't conduct business with China, or try to improve on what has always been a very delicate relationship; not at all. But, I'll let the reader do the math here :).

Sadly, this current US Administration has dropped the ball, and what makes matters worse, to me anyway, is that the goal line was clearly in view. This only amplifies how bad this administration is with regard to geopolitics (this is even disregarding the Neocons for the moment). For me, the first sign of trouble was Obama's appointment of Michael McFaul as Ambassador to Russia in 2012, apparently coinciding with Putin's return to the Presidency. McFaul's appointment was simply a horrible decision, and even the most pedestrian of observers like myself felt a pit in my stomach at that time.

What a wasted opportunity for both countries to work in tandem with Europe to benefit their perspective populations, balance China's ascent, and to neutralize terrorism (among other things) in the Middle East. 

I can't help but feel it will take years before relations get back to where they were, if they ever do. My only saving grace is the simple knowledge that nothing stays the same. As we have seen in the deterioration of Russian-American relations, unfortunately.   


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Offline mendeleyev

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #22 on: May 22, 2014, 12:48:12 PM »
Quote
Boy how I miss Ambassador Beyrle.

Me too, Dan. He, other than America's first Ambassador to Russia John Quincy Adams (who later became a US President) was perhaps one of the most loved and uniquely qualified. The Russians respected him but they also admired him.

The "reset" button disaster was my first hunch that he would be replaced. Even with scores of loyal Americans in the Embassy who are fluent in Russian, the new Obama administration didn't trust the Embassy because they didn't view Ambassador Beyrle as "their" man. The misspelling of that "reset" button (Obama's staff oversaw the State Department project as they really weren't sure about Hillary back then either and used the Russian word for "overload" thinking it meant "reset") could have been easily corrected had just about anyone in the Embassy been involved in the project. Instead the administration deliberately kept Beyrle and his staff out of the loop thinking that only the White House knew best.

I wrote back then about Beyrle's removal: http://russianreport.wordpress.com/2011/05/29/michael-mcfaul-will-replace-john-beyrle-as-us-ambassador-to-russia/
Quote
But of all the ties the one that strongly binds this Ambassador close to the hearts of the Russia people comes through his father. As we wrote on these pages in January, Beyrle’s father was the only known American to have served in both the American and Soviet armies when the two countries were allies in the war against Nazi aggression. Shot down by German anti-aircraft fire, the senior Beyrle quickly learned Russian, donned a Soviet army uniform and continued fighting until the end of the war when he was decorated by both countries for his service. Russians respect that kind of history and because of his father the current Ambassador is accepted as a brother.


Offline Halo

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #23 on: May 23, 2014, 10:20:02 AM »
Russia wins round two.

Not really.  Russia will not be able to use gas as a hammer with China, as it has with Ukraine and the EU. 
After the fall of communism, the biggest mistake Boris Yeltsin's regime made was not to disband the KGB altogether. Instead it changed its name to the FSB and, to many observers, morphed into a gangster organisation, eventually headed by master criminal Vladimir Putin. - Gerard Batten

Online andrewfi

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Re: Putin's $400 billion 30 year gas deal with China
« Reply #24 on: May 23, 2014, 10:41:50 AM »
Russia wins round two.

Not really.  Russia will not be able to use gas as a hammer with China, as it has with Ukraine and the EU.

If Ukraine paid their bills as agreed then Russia would be unlikely to take action to protect their business interests. Russia has not used gas as a 'hammer' in respect of Europe. Ukraine caused problems in the past by stealing gas due for delivery in Europe,  providing the impetus for Russian interests to invest, with other shareholders, in Nord Stream and South Stream. Russia is not well served by disruption in delivery of gas contracted for by its European clients.

The chances are that China will not renage on its agreements and thus it is unlikely that there will be any problems from that quarter in this regard.

Where do people get these counterfactual ideas from?
...everything ends always well; if it’s still bad, then it’s not the end!


 

 

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