Russia And China About To Sign "Holy Grail" Gas Deal

Tyler Durden's picture

Several weeks ago we reported that in response to ongoing alienation of Russia by the west Putin was aggressively setting the stage for Russia's eastward expansion, set to culminate with a "holy grail" gas deal with China. We said that "while Europe is furiously scrambling to find alternative sources of energy should Gazprom pull the plug on natgas exports to Germany and Europe (the imminent surge in Ukraine gas prices by 40% is probably the best indication of what the outcome would be), Russia is preparing the announcement of the "Holy Grail" energy deal with none other than China, a move which would send geopolitical shockwaves around the world and bind the two nations in a commodity-backed axis."

Reuters added, reflecting on the recent trip of Rosneft executive chairman to Asia, that "the underlying message from the head of Russia's biggest oil company, Rosneft, was clear: If Europe and the United States isolate Russia, Moscow will look East for new business, energy deals, military contracts and political alliances.  The Holy Grail for Moscow is a natural gas supply deal with China that is apparently now close after years of negotiations. If it can be signed when Putin visits China in May, he will be able to hold it up to show that global power has shifted eastwards and he does not need the West."

It's time for an update. According to Itar-Tass, "Russia's Gazprom and China are poised to conclude a gas supply contract in coming weeks, the first in a series of energy projects planned between the two countries. "We’re working now to sign a gas contract in May," said Deputy Prime Minister Arkady Dvorkovich. "Consultations are continuing and Gazprom's leaders are holding talks with Chinese partners on the contract terms. We hope to conclude the contract in May and believe it should come into effect by the year end."

The key sticking point remains the price: "Base price is the only problem to be solved,” Dvorkovich said on Wednesday at a session of a Russia-China intergovernmental commission on energy co-operation, co-chaired by Chinese Vice-Premier Zhang Gaoli." However, even if Russia concedes the topline to China, it will surely "more than make up for it in volume" to borrow a line from Amazon, and furthermore the geopolitical implications from such a deal, not to mention the increase in national leverage vis-a-vis its dealings with Europe and the West, will more than make up for any immediately revenue shortfalls.

But wait - there's more in the rapidly shifting geopolitical axis which increasingly positions Russias as a key commodity source for China:

In other plans, Russian company Novatek’s Yamal region LNG (liquefied natural gas) project was near ready for signing, Drovkovich said. Russia's Rosneft had several interesting plans "seeking to increase maritime supplies by several million tonnes per year,” he said.


“Russia and China have agreed to jointly develop gas fields in (Russia's far eastern) Sakhalin and East Siberia,” Dvorkovich said. “We have discussed co-operation in the coal sphere, agreeing to develop deposits, supply equipment and build electric power plants as well as providing China with additional electricity supplies”.


“We’re finding mutually advantageous decisions on certain projects that will allow us to implement them in the shortest period of time,” Dvorkovich added. Conditions were right to speed the Tianjin oil refinery project and to build a petrochemical facility, he said.

This is happening as Ukraine announced overnight that it won't import Russian gas in April due to the surge in price that Gazprom is demanding from the US proxy state, and following ongoing Gazprom invoiving of how much Ukraine owes it which at last count was well over $2 billion - an amount which we be funded from the still to be finalized western aid to be provided for Ukraine.

Of course, at this pace, Ukraine and even Europe, will become far less meaningful markets to Russia as Putin prepares to announce what indeed would be the holy grail of gas supply deals, one that reduces Russia's reliance on European energy imports and substantially raises Russia's relevance to China as the two countries increasingly become the bestest of buddies.

Which certainly is also why, as Bloomberg reported this morning, "in the talks between China and U.S.’s Hagel overnight, the Chinese are taking a different tack. Rather than argue the merits of the disputed islands/history, they seem instead to say that it’s none of the U.S. business to get mixed up in something in another part of the world and between two sovereign nations. 

Bloomberg's conclusion: "Not only is this probably music to Putin’s ears, it also serves to ratchet up the tensions."

Just wait to see how "ratcheted up" tensions will be once Russia and China are finally locked into a bearhug of mutual codependence.

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savedeposit's picture

Ding Dong Dollar !

LawsofPhysics's picture

less about the "dollar" and more about simply not wanting to "play the game" with a bunch of spoiled arrogant cunts from the west...

We all remember playing monopoly as a kid, eventually one player had all the property, all the cash etc., and the rest of the players simply said "fuck it" and went outside to do something else...

same as it ever was...

Greenskeeper_Carl's picture

thats a good analogy. Ever since i became aware of how all this works, Ive wondered how long the rest of the world would give us real things, especially oil, in exchange for worthless pieces of paper that we print out of thin air to give them. pretty crazy once you realize that is essentially all we have been doing, and that we have gotten away with it for so long.

McMolotov's picture

It's hard to know whether the people who came up with the scam were absolute geniuses or whether everyone else was just profoundly stupid. Either way, it's been a great scam for some well-connected people, and it'll work until it doesn't.

(At which point they'll come up with something equally as devious and screw everyone all over again.)

SoilMyselfRotten's picture

Easy to understand Carl. They either use our currency or we give them a gentle reminder(bombs).

RafterManFMJ's picture

The, then, is how fiat dies; not with a bang but a whimper...

Max Hunter's picture

We give them an offer they can't refuse.. literally..

Withdrawn Sanction's picture

Well, maybe.  The bully method (favored by the likes of John McStain, and John "Horseface" Kerry among many others) has worked before.  But you wonder for how much longer will it continue to work?  After all making weapons and arming combatants takes money, lots of it.  Moreover, the technology of destruction itself is changing.

CBS was interviewing some USN Admiral the other night about his fancy new rail gun based on EMP technology that can hurl a projectile at mach 7+.  It could penetrate multiple layers of inch thick steel. The cost of the projectile (basically a cone shaped hunk of metal) was reported to be $25K a pop, compared to a ballistic missile costing several millions apiece.  The Admiral was positively glowing about the technological advance his boyz in the research dept had come up with.  It apparently hadn't dawned on him that his invention completely changes the dynamics of traditional naval operations.  The USN's multi ship fleet is now a floating anachronism (or at least, very soon will be).  It's a bit like medieval castles when faced w/the invention of gun powder.  Castles are good against archers and swordsmen, but against cannon, not so much.

Tabarnaque's picture

The move away from the USD as the world reserve currency is inevitable. The Ukrainian blunder will only accelerate it. Now Russia and China fully understand that no one can be friend with the fascists in Washington. They want nothing else than total and complete world hegemony. Ukraine was a direct assault against Russia. The West will not accept a multi polar world. Therefore, the gloves are off and the war has already started. In my opinion, Ukraine is the point of no return. There can be no truce or peaceful cooperation with the fascists that are at the top of the Anglo-American Banking Cartel. 


On one side this is a fight to dominate and on the other side it is a fight to survive. My money is on the other side. I think that the BRICS will survive and the fascist empire will fail. And they very well know where the Anglo-American Banking Cartel is the most vulnerable. Therefore, I would expect a direct and full frontal attack on the USD as soon as they can mount it. The guns are being loaded as I write these lines. I doubt that it will take more than 12 months as most of the mechanics of such frontal attack will be operational in less than 6 months; BRICS Development Bank, the Yuan being fully convertible, several Gold physical exchange platforms, direct swaps agreement between China and its most important trading partners, Russia Pro 100 monetary transfer system, the BRICS undersea internet cable with its own SWIFT-like banking transfer system, etc... This is all coming operational within the next 6 to 12 months. This is not coming out of a fiction book. This is all very real stuff.


There is so much "money stored" in USD that when the move away from the USD starts, it will be violent. Investors won't have time to get out. I think it will be some sort of "over the weekend" devaluation.

Latina Lover's picture

On the face of it, why shouldn't Russia and China do bilateral deals, with no USD's in the middle?  The main reason why the rest of the world does not do this is due to the US military threat, fronted by financial, electronic and economic warfare.  The USSA is  attacking China and Russia via non military means, and they will harm both economies, but in the end neither nation will be forced into submission.   Ultimately, the US will denied victory unless we are stupid enough to go nuclear, then ALL will lose, even the banksters hiding in their bunkers.

Jack Napier's picture

I am amazed by how many people here actually believe that the West and the East aren't under the same iron fist. This is and always has been about wealth transfer and class warfare, not nation warfare. The West is deliberately shifting power to the East, after the East willingly let us play our games for the last few decades. We created the global world reserve currency to kill real money, the powerhouse of the West has been stripped bare thanks to this very globalization, and now the promises that were made to the East in order to allow this to happen are being fulfilled. It's all about screwing over the working class. Leaders on both sides don't care about their respective countries, and they aren't "blundering" anything. I mean honestly, we destroyed China's currency when silver was demonetized, and yet they are willing to buy up all our debt out of the goodness of their hearts? Or maybe it's because they know we will pay it back since we are good for it, HA! No, it's all scripted. Their cooperation was required, and now it's their turn to be on the receiving end. If not for the actions of the West in Ukraine, none of this would be happening right now. Forget about supposed intent. Cause and effect will light the way.

Manthong's picture

“It's hard to know whether the people who came up with the scam were absolute geniuses or whether everyone else was just profoundly stupid.”

Not hard to know with even a bit of research.

The last (and for our purposes final) go-around was in 1913.


Everyone, including the princeton potus (small caps intentional) were scammed by the english/german bankers.

They got the money, control and luxury while the rest of the world got war, poverty and death.

Snidley Whipsnae's picture

Jack... The 'old money' in China was around long before the name Rothchild existed. It's still around and calling the shots in China... and probably the rest of the banking world.

Who knows how much PMs the old Chinese families have buried, for centuries, under Chinese gardens, pig pens and homes?

Their patience and regard for generational wealth and secrecy is beyond anything we can imagine.

Granted the Jews and some gentiles are good with money... but pikers and new comers compared to the Chinese.

TheFutureReset's picture

If they are so ultimately conniving and evil, why would they trust each other? I think they may have formed a pact when the Chinese saw something in it for them. The "five families" (godfather reference) agreed on the rules and the territory. Now some of them want a new Don, or a new agreement cutting up the head families territory and property. It's in their nature to plot and scheme for power and influence. They trust no one, so all coordination is temporary. We are witnessing the end of that temporary coordination. 

Newsboy's picture

We don't need no stinkin' dollars.

eatthebanksters's picture

We were so prepared for this weren't we? Our CIA and NSA had all the information so we could be ahead of all this right?  We have answers, right?  Valerie Jarrett will tell her puppet, er, I mean Obama, how to spin this fucking disaster and our dumbed down polulation will have no clue as to the implications that all these actions have on their future.

Freddie's picture

The Russian anti-ship missiles are not too expensive and they can be hidden on freighters, on trains, semi trucks plus surface ships and jets.

Surface ships including carriers are becoming an anachronism. As long as you could beat up, destroy, mass murder and loot countries with no one standing up to them - you were golden. The corrupt media could spin it as democracy.

Russia has started standing up to the bully.

BlindMonkey's picture

I want to take your thought to the next level:

If these ASM missiles are good enough to make warships an anachronism as you say an interesting thing will happen. There will be no global hedgimony based on military power projection. All power will become regional in scope because shipping will only be effective under the he ageis of the ASM umbrellas that are provided by the home/allied countries. Places like the Med may be demilitarized altogether because there are some many disparate powers operating in proximity.

Just a thought.

AbbeBrel's picture

Humm yes - the paradigm shift is upon us.   Should be short gunpowder and old tek.   Like most of Western Europe.   Long micro-flechettes and backpack based quadcopters for personal protection.    Guess what folks, things change.  


and as usual from Clarke (wikipedia):


Clarke's Second Law: The only way of discovering the limits of the possible is to venture a little way past them into the impossible.

"Hazards of Prophecy: The Failure of Imagination" in Profiles of the Future (1962)

Clarke's Third Law: Any sufficiently advanced technology is indistinguishable from magic.

Profiles of the Future (revised edition, 1973)

post turtle saver's picture

rail gun tech is going to obsolete a _lot_ of current military thinking, strongly agree... let alone what it means for the Navy, if I were the Air Force I'd start to wonder about the viability of manned flight in 20 years...

MIC porn:

SteveNYC's picture

From what I've read, the rail gun is a long way off from being effective in an actual "battle" situation:


Issues with the barrel, wear and tear etc. Interesting reading.

SamAdams's picture

Actually, the people who installed the FED, and the Congress who allowed it, were aware.  However, if you have the power to create money, you also have the power to buy the support of men and women of low integrity and having weak virtue.

Lots of Senators were against it, they were coerced, sometimes fatally into silence.

The scam predates the FED.

Herd Redirection Committee's picture

And upon discovering it, you have two options:  Try to stand against it, or try to profit from what you know.

And unfortunately, for the last 100 years, men have found it more profitable to NOT stand against!

HardAssets's picture

But then the bastards come up with some other fiat made up outta nothing . . . like the SDR

Four chan's picture

can two back stabbing bastards mkae a deal with one another that works?

SamAdams's picture

The real question is, How is that the Communist societies are joining in resistance to the Capitalists, while also taking hold of the gold?  Meanwhile, the controllers of the Home of the Free are busy weakening its core. 

Almost sounds like they are purposely destroying the last thing that stands in their way of the global coup.  Using Russia and China as the "good guys" against the "bad guys", when if fact, they all have the same ultimate goal.

Wouldn't be the first time both sides are played against the middle.

TruthTalker's picture

He is correct - after this what more do you need to know?

Took Red Pill's picture

except many of them now have their own bombs, too.

0b1knob's picture

 "Base price is the only problem to be solved,”

??????????????????   Nothing to see here people, move along.

Urban Redneck's picture

The oringal MOU that kicked off this process was signed almost 4 1/2 years ago...  A lot of obstacles have been overcome in the interim, but this one has been dragging on for a while, and the only thing that has changed in the recently is Ukraine...

Snidley Whipsnae's picture

Mac... "it's been a great scam for some well-connected people"

It's been a great scam for the vast majority of Americans that have gas guzzling SUVs, homes with air conditioning, vacations, good pay (once upon a time), and lots of other niceities that the other 95% of the world did not have.

The end of dollar world reserve status is a huge game changer for Americans.

They just don't know it yet.

Mercuryquicksilver's picture

Worthless?  I think not, they're backed by the full faith and credit of The Federal Reserve.


We lost the cold war too. We just lost it after USSR and its taken 30 years to figure it out.

kito's picture

greenskeeper you forget we give the world democracy and capitalism. its our global responsibility to dethrone evil dictators (only the ones who dont toe our line of course), free the people, install a "democratically elected" leader, teach them free market capitalism by assisting them with their resource rich "export business" to the u.s., and help the masses by providing humanitarian loans in the billions and help them trim the wasteful spending so they can learn "fiscal responsibility". the

no greenskeeper, we do alot more than just give away worthless pieces of paper. we save the world.  

ATM's picture

We will eventually give them real things in return, American companies, natural resources, real estate as all those paper bills eventually flood back to the US seeking anything of value.


Snidley Whipsnae's picture

ATM... Yes, we will. 

Last estimate I heard there is ~ $7 Trillion held oversear and I believe that to be a low ball estimate.

My new neighbors might be speaking Russian and Mandarin or who knows what.

The TV reruns will have various languages scrolling across the bottom of the screens.

Jefferson predicted this very event would happen if we turned over our money to bankers.

teslaberry's picture

what in tarnation are you talking about? 

essentially all we have been doing is going to war again and again. 

the worthless paper given to the loser is just what happens during prolonged 'rest' periods in between wars that we call 'peacetime'. 


bretton woods bitchez.

FlyingDutchman's picture

As long as you have the biggest guns.

horseman's picture

The govt may have paid with paper, but the people of the US have paid with blood, at least those families that serve.  Not a very good trade for the people.

I am more equal than others's picture



Supply and demand imbalances affect value. 

Demand for dollars are about to decrease. 

Supply remains the same (really increases with Fed printing-fest)

Sounds like an inflation inducing event.


Oracle 911's picture

"Sounds like an inflation inducing event."


It is actually hyperinflation inducing event.

insanelysane's picture

"Never get in a commodities war with Asia"


Kina's picture

And when the US thought it might lose it started a war in the players backyard.

KickIce's picture

Except in this case when you go outside you find out that the same kid owns the playground and the toys as well as the ice cream truck.

Seasmoke's picture

And the drones ABOVE you. 

LawsofPhysics's picture

Bullshit, I know where the real owners live.