Russia's "Holy Grail" Gas Deal With China Now "Only One Digit Away"

Tyler Durden's picture

We have previously profiled the "holy grail" gas deal between Russia and China on several occasions, and noted last week how it is expected to be signed this week - pending some final price negotiations. It appears that was spot on as Reuters reports, Russian state-run Gazprom said it was still "one digit" away from finalising a 30-year gas supply deal with Beijing which is expected to crown Russian President Vladimir Putin's visit to China next week. On the heels of Russia's de-dollarization meetings, the coming week appears a crucial one for the history books of the US Dollar as reserve currency (or will China leverage Russia's need to diversify from Europe and stall the deal once again?)



As we have discussed in detail, Russia has been in talks with China to supply it with 38 billion cubic metres (bcm) of gas a year for more than a decade but the deal has been postponed repeatedly over price disagreements. And as Reuters reports, last week, state China National Petroleum Corp (CNPC) said that it and Gazprom had reached an agreement to sign a contract during Putin's visit but that the two sides had yet to iron out price differences.

Gazprom chief executive Alexei Miller confirmed in an interview on state Rossiya 24 television that the talks were in the final stage and only centred around base price.


"There is just one question - it's ... a starting, base price in the price formula which, it's remarkable, has already been fully agreed upon with our Chinese partners," Miller told news show Vesti on Saturday with Sergey Brilev.


"It's a very little more - to put in only one digit, and a 30-year contract to supply 38 bcm of gas from East Siberia to China will be signed," said Miller.

The question is - of course - will the price disagreements once again spoil the party...

With tensions high with the West over Russia's role in the Ukraine crisis, Moscow is eager to divert some oil and gas from European markets, part of its wider push to Asia.




About 80 percent of Gazprom's revenue comes from gas sales to Europe and analysts say that failure to clinch a deal with China, the world's top energy consumer, would expose its huge reliance on Western consumers and might strengthen Beijing's bargaining positions in the months to come.


Miller emphasized that the contract would be signed on mutually beneficial terms, adding that the sides had also agreed to start talks on a second route for Russian gas supplies to China after the current deal is signed.

As we noted previously, quid pro quo:

"Observers expect both leaders to take a united stand on major international issues, and Putin may seek China's support on Russia's dealings with Ukraine."

And also on the dollar as we reported in "Russia Holds "De-Dollarization Meeting": China, Iran Willing To Drop USD From Bilateral Trade." In which case expect random Chinese space rockets to mysteriously explode during take off too.

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chunga's picture

C'mon, round it off.

ZerOhead's picture

We usually just flip the coin on these kinds of impasses...

Our special coin that is.

chunga's picture

Man, how things have changed since I was a Boy Scout.

It's really hard to believe.

gmrpeabody's picture

Is that the digit on the left..., or the digit on the right?

ZerOhead's picture

Just so long as it's not the middle digit...

0b1knob's picture

Hitler-Stalin Pact Two?

ilion's picture

Strategically Putin is doing the right thing.

yrbmegr's picture

The probably differ by one on the number of digits.

BrigstockBoy's picture

Would that be the trillion dollar coin?

ZerOhead's picture

You wouldn't want a 1,000 oz. two-headed platinum coin landing on your foot now would you?

grunk's picture

How do you flip a bitcoin?

svayambhu108's picture

How do you flip a bitcoin without loosing it, and this is the crux of the problem, almost metaphysical, the more the abstract the less its demurrage, but the less resilient if the system is in shock, if it doesn't have some kind of intrinsec value is worthless.


Kirk2NCC1701's picture

Which digit?

Numbers or Fingers?

NuYawkFrankie's picture

Confucius say:

 He who has gas, has friend  He who pass gas, has no friend

Oracle 911's picture

It is definitively bullish sign for US$.

Do I need the /sarc tag?

Winston Churchill's picture

If its priced in SDR's we have all been had.

fonzannoon's picture

yeah what is the actual effect that will be felt from this? will it be measurable? 

Al Huxley's picture

I think it's a strategic hint that global support for the USD has evaporated, but short-term I doubt there's any visible impact.  Probably will see a trend of non-USD trade agreements, maybe some kind of collateral backing the settlement, and then at some point in the future the global financial system will go through another major stress event, and THAT will be the point when it becomes obvious that nobody's treated it as reserve currency anymore.

Lore's picture

Anybody who tried this before got their ass liberated.  Are the warhawks going to invade Russia next?  That would be one heckuva counter-insurgency operation. 

Seriously, the deal is done. Putin isn't flying to China just to tour the Forbidden City and pick up some cheap Rolexes.  So much of what we see today was planned many years ago. 

CheapBastard's picture

Better sign. China's going to require lots of earl and gas for their military when the conflicts heat up with Vietnam and the others in SE Asia.


Oracle 911's picture

@ Winston

SDR? It is even worst option the the US$.

Winston Churchill's picture

I agree.
Do you really think TPTB are going to let go of their power ?
It's WWIII or the SDR ,or WWIII to get to their SDR.
I hope he's wrong, but very plausible action/reaction/solution dialectic by TPTB.

fonzannoon's picture

Hey Winston i just read that philosophyofmetrics oil/sdr article. it does not really explain the impact of that decision on the various markets and currencies. what's your guess as to the impact(s)?

Winston Churchill's picture

Wish I knew for sure,Fonz.
There is a nine part series inside that weblog on how the BIS
is in total control, and forcing SDR adoption.
I can foresee the USA ceasing to exist as a centralized state
as a bloody byeproduct.Secessions everywhere.
Short term panic,and hyperinflation as an alternate.
Wish could see how it plays out if Collins is correct.
I can see TPTB plan,but
The best laid plans of mice and men .....

fonzannoon's picture

i hear you man thanks for the reply.

Oracle 911's picture

Well they may try force SDR on Russia, China and to the rest of the BRICS. But they wont succeed. Russia and China know TPTB which is behind the USA and IMF is they real sworn enemies.

About WWIII:

1st) If it go hot between USA and Russia/China we will see a thermonuclear war. TPTB is certainly homicidal but it is anything but suicidal.

2nd) The WWIII is already on, make no mistake, it started on Maidan. Luckylly it is mainly "just" financial, cultural and economical war. In other words war between civilization models.

Bohm Squad's picture

Collin's premise is that Russia and China are already in on it.  Russia plays the bad guy, China plays the good guy.  The good guy will guide everyone to the SDR.

ebworthen's picture

Europe will still need the Russian gas; what's the U.S. going to do, airlift it?

Doña K's picture

That's why they need Syrian regime change to get Saudi and Quatari gas pipelines through Syria. Granted though that it will still need to be liquified and shipped which is a lot more expensive

813kml's picture

The US can just float it over in giant zeppelins.

BrosephStiglitz's picture

Maybe just import Condi Rice.   With the amount of hot air she blows we could employ geo-thermal and power the entire continent.

Rock On Roger's picture

You might be onto something there.

If the zepps are large enough then an umbrella effect would occur on earth,

And global warming might be slowed,

But climate change would be affected.


Fart On

Handful of Dust's picture

@Eb: << Europe will still need the Russian gas; what's the U.S. going to do, airlift it? >>

Barry will get Amazon to drone it to them Next Day Delivery.

CrashisOptimistic's picture

And that is the bottom line.

Folks here never quite grasp, and for good reason because they are always looking to make money, but they never grasp that you can't make money on scarcity.

Scarce oil drives the price to $180?  What happens.  Economic activity is smashed and the price collapses to $50.  All of a sudden you have cheap oil goosing economies.  That's just ebb and flow.

The problem arises when there isn't enough to go around, at any price.  The response time coefficient on shale oil is higher than ever in history.  You cut price, the drilling stops.  If the drilling stops, output crashes because these wells die so fast.  Drill again and in 2 months you have output again.

But there are constraints.  There is only so much pipe.  Only so much proppant.  Only so much water.  Price won't matter.  You can't drill more than what is possible.

Then you stop worrying about how to pay for it and worry about how to deny it to the guy you need to take it from.  That has nothing to do with money.

f16hoser's picture

Eat Shit and Die, Cheney/Kissinger...!

DaddyO's picture

And which one of these is Obama's special adviser and emmisary to Russia?


Leveraged Algorithm's picture

I have gas today........

Winston Churchill's picture

Alas , the burritos last night leave me in similar straits.

Jack Burton's picture

RT is going to offer live coverage of this event. It does not escape Russia how important this type of deal is to send a message to Washington that their attempts to rule the world are coming to naught. Along those lines, German corporations and some politicians are beginning to push back publicly against Washington's crusade to force Germany to scrap tens of billions in mutual trade, and the 300,000 direct jobs associated to trade with Russia. German companies are making big money and employing many 10 of thoudans of Germans at high pay servicing Russia's import economy. While Washington howles at the moon like a pack of mad dogs demanding an end to trade with Russia, Germans beg to differ. Not just that, but German media is beginning to pick up on how many Nazis are in the Kiev government, and how many armed gangs are roaming Ukraine with guns and nazi symbols. Public pressure in Germany is saying NO to America's manufactured extremist Kiev coup government. The one shelling cities in East Ukraine now, though a convy of APCs trying to capture Slavyansk was defeated and forced back by self defense forces today.

It is natural that if the EU want to lose hundreds of thousands of jobs and tens of billions in profits, China will gladly move in to fill the gap. The whole US policy smacks of a desperation and lunatic plan to force war upon Ukraine and Russia.

The nazis in Kiev today announced they plan to start a guerrilla war in East Ukraine using terror tactics to destroy the people living there who refuse to submit to Ameica's Kiev coup government.  I predict that if Kiev begins to attempt this type of conflict in the East, that the East will return this in kind. Then this spirals into a real bloodbath. Nothing could make Nuland happier, as this was her policy all along. The destroyer of nations can mark up another destroyed country and a big body count.

Nuland should be arrested for international war crimes. Her hands are dripping with blood.

ZerOhead's picture

Former German Chancellor Helmut Schmidt had some things to say as well...

President Vladimir Putin’s approach to the Crimean issue is “completely understandable,” Schmidt wrote in Die Zeit newspaper where he’s employed as an editor.

While the sanctions, which target individual Russian politicians and businessmen, employed by the EU and the US against Russia are “a stupid idea,” he added.

The current restrictive measures are of symbolic nature, but if more serious economic sanctions are introduced “they’ll hit the West as hard as Russia,” Schmidt warned.

He also believes that the refusal of the Western countries to cooperate with Russia in the framework of the G8 is a wrong decision.

“It would’ve been ideal to get together now. It would certainly do a lot more to promotion of peace than the threats of sanctions,” the ex-chancellor explained.


 I guess somebody forgot to provide him with Obama's teleprompter download...

Kaiser Sousa's picture

Fuck arrested...the MoneyChangers who she represents  control the Judiciary and police...

she should be shot on sight...

MillionDollarBoner_'s picture is you, isn't it ?:O)

intric8's picture

Neocon fools. America has power tripped itself into some real pretty shit now! If the economic loss is large enough, she will eventually go to war over some trumped up pretext. As for Nuland, i think that bitch has bitten off more than she can chew. If america can only see through the propaganda! They'd have her head on a bloody stick come tuesday

Razor_Edge's picture

Nuland is an employee of Obummers administration. That she hasn't been fired makes it clear that what she is up to is intra vires of her job spec..That makes her actions those of her immediate master, Mr Ed, and ultimately those of the puppet in chief, Obummer. They all have blood on their hands, but most especially Obummer.