Russia And China Finally Sign Historic $400 Billion "Holy Grail" Gas Deal

Tyler Durden's picture

There was some trepidation yesterday when after the first day of Putin's visit to China the two countries did not announce the completion of the long-awaited "holy grail" gas dead, and fears that it may get scuttled over price negotiations. It wasn't: moments ago Russia's Gazprom and China's CNPC announced, that after a decade of negotiations, the two nations signed a 30 year gas contract amounting to around $400 billion. And with the west doing all it can to alienate Russia and to force it into China's embrace, this is merely the beginning of what will be a far closer commercial (and political) relationship between China and Russia.

So far there have been no public pricing details on the deal which accrording to Gazprom CEO Aleksey Miller is a "commercial secret", and which is believed to involve Russia supplying 38 billion cubic metres of gas per year to China via a new eastern pipeline linking the countries.

According to Itar-Tass, the compromise between Russian gas export monopoly Gazprom and Chinese National Petroleum Corporation (CNPC) on Russian gas price is estimated at $75 billion, citing the Deputy Head of the National Energy Security Fund Alexei Grivach. The differences on the price for 38 and 60 billion cubic meters supplies a year were $1.5 billion and $2.5 billion, he added, so the subject of the negotiations is quite a significant one.

Gazprom expected a base price of $400 for 1,000 cubic meters, an expert of the Eurasian Development Research Center of the Chinese State Council said in April, whereas the CNPC’s proposal was $350-360 for 1,000 cubic meters.

RIA has more details:

According to Miller, only at 4 am local time it became clear “that all the principal issues have been solved.”


Russia and China have foreseen providing “preferential tax regimes,” Miller told journalists, without giving details.


Russia earlier suggested nullifying the extraction tax for gas fields delivering fuel to China, while Chinese officials expressed their readiness to cancel import taxes on gas from Russia, Rosneft CEO Igor Sechin said Tuesday.


Gazprom’s stocks rose 0.9 percent following reports that the long-awaited gas supply contract was signed. Russian stocks increased Tuesday amid positive aftermath of the first day of President Vladimir Putin’s visit to Shanghai.


In March 2013, Gazprom and CNPC signed a memorandum of understanding on the planned gas supplies to China along the eastern route via the Power of Siberia pipeline. The signing of the contract has been delayed several times as the two sides failed to reach an agreement citing a pricing issue as the main stumbling block. President Putin’s current visit to China became the final stage of the negotiating process.


The Gazprom CEO said earlier the company could receive advance payment from China for the gas, which could start flowing as early as 2018. The planned project has an estimated capacity to pump up to 38 billion cubic meters annually, which could later increase to 60 billion cubic meters.

Then this from from RT:

A memorandum of understanding was signed in the presence of Russian President Vladimir Putin and President of China Xi Jinping on the second day of Putin’s two-day state visit to Shanghai. The price China will pay for Russian gas remains a "commercial secret" according to Gazprom CEO Aleksey Miller. Gas will be delivered to China's via the eastern 'Power of Siberia' pipeline.


RT producers were informed of the landmark energy deal prior to its signing after a conversation with Miller. 


Under the long-term deal, Gazprom will begin providing China's growing economy with 38 billion cubic meters of natural gas per year for the next 30 years, beginning in 2018. The details of the deal were discussed for more than 10 years, with Moscow and Beijing negotiating over gas prices and the pipeline route, as well as possible Chinese stakes in Russian projects.


Just ahead of Putin's visit to Shanghai, Russian Prime Minister Dmitry Medvedev gave reassurance that the agreed price would be fair.


“One side always wants to sell for a higher price, while the other wants to buy for a lower price,” Medvedev said. “I believe that in the long run, the price will be fair and totally comparable to the price of European supplies.”


A major breakthrough in negotiations came on Sunday as Gazprom chief Aleksey Miller sat down with his CNPC counterpart, Zhou Jiping, in Beijing to discuss final details, including price formulas.


Although Europe is still Russia's largest energy market – buying more than 160 billion cubic meters of Russian natural gas in 2013 – Moscow will use every opportunity to diversify gas deliveries and boost its presence in Asian markets.


“I wouldn’t look for politics behind this, but I have no doubt that supplying energy to the Asia Pacific Region holds out a great promise in the future,” Medvedev said.


In October 2009, Gazprom and CNPC inked a framework agreement for the Altai project which envisions building a pipeline to supply natural gas from fields in Siberia via the western part of the Russia-China border.


In March 2013, Gazprom and CNPC signed a memorandum of understanding on Russian gas supplies to China along the so-called eastern 'Power of Siberia' route. When both pipelines are activated, Russia can supply Asia with 68 billion cubic meters of gas annually.

Last year, China consumed about 170 billion cubic meters of natural gas and is expected to consume 420 billion cubic meters per year by 2020.

Regardless of what the final price ended up being, and whether or not China got the upper hand in the negotiations, the final outcome is there and it is real: as a result of his disastrous foreign policy in the past two months, Barack Obama finally pushed Russia into China's hands, culminating with a deal that was ten years in the making and was never certain, until the Ukraine crisis. 

And yes, this was all predictable from day one. Here is what we said precisely two months ago:

If it was the intent of the West to bring Russia and China together - one a natural resource (if "somewhat" corrupt) superpower and the other a fixed capital / labor output (if "somewhat" capital misallocating and credit bubbleicious) powerhouse - in the process marginalizing the dollar and encouraging Ruble and Renminbi bilateral trade, then things are surely "going according to plan."


For now there have been no major developments as a result of the shift in the geopolitical axis that has seen global US influence, away from the Group of 7 (most insolvent nations) of course, decline precipitously in the aftermath of the bungled Syrian intervention attempt and the bloodless Russian annexation of Crimea, but that will soon change. Because while the west is focused on day to day developments in Ukraine, and how to halt Russian expansion through appeasement (hardly a winning tactic as events in the 1930s demonstrated), Russia is once again thinking 3 steps ahead... and quite a few steps east.


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. One which, as some especially on these pages, have suggested would lay the groundwork for a new joint, commodity-backed reserve currency that bypasses the dollar, something which Russia implied moments ago when its finance minister Siluanov said that Russia may refrain from foreign borrowing this year. Translated: bypass western purchases of Russian debt, funded by Chinese purchases of US Treasurys, and go straight to the source.


Here is what will likely happen next, as explained by Reuters:

Igor Sechin gathered media in Tokyo the next day to warn Western governments that more sanctions over Moscow's seizure of the Black Sea peninsula from Ukraine would be counter-productive.


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.

* * *


To summarize: while the biggest geopolitical tectonic shift since the cold war accelerates with the inevitable firming of the "Asian axis", the west monetizes its debt, revels in the paper wealth created from an all time high manipulated stock market while at the same time trying to explain why 6.5% unemployment is really indicative of a weak economy, blames the weather for every disappointing economic data point, and every single person is transfixed with finding a missing airplane.

To conclude with the traditional geopolitical balance of power summary: Putin wins (again), Obama loses (again), and the monument to the dollar's status as world's reserve currency gets yet another tarnishing blow.

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I am a Man I am Forty's picture

$13B a year, gonna take more than that

dryam's picture

The days of U.S. money printing with impunity are close to an end.

Arius's picture

I wondered what is the real intention to peg gold at 1300?

On appearance is about controlling the price right, but if you look closely, it seems it is helping gold become a safe haven ... instead of playing futures people will be forced to buy physical, and that for sure will help bring the game closer to its end ... at least thats how i look at it.

I think the big players are already position, and now is all about closing the game.

everyone knows they cannot sell 500 tons everyday, you can do on paper but what happens when the fix is over ... all they need to close the London fix is 7 days of notice and change the system.

Already there are in place 5-6 exchanges in Asia, where one can sell and buy only the real stuff ... WHY?

well someone is planning in advance...

there wont be London fix so there will be only real exchanges ... the price?  well whatever the market determines .... guess what will be when to supress it at 1300 they need to sell on daily basis worth half a year production ...


the Masters of Universe own the real stuff and they are greedy so, you can guess where the price will go ... this peg development only expedites the process TOGETHER with this China Russia development... if it was that easy the PEG would have been done long time ago ...

dryam's picture

Screw gold, buy palladium. It's not as easy to manipulate. The largest mine is in Russia & that company has a 51% stake in the largest North American palladium mining company, Stillwater Mining. There are only a handful of Palladium mines in the world. Russia directly and indirectly controls greater than 50% of the market. All of this is why the Palladium charts look better than any of the other PM charts.

Arius's picture

obviously i hit a nerve there ... dont recall you posting much before, although you seem pretty versed on the subject ... i'll see you at the other end of the tunnel and we can talk about palladium then ....

dryam's picture

Gold is controlled by governments more so than anything else. I'm not saying it's not good to own some. It's just not my favorite PM because of this.

MeMadMax's picture

Sweet, start building that pipe ASAP.

Arius's picture

quick question since you seem to know the stuff.

WHERE did all this gold thousands of tons .. GO???

That includes all the gold that all Western Central Banks have been selling since 1999 (Gordon Browns bottom at $250 sold half of gold of central Bank of Britain) has been GONE ?

Not to you and me thats for sure ... the average Joe has been selling on Cash for Gold in everycountry around the World.


Who Can buy all that gold all Central Banks have been selling ... everyone talk about selling none talks about who is BUYING it all ???

dryam's picture

I have no idea & my speculation is just about as worthless as anyone else's. In addition, if I did know I suspect I would be at risk for a nail gun accident or throwing myself off an embankment.

jeff montanye's picture

some private hands in the west but clearly most of the demand is from china, india, the oil exporting countries, some from russia. neither russia nor china export any of the gold they mine, so it is not a stretch to imagine the wealthy there own some privately, in addition to central bank and,perhaps, other, hidden government reserves. many other central banks overflowing with dollars, like south korea, japan, taiwan, and other economies in this area, own very little gold as a percentage of assets.  of course they could buy more if they so chose.

Arius's picture

common dryam ... you dont have to be a genius to figure this out ...


Jeffmontagne ... most of the gold by Central Banks was sold earlier on.  In 1999 there was a five year agreement between all central banks that they had to sell 1000 tons each year, the agreement was renewed in 2004.  bank of Englad sold its half in 1999, Canada sold it all in early 2000.

China and India and the rest came late into the game ... majority has been sold earlier on ... do you really think anyone who is building the NEW SYSTEM would just give it away ...

HINT: there are some well protected tunnels in the montains of Switzerland, even against bombing....


Incidentally this is the same Switzerland with its 18 brave soldiers, that bravely stood up to Hitler, Stalin and whoever burned up the rest of Europe ....

such gentlemans these fellows must have been come to think of it ... respecting the neutrality of a small country while did not care killing millions of innocent elsewhere ... food for thought


Oh regional Indian's picture

The gnomes of Zurich and their hidey-holes!

So, the Sino-Russia axis, long predicted is now cemented.

Note, axis.

Allies: US/ZATO/Japan/Hebridies.

I gues the boys are about ready to start pulling triggers in shortish order. Another few months/years of ship and troop movements and the boyz with the toyz will want to pull triggers.

Too obvious though, something is building somewhere. I want to know.

Brazil? Exploding balls?

The WC will either go very well or very badly.

HardAssets's picture

Nazi nations need enemies.

So, of course they would make every move possible to solidify the Russia/China link (by making dumb moves in Ukraine & in other places). They convince the economically clueless military brass that any nation trying to get outside the system of dollars-losing-value is somehow a 'financial terryist waging financial war on America'.

WW3 is the psychopaths final move for their global conquering new world order.  They can use war as the excuse for a domestic crack down & might even get lots of 'useless eaters' to kill each other while waving their various flags.

Quite insane.

TheRedScourge's picture

You mean the same noble Swiss folks who melted down dental gold from Nazi concentration camp victims?

Bingo Hammer's picture

You may well find some very interesting perspectives on this by checking out the thoughts of Catherine Austin-Fitts, Dr Joseph P Farrell and Richard Dolan

MontgomeryScott's picture

I am waiting to hear Gerald Celente and Max Keiser go with THIS story...

'I tried to tell you, but you wouldn't listen. I said, "Touch nothing", but, you just bunch of cowboys...'

I can't WAIT to see what Soetoro (and McCain and Boehner and Graham and their bankers) decides to do now.


I can see Curly now. 'OH! It's an "OILIGARCHY"! Nyuk nyuk nyuk!'

Handful of Dust's picture

Could be some serious cold there in the EU next winter. Beteer buy some of those "Hecho en China" thick coats.

RafterManFMJ's picture

...and just as we appear to be entering a global cooling period.  How is it, HAARP notwithstanding, the weather is always on Russia's side?  General Winter says it'll be nipply in Europe this year.

Flakmeister's picture

Global cooling...



Herd Redirection Committee's picture

The Little Ice Age lasted from 1550-1750.  Prior to the Industrial Revolution, for those who have a grasp of chronology.  Before that was a warm period as well.  Resulted in the population of northern lands swelling, hence the Slavic and Viking migrations of that era.

Flakmeister's picture

What is your point?

Here is  the  latest most compreshensive measurement of the NH for the past 2000 years

More details here:

Bendromeda Strain's picture

Bogus reconstructions are not "measurements". Next time you want to facepalm, please load your hand with some of the guano you so frequently post.

Flakmeister's picture

Well, I would say your friends at Climateaudit should have no problem publishing a paper about the shortcoming of the PAGES2K paper...

Assuming of course that they are not full of shit....

The last clown that tried to overturn the hockey stick using proxy data had to issue a correction....

Remember him?

john39's picture

if the Germans wise up, they turn those nuke power plants back on...

Protokletos's picture

Can you point me in the right direction? All I can find is "UFO's for the 21st Century..."

UselessEater's picture

Try subscribing to the Solari Report for a month. Several past interviews with Farrell (Babylon Banksters author website Giza Death Star) and Dolan are there with transcripts. Interesting listening for a few more piece of the puzzle.

tip e. canoe's picture

perhaps there's a reason why they're called "precious" metals?

tinfoil science class for the day:


There is a group of elements found in the middle of the periodic table known as the "transition group elements":

1) One category of these is called the precious elements:

2) Another category of these are the non precious elements:

These elements are known as "transition group elements". They are in an uncertain state as regards their positive or negative electro-charge behavior, hence the name "transition". Their valence. electron orbitals are always half filled or half empty. (Electrons in the outer shells of an atom are referred to as valence electrons. Different orbital states for electrons can hold only certain numbers of electrons. ) Elements with fewer electrons in the outer shells tend to be electro-positive, and those with more electrons in the outer shells tend to be electro-negative.

These transition elements possess a unique property in that the electrons in the Partially filled outer orbitals can interchange under the right conditions with electrons in the partially filled inner orbitals (d). This is the underlying basis of catalytic reactions. (A catalytic reaction is a chemical reaction that occurs much more rapidly than normal without the catalyst itself participating in the reaction.)


cossack55's picture

Its obvious.  Belgium

Arius's picture

You seem pretty one sided ... the government is you and me, and people we elect to hold official office to serve us.

the government is not eternal and if I was you  I would not count on them too much ... if they are gone, tomorrow or policy changes, what you going to do?  ask them to be responsible and continue the same policies and financial games??? well good luck!

supermaxedout's picture

The gold the Centraal Bnks were selling did often not even exist.

Think about the following. During the 1950 and early 1960 when Germany aquired most of its gold. The process was like this. Germany forwarded hard Deutsch Marks to the Fed or whoever is in charge of the US gold. And then guess what happened. The Germans received a paper that they own now so many tons of gold, secure stored in US vaults. That was it.  Thus by a simple paper,  gold came on paper into existence but not in reality.

The situation was most probably not much different with the other gold holding Western Central banks.  Then  these gold "ghost" positions had to be brought down prior to the phenomenal rise in prise.  This was done when the price of gold was down.  Many Central Banks sold then gold but again on paper and the paper gold disappeared accordingly from their balance sheets. But the whole maneuver was only a simple balance sheet trick which had to end before the value of gold exploded.

But Germany, France, Italy and some other countries did not sell their paper gold or very little as the UK did.  They insisted, that they had bought gold in good faith and that they want to have the physical one day, like Germany did as a forerunner.  The Swiss sold a lot of physical gold I guess.  But I#M further guessing this gold did not leave Switzerland it was sold to the BIS in Basel, the Central Bank of the Central Banks.  So its still in Switzerland and who knows, maybe it was not sold at all in reality. Mybe the Swiss National Bank has an option to repurchase the gold for the same price from the BIS whenever they want.

In short the gold sales and purchases and announcements from the Central Banks are all just smoke and mirrors.  The trick is to hide the amount of gold really in existence. Its enough that everybody believes the gold is there in the vaults. The truth about gold is the biggest secret.

Nobody knows how much gold does exist in the US controlled Western central banks. But one thing is sure. It is not more compared to what is shown in their balance sheets. But it could be much lesser. While, China Russia and other could come up with a surprise in a positive way.


MEDIEVAL ENGLAND (1000 - 1100 A.D.)

Here we find goldsmith's offering to keep other people's gold and silver safe in their vaults, and in return people walking away with a receipt for what they have left there.

These paper receipts soon became popular for trade as they were less heavy to carry around than gold and silver coins.

After a while, the goldsmith's must have noticed that only a small percentage of their depositor's ever came in to demand their gold at any one time. So cleverly the goldsmith's made out some receipts for gold which didn't even exist, and then they loaned it out to earn interest.

A nod and a wink amongst themselves, they incorporated this practice into the banking system. They even gave it a name to make it seem more acceptable, christening the practice 'Fractional Reserve Banking' which translates to mean, lending out many times more money than you have assets on deposit.

Today banks are allowed to loan out at least ten times the amount they actually are holding, so while you wonder how they get rich charging you 11% interest, it's not 11% a year they make on that amount but actually 110%.

THE TALLY STICKS (1100 - 1854)

King Henry the First produced sticks of polished wood, with notches cut along one edge to signify the denominations. The stick was then split full length so each piece still had a record of the notches.

The King kept one half for proof against counterfeiting, and then spent the other half into the market place where it would continue to circulate as money.

Because only Tally Sticks were accepted by Henry for payment of taxes, there was a built in demand for them, which gave people confidence to accept these as money.

He could have used anything really, so long as the people agreed it had value, and his willingness to accept these sticks as legal tender made it easy for the people to agree. Money is only as valuable as peoples faith in it, and without that faith even today's money is just paper.

The tally stick system worked really well for 726 years. It was the most successful form of currency in recent history and the British Empire was actually built under the Tally Stick system, but how is it that most of us are not aware of its existence?

Perhaps the fact that in 1694 the Bank of England at its formation attacked the Tally Stick System gives us a clue as to why most of us have never heard of them. They realised it was money outside the power of the money changers, (the very thing King Henry had intended).

Excerpt from


Ghordius's picture

excellent excursion in monetary history

yet one thing... in defense of fractional reserve banking: it's "natural"

every time I write an IOU and people accept it without asking for an audit of my books, without asking for collateral, etc. etc.... I might be engaging - depending from my finances - in fractional reserve banking

our problems with banks does not stem from fractional reserve banking per se. and also not by fiat currency per se

our problems with banks stem from TBTF and currency wars

so our problems are at the end... political, not monetary or financial. just my opinion

dryam's picture

A debt based monetary system is doomed to fail because of the perverse incentives throughout the system to keep it moving forward as much as possible.. The traffics lights that are supposed to regulate the system fail because of greed by various entities. Once the system starts moving too fast there's no way to reel it in without undergoing severe pain thoughout the entire economy.

It's easy for just about any monetary system to look healthy when the economy is getting a huge unnatural boost by cheap oil. Cheap oil is now on the decline and reality will soon be setting in.

Ghordius's picture

I agree... yet again, it's political, including the "keep it moving forward as much as possible". and Cheap Oil... let me put it this way: for us europeans (or for many others), Cheap Oil is something we read about on the NYT

dryam's picture

The U.S. has clearly benefited the most from cheap oil, but most of the world has benefitted either directly or indirectly. Overlay a graph of man's use of fossil fuels & world population. The exponential curves are almost a perfect fit. With the decline of cheap oil countries are scrambling for resources. "Growth" is over with. There will not be a be a "recovery". There will only be countries that decline faster and some will decline slower, but everyone's standard of living will be going down.

Spastica Rex's picture

I don't think everyone's standard of living will go down.

In the aggregate - yes.

dryam's picture

Agree. I probably overstated it. I should have said most countries will see a decline in their standard of living,

tip e. canoe's picture

well, the Cubans saw their their standard of living when their Soviet sugar daddy imploded and their access to oil plummeted.

then they (re)learned how to grow their own food.

now it's a debatable point as to whether their "standard of living" is better now than when daddy was still around.   betya a silver quarter though that they are much healthier.

old naughty's picture

"...In short the gold sales and purchases and announcements from the Central Banks are all just smoke and mirrors. The trick is to hide the amount of gold really in existence. Its enough that everybody believes the gold is there in the vaults. The truth about gold is the biggest secret.

Nobody knows how much gold does exist in the US controlled Western central banks. But one thing is sure. It is not more compared to what is shown in their balance sheets. But it could be much lesser. While, China Russia and other could come up with a surprise in a positive way."


So most of us assume that China took delivery of the physical...Could it be all smoke and mirrors also, such that it perpectuated the game?

So China Russia and other could surprise in a negative (to sheeples) way?

Just sayiing...

silverserfer's picture

can someone plesae freshen up Ghordus here on "moral hazard" and 'human nature" they seen to both be in his blind spot. 

fxrxexexdxoxmx's picture

Thank goodness you all have no problem with nuclear power plants .How many do you all have on that landmass? Do not exclude any that have meaningless political boundaries, like not a part of EU, Russia or its former satellites.

Martian Moon's picture


If banks can engage in "fractional reserve lending"  but I can't, under penalty of violence against my person or assets, then what is "natural" about "fractional reserve lending?"

If your laws include exceptions, you lose all claim to being just.

tarsubil's picture

The tally sticks story explains why today the Federal Income Tax, collected in dollars, ensures the continued use of dollars domestically. At least, that's what I took away from it and the fact the Federal Reserve and Federal Income Tax were created at the same time.

MontgomeryScott's picture


... the government is you and me, and people we elect to hold official office to serve us.

I must have missed the 'sarc' tag or something.

Wake the fuck UP, already!

Arius's picture

thanks, but i still hold the belief on government and believe things will at some point get better.

Spastica Rex's picture

21st century government does a pretty good job of protecting the interests of its constituencies. You should ask yourself if you're really a member of any of those constituencies.

Apply Force's picture

I believe things will get better as well, and whole-heartedly believe that it will have nothing to do with .gov

But my idea of "better" is quite a bit different than BAU.