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Russia And China Finally Sign Historic $400 Billion "Holy Grail" Gas Deal
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.
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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And for this, Merkel and Steinmeier have gotten but Klitschko-the-boxing-guy, Tymoshenko-the-Jewish-princess and some oligarchs in Ukraine!
And the European Commission warning Gazprom to ensure gas supplies to Western Europe and at the same time threatening economic sanctions, freezing accounts... FOOLS!
The US administration only have themselves to blame for pushing Russia and China together.
The balance of power is shifting.
'Jumpin' Jack Vlad is a gaz, gaz, gaz!'
Hi long time reader rare poster.
The analysis on Russia / China has been completely accurate throughout this Ukraine issue.
I sit in the morning meeting call at work and im listening to Alphas talk about stocks and geopolitical stuff.
They dont have a clue -
On this issue you guys are 100% right and you have been right the whole time and whoever is writing this you deserve a fucking medal.
I really appreciate what you are doing.
yF
yur mum!
IT IS NOT IN USD
In a symbolic blow to U.S. global financial hegemony, Russia and China took a small step toward undercutting the domination of the U.S. dollar as the international reserve currency on Tuesday when Russia’s second biggest financial institution, VTB, signed a deal with Bank of China to bypass the dollar and pay each other in domestic currencies.
http://america.aljazeera.com/articles/2014/5/20/russia-china-bankdeal.html
THe Kenyan gets yet another lesson in capitalism from the commies! 'Change You Can Believe In!'
It would be more fitting to say "The commie Kenyan gets yet another lesson in capitalism from the best capitalists."
'Change You Can't Refuse to Believe In.'
(As usual, it doesn't matter who is in the White House, a republican or democrat. Same for US Congress. The Money Trust owns them all.)
Looks like its gonna be a cold winter in Euroland!
More obama foreign policy (lack of a coherent one) treachery to isolate and weaken the ussa. he's too busy paying attention to his sinaloa cartel business to do his wh job. the new mexico monument is a freeway for the cartel because the white house will directly control access by law enforcement thus giving the cartel a safe haven...walking distance to Juarez...
So now US Dollars will go to China to purchase products we used to make, China wil then convert our dollars and send real money to Russia. Another foreign policy success!!
China may soon refuse to accept USD for its products. It will be happy to spend USD as fast as it can, but taking USD will take some courage and calculations.
BTW, how does one convert fake money to real money?
Ebay hacked?
EBay Inc issued a notice on its websites asking users to change their passwords, but took down the message a short time later without explanation.
More:
http://tersee.com/#!q=ebay&t=text
Just the NSA seeing what everyone is buying. This has been brought to you by FASCISM.
Nice job Team Obama!
Another policy backfire. Bullying, intimidation, blackmail, bombs and total surveeillance does not make any friends.
.
For those who like equivalences : The price for the russian gas is touted at 350 $/ 1000 CU M.
Based on calorific content that works out as equivalent to approx. 60$/bbl of sweet light oil currently selling at around 100-105 $/bbl. Keep in mind that Gas is only fuel for heating or electricity gen. Whereas Oil also feeds the transport industry mainly which pays a premium as there is no real competition to gasoline and jet fuel (approx. 60-70% of light crude oil after distillation). So its normal that Nat. Gas should be sold cheaper than Oil for this reason.
I don't know how that compares to LNG on the market today from Qatar.
But any feed back on current price equivalence of liquid gas vs oil vs pipeline gas would be helpful.
PS / Based on LNG prices in the range of 8.4 to 12 $/mmbtu being practiced in India to Japan/China, the 350 $ 1000 cu M gas line price corresponds to 9.6 $/mmbtu LNG delivered c&f but will involve local regasification cost at destination before distribution in industry.
This is not a bad deal for China and fair for Russia (apart from the Capex aspect, but as its over 30 yrs it can be amortized.)
Tyler I don't see anything except $ values. Nothing to see here folks on to the next story......................
Because it's written for Western audiences. That says nothing about what currencies the actual trade will be denominated in.
"written for Western audiences" ....it's written for the stupid sheep of the world, no major media outlet of the west would dare say a word other than "dollars"
This is history in the making. The opening salvos of USD collapse and new reserve currency.
The only collapse you will see related to this is the Ruble.
The dollar sucks but the Ruble is rubble.
Give some credit to the Neo Con lunatics. They've made considerable contribution to the accelerated progress of Euroasian political and economic alliance.
When China, India, Russia, Iran, Pakistan, Indonesia, Venezuela, Brazil, etc stand on common grounds, that's well over 65% of the planet's population the US government will have to fight.
US media may continue to BS about "the world community supporting US war on terror" and rubbish like that. But the reality on the ground is that the US is getting more isolated than China and Russia.
Even Japan, a major satellite/vassal state of the US, seems to be paying mere lip service to the phony war on terror. Looks like Japan doesn't want to anger Russia and lose the prospect of being able to buy some of Russia's oil after all.
Wonder how Putin is going to like being a Chinese satellite? China's East Germany!
$400 Billion??? Big Fucking Deal!! Yellen prints that in 6 months.
Why the Russians don want to publish the price. Is this a non binding aggreement only for the purpose of politics?
So russians do what americans did with china. So what?
Curious that the price for gas is being quoted in.....dollars....wonder why they are making a big deal out of using their own currencies. I wonder how they will price gas when China is paying for it with goods instead of paper.
China will pay the Russians in Yuan (which is pegged to usd ) with which Russia will in turn buy inflated Chinese "goods". Not surprizing that western media quotes deal in dollars, western news agencys are owned and heel like dogs for the owners of the west.
It wouldn't be entirely in China's interests to pay Russia in Yuan, mainly because China is holding a vast amount of USD that it needs to get rid of ASAP. Russia wouldn't want too much USD, of course. Moreover, an open announcement of such a giant deal not done in USD would likely cause strong downward pressure on the USD, in turn causing massive losses to China's USD holdings.
A flexible, mixed payment arrangement coupled with a reserved official disclosure would be a smart thing to do in my opinion.
"They didn't build that gaz deal!' - The Kenyan
don't give o'bozo so much credit.
THE FED AND JPMORGAN DID THIS. CURRENCY WAR AND UNLIMITED PRINTING BY THE BIG BANKS DID THIS.
PRICE MANIPULATION OF PETRO-DOLLARS DID THIS.
THIS 'EVENT' HAS BEEN COMING SINCE NIXON CAME OFF THE GOLD STANDARD AND THE ROCKEFELLERS DECIDED TO HELP OPEN CHINA UP AS THE CHEAP LABOR OUTSOURCING CAPITAL OF THE WORLD.
this 'even't is just an inevitable result of historical forces. not some bullshit obama doing .
perhaps you can blame the 'timing' of obama's neocon incursion into ukraine and syria on this.
but realistically, this was going to happen no matter what.
The oligarchs who own Amerikan politicians have decided that, to have a world government, America and the dollar have to be destroyed.
Then there's the depopulation at any cost faction who use vaccines as a tool. That's the one that scares me.
My grandfathers would have done something about this but, here I stand, an armchair patriot, doing nothing. What's wrong with this picture?
I would guess the internet is a pressure-release valve, in addition to an information exchange and communcations medium.
Double-edged sword.
We are beginning to see resistance, such as the bundy ranch episode last month, and now the thing in NM has the sheriffs concerned. Not sure of how that one will work out, but this time the sheriffs are actively against it.
I don't know about all this "New Cold War".
I'm trying to figure it out.
Russia Hires Goldman as Corporate Broker to Boost Image
http://www.bloomberg.com/news/2013-02-05/goldman-sachs-hired-by-russia-as-corporate-broker-to-boost-image.html
Goldman names new Russia investment banking co-heads -memo
Feb 17 (Reuters) - U.S. investment bank Goldman Sachs has appointed two heads of investment banking in Russia, according to an internal memo seen by Reuters.
These are new positions and show the bank's commitment to the Russian market where investment banks as a whole have had a modest increase in revenues over the last year.
http://uk.reuters.com/article/2014/02/17/russia-goldman-idUKL2N0LM0CW20140217?feedType=RSS
China’s capital markets are now where the U.S. capital markets were in the late 1970s/early 1980s, and merger and acquisition and financing activities are about to explode in the years ahead. As is the case for most products and services, China is likely to become one of the largest markets for investment banking services over the next 10 years.
http://www.forbes.com/sites/jackperkowski/2012/03/19/wall-street-goldman-sachs-and-china/
(Forbes, yeah, I know!)
Yesterday, the China Banking Regulatory Commission approved a pilot of five privately owned banks – a move designed to introduce competition and private capital into the state-dominated banking sector while providing better financial services for small and medium sized enterprises (SMEs). In doing so, it may have just created the single most powerful company in the world.
http://www.forbes.com/sites/oliverbarron/2014/03/12/china-merges-wal-mart-with-goldman-sachs-in-alibaba/
And so on.
As O'Rourke said, we hate foreign policy because we hate foreigners because our ancestors were foreigners.
would that be the reason why the US government has been screwing US citizens?
Oh, and let's not forget this one too:
Haaretz: Iran, Russia working to seal $20b oil-for-goods deal
Is it just me? I don't see any mention of pricing in yuan or rubles. I'm assuming that it is in one or the other, but I have yet to see that written anywhere. Everything is worded "valued at " with some number and a $ in front. No mention of direct trade in local currency. frustrating.