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What It's All About: Russia, China Begin Construction Of World's Largest Gas Pipeline
If after months of Eurasian axis formation, one still hasn't realized why in the grand game over Ukraine supremacy - not to mention superpower geopolitics - Europe, and the West, has zero leverage, while Russia has all the trump cards, then today's latest development in Chinese-Russian cooperation should make it abundantly clear.
Overnight, following a grand ceremony in the Siberian city of Yakutsk, Russia and China officially began the construction of a new gas pipeline linking the countries. The bottom line to Russia - nearly half a trillion after China's CNPC agreed to buy $400bn in gas from Russia's Gazprom back in May. In return, Russia will ship 38 billion cubic meters (bcm) of gas annually over a period of 30 years. The 3,968 km pipeline linking gas fields in eastern Siberia to China will be the world's largest fuel network in the world.
As BBC reports, "the deal will lessen Russia's dependence on European buyers, who have imposed economic sanctions because of the crisis in Ukraine." That is not news and has been known for months ever since the long-anticipated Holy Grail deal was signed in May. More importantly, as Zero Hedge reported last week, one awaits as the invoices become increasingly less denominated in USD, and more in CNY or RUB. Most importantly, and confirming the significance of Russia's pivot away from Europe, which ultimately can have Qatar's gas it so very desires, irrelevant how many thousands of innocent people have to die, the construction ceremony was attended by Russian President Vladimir Putin and Chinese Vice-Premier Zhang Gaoli.
China will start work on the construction of its side of the pipeline in the first half of 2015, Mr Zhang said.
The first gas will be pumped from Siberia to north-east China in early 2019.
Over the past 10 years, China has used other gas suppliers. Turkmenistan is now China's largest foreign gas supplier. Last year, it started importing piped natural gas from Myanmar.
Increasingly it appears that China will defer to Russia when it comes to cementing bilateral commodity deals, especially if it means further distancing both sides from what has emerged as a natural foe to both aspirational nations: the United States.
Here is what Putin had to say about the latest gas pipeline, soon to be the world's largest, during the groundbreaking ceremony outside the city of Yakutsh, via RT: "The new gas branch will significantly strengthen the economic cooperation with countries in the Asia-Pacific region and above all - our key partner China."
“Once we create a gas pipeline network here in the Far East and Siberia, we will be able to connect European pipeline system to the East. And this, in terms of export opportunities and expanding Russia’s ‘gasification’, is very beneficial. Depending on the situation in world markets, we can more effectively implement gas flows- either more to the West or to the East,” Putin told students at North-Eastern Federal University earlier on Monday.
More:
Both President Putin and Vice Premier Zhang Gaoli signed the freshly-welded pipeline in a time-honored Russian tradition. The 'Power of Siberia' was welded together by workers from Chayanda gas field, overseen by CEO Aleksey Miller.
"Gazprom is always a reliable supplier of gas to its customers - which also applies to the ‘Power of Siberia," Miller said.
The 3,968 km pipeline linking gas fields in eastern Siberia to China will be the world's largest fuel network in the world. Both Putin and Vice Premier Zhang Gaoli have called the project the world’s largest construction project, as investment from both countries will be more than $70 billion.
“The gas pipeline ‘Power of Siberia’ will increase energy security and ensure Russia’s ability to fulfill export obligations,” Putin said in the opening remarks.
Starting in 2019, Power of Siberia will pump gas from Siberia to China’s populous northeast region as well as to Russia’s Far East. The Chinese side will start the construction of its part of the pipeline in the first half of 2015, the Vice Premier of China said.
Last year, China consumed about 170 billion cubic meters of natural gas and expects to consume 420 billion cubic meters per year by 2020. Europe still remains Russia’s largest energy market, buying more than 160 billion meters of Russian natural gas in 2013.
So while the west is no longer able to find any growth opportunities, with the marginal free cash flow dollar increasingly going in stock buybacks, Russia has no such problems: running from the Chayanda gas field in the Republic of Yakutia, the cost of construction is estimated at more than $20 billion (770 billion rubles), which includes other investment in the region of $7.5 billion (283 billion rubles). Russia’s largest steel pipeline manufacturer, TMK, will provide materials for the project.
The gas pipeline will become a common transit center for gas production centers in the Yakutia and Irkutsk regions.
The first stage of the project will be to transport gas from the Chayanda deposit in Yakutia and connect to the town of Blagoveshchensk on the Chinese border. The 968 km pipeline should be completed by 2018.
The Chayanda field, which will begin production in 2015, is estimated to have reserves of 1.2 trillion cubic meters in gas and 93 million tons of liquid hydrocarbons. Each year the field is expected to produce up to 25 billion cubic meters of gas and at least 1.5 million tons of oil.
Putin also said that China can become a shareholder in the Vankor oil and gas fields in the Krasnoyarsk region in Eastern Siberia. China will enter into a strategic relationship with Rosneft, Russia's largest oil company, which owns the field.
But, Obama keeps repeating Russia is isolated by the entire world... Is he once again simply, gasp, lying?
To summarize all of the above: while Europe will continue to depend on Russia for its gas imports indefinitely, Russia will no longer depend on Europe for its experts.
Finally, a video of today's festivities if only for Russia, not so much the countries which are "isolating" it...
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China and Russia are building, growing and thriving while USA and Europe are bitching like jealous toddlers throwing a tantrum.
This is how bad its gotten, while the rest of the world is progressing, the "Old world Empire" nations are essentially thumping their heads against a wall thats crumbling, we as nations can no longer compete , so we instead opt to try and impede the progress of other nations through war and sanctions. . . . that have little to no effect on their intended targets. . . and more often than not come back and harm us more than we intended to harm our supposed enemy.
Until leadership in the USA changes and we get some smart people in there who are actually capable of cutting the cancer out of our own government , nothing is going to change and its going to get progressively worse, sure we might chug along a few more years or even a decade or so, but we are falling behind technologically, the gap we had in terms of Tech is gone, so there isn't much there keeping us from falling anymore.
There was a time when nations feared and respected the USA, now they see that we are essentially doomed to spend ourselves into oblivion and all they have to do is focus on their own development while we implode from within.
China is fixed to the Yankee buck and the Rouble is in free fall.
China and Russia are solving that problem by dealing directly with each other. Doing so strengthens the ruble and saves China money.
The first thing the crooks on Wall Street will tell you is that when you want to take a large position in something (say the rouble) you drive the price down into the dirt and slowly buy it back. No?
Yes the modern silkroad for Oil & Gas that may prompt US to derail with money creation for armaments to destabilise where the pipeline pass.
This pipeline is break out to the Russia/China Axis against US hegemony. Why tussle in ME where the landscape is filled with angry people and sea routes historically controlled and more difficult to dismantle ? ME oil reserve shall remain important but an alternative.
Also, the alternative to spend large US$ reserves with all its spin-offs rather than play in the US dominated rigged global paper markets.
Europe - a tipping point to be part of this fillip or to continue to fight the deflation with debt fueled pumps and its variants. Europe should realise by now that the Global Oligarchs and Banksters may jumpstart them to take their bites with the "Oil & Gas" Silkroad as it fly. (They have no special allegiance even to homelands).
Let's get real about what a joke this is. You will get a better rate of return holding...gasp... the long bond.
38 billion cubic meters of gas at $400 billion over 30 years. Let's put this in context: in 2013 alone, Europe imported 162 billion cubic meters from Gazprom. China isn't replacing the European market, guys.
Revenue-wise, this deal gives you about $10 per million btu, which is more or less NYMEX market price. And if they try to jack the price, China will secure the supplies from Central Asia instead. I don't know what the cost of pipeline buildout will be, but with a fair estimate you are probably getting a 5% operating margin, assuming no cost overruns and best-case assumptions. Net of taxes, interest, and the rest, you are closer to 2%.
By the time Putin and his thugs get their cut ciphoned off, the resource-rich Russian nation is likely giving away nattie to China just so Putin can say they he is sticking it to Europe.
Seriously, the man is a clown to be laughed at, save that he is destroying his poor country and his neighbors. And that's not funny.
At today's prices, it's more like $18 Billion a year.
Those revenues are ADDED to the sales they make to Europe. Most economies would like to increase their revenues by $18 billion a year from one program.
As China's economy grows, maybe the amounts goes up.
As for the 5%, you've left out the 95%, which is money that will be used to boost the Russian economy.
"those revenues are ADDED..."
No kidding. My point is that Europe is the natural gas market for Russia for the foreseeale future. Go ahead an turn the pipline off, supply will be found somewhere else, and Russia will be sitting on a stockpile.
"As for the 5%, you've left out the 95%, which is money that will be used to boost the Russian economy."
The 95% is cost and a chunk will be repatriated by caterpillar, or whichever engineering companies involved. Likely repatriated to China. As to the social add-on value of a pipeline in the middle of Siberia, I kinda chuckle.
"At today's prices, it's more like $18 Billion a year.... as China's economy grows, maybe the amounts goes up."
That's the funniest part of the joke. It is heavily contingent on Chinese demand and the exclusiviy of Russian supply. Chinese GDP isn't going to grwo at 8% forever, and anybody looking at the deal knows Rusia is praying for nattie gas prices to increase. Gazprom, aka gangsta's paradise, will ake sure that any possible profits du eot price will never be realized, and instead go straight to an oligarch's pocket.
Yes, the 95% ios cost to one side of the equation. But for the other sie it is REVENUE!
IOW, when the builders of the pipeline order computers or copiers or desks or trucks, etc, etc, etc, someone will be selling those things to them. Those companies benefit who turn around and buy more stuff.
IOW, the billions multiply in their effect spreading beyond their original recipients.
There is no country in the world that wouldn't be thrilled with increasing their revenues by tens of billions a year.
Also keep in mind that China and Russia won't be buying US dollars to transact this deal. Bit by bit, the grip of the currency brokers weakens.
With 2 trillion of them, I doubt China will be buying US dollars for a while
But they'll probably be paying Russia in US dollars, to be used by Russia to levitate their economy hit by the sanctions.
The USD will lose more demand and get more selling, lowering its value against the yuan, which they've wanted for years.
But not too much or the Fed will intervene.
The deal is 400 billion over 30 years or 13.33 b per year. They fought over price for a decade its not market price.
That's dollars, but they won't use dollars.
Perhaps they should transact in terms of metals or oil.
Look up yuan usd peg. Exchange rate is .16 so 13.3 / .16 is 83.33 yuan
The value is equal.
Whether the amount is $18 billion or $13 billion a year, it's all good for Russia and China. A win-win.
Both parties are no doubt thrilled and celebrating.
Have you noticed that once the sky is falling scale does not matter. Proper analysis must include scale. Real knowledge requires depth, we often see only headline skimmers here.
Parroting news spoon feed each day, direct from the real owners of this worlds wealth.
It is pure emotion. Some people feel helpless and hopeless and interpret the world that way,,, no matter what. There are also plenty of people that prey on these types.
Take a look at CRAY ( homework ) their machines are recording all. Govt cant live without them now. You may make some bucks. Beats thinking about Russian horse shit.
This is why America Fails soo much recently:
http://3.bp.blogspot.com/-CsuG16ooWNY/TynJfRpgOuI/AAAAAAAAEs8/2A2MMifQFu...
The meaning of "Build it and they will come" has been somewhat re-defined as a bad thing over the past few decades.
Any smart person can access EU, UK, or United States of America think tank sites to understand what is going on.
Jewlander media is a mindless distraction. Good luck figuring out the daily tactics. When you do, the MSM goes upside down. The lies and deception will be fought threw counter deception truth statements.
Just a vision into the future.
Yeah, yeah, Russia and China have been playing this game for a long time, Russia and China on one end of the chessboard and the U.S. shows up to play tiddlywinks. But, we are going to win or turn the world into a giant gamma ray producer.
And in the mean time, the US can't even get the Keystone pipeline built because it might interfere with Buffets railroad profits.
"Exporting communism to the US was brilliant, Vlad."
"Thanks, Medvedev. I am also exporting Oligarchs."
"You mean...."
"Buffett is an assumed name, Med."
Oran "Juice" Jones - The Rain
https://www.youtube.com/watch?v=9dZW1C3neao
Don't forget the boost to the Russian economy due to the $20B construction cost over the next 4 years. That's an aweful lot of steel and manpower. Plus probably similar for China.
Buy The Fuckin Russian Dip Now - BTFRDN
Wow that was pretty impressive. The first thorium reactor to come online in China in 2020. Long live WWIII
Nixon's one redeeming brilliant act was to break apart the Soviet China communist block....Mr. Obama has managed to put it back together again...way to go...
This requires some actual thinking and historical book knowledge:
1) Pull up a geographic feature map of NE Asia and Siberia
2) Recall your readings of the many unfair treaties China discusses
3) Re-read The Treaty of Nerchinsk of 1689
4) Compare the maps of Greater China before and after the treaty mentioned in (3)
5) Now look at the map of the proposed pipeline
The pipeline comes out from the NW coast of Lake Baikal, moves up and over the Siberian Mountains between the Siberian Traps and NE coastline of Lake Baikal, follows the Northern boundary of those mountains and then heads SW and SE to meet the border with China and its pipelines.
This cannot be over-stated.
Putin is playing chess with the Chinese, and winning.
Here is why:
The area around Lake Baikal and the Siberian Mountains are not considered by some ultra-nationalistic Chinese to ''have always been part of China" as they consider Vladivostok Oblast and near Siberia on the NE border of China. The mountains and the lake form a large physical barrier that makes it impossible to take that land by force, and besides the Chinese have never claimed that land even in their most feverish delusions.
The Chinese DO want back the area up against the border where Russia will build the pipeline.
BUT - if they take that, the Russians just pull the plug on the tap at its source NW of Lake Baikal, safely protected by any military designs by the lake and the mountains and lots of Russian territory.
Putin has just defanged China's claims to that area of Asia from the Treaty of Nerchinsk, one of many unfair treaties the Chinese do not accept. They want all the islands in the China Sea by a similar reasoning.
Putin has beaten the Chinese at their own game, hence his very smug, and deserved, smile in the video from yesterday.
Pure genius.
China telegraphed their acceptance when they began to propose CRH extensions from Haerbin to the NE and E, to meet work areas for their sections of the pipelines. Months ago.
Leraconteur,
Very interesting. Thanks a lot.
Oblom: I have always suspected some of the "Pro-Putin/Russia" Zero Hedge crowd is actually from Russia and elsewhere east of Poland/Ukraine borders. Possibly, just a few users with multiple ZH user names? Or, maybe, students of a Russia/Belarus based cyberwarfare centre spreading the Pro-Putin/Russian propaganda gospel on western websites? They almost always show up (and gang up together) during heightened geo-political world tensions and target ZH news articles for maximum propaganda effect.
It's just too easy these days to "mask" your internet identity and access Zero Hedge via a foreign proxy server in Spain or The Netherlands. Traffic shows up on ZH logs as originating in Spain but really comes from somwhere else in Pro-Putin/Russia territory.
Hey, that is a creative way to ignore reality.
Sorry, what you think is man-love for Vlad is disgust for US corruption.
(Posted from my 1 account I have always had)
There's a little admiration for Vlad for having taken on the foul demon.
Not really, but *some*, not all, of the man-love for Vladdy is coming from the choir boys in his home country. They are too easy to feret out.:-)
you obviously dont understand syntax and alternate use of words that are essentially the same - which give away a New Yorker vs a foreigner etc etc
you are flat out wrong - anyone who has seen this shit show since Vietnam knows the drill over and over - same movie - different ground hog day
which is what you dont get
Yes, true, sloppy online grammar due to being educated and living in America. :-) But, yours is almost perfect as the Russians I know speak and write english very well. Better than most Americans! My wife corrects me all the time as she learned english in a former British colony. :-)
moron, read the newspapers in the Well u don=t need to, it the same bullshit, like in the US.
Then read the discussions under the "news", you will be astohished, that 90% of the people have prorussian stance.l
90% in the U.S? Not likely, but maybe in Russia? Not all, but *some* users on ZH.
I will be in Amsterdam and Oxford/Cambridge, UK next month so I will check with my tech buddies to see if they fall into the 90% category.
The funny thing, I posted my noted my comment knowing it was going to receive a decisive "thumbs down" and predicted "9"
users. Bingo, 9 it was! I was right. :-) I stand by what I have been saying.
(Impressive, well-made 30 sec. video spot ends with:)
"Amerikanskis! Your government has robbed you. Come to Russia! You can have work, real work, and make money-real money, backed by the new petro-gold-rublewan! We have vodka and women, too! Only real men need apply!"
--That's a good ad, Medvedev!
Thanks, Vlad.
This will attarct the best of Amerikanski youths.
Well, I think it is also a noble idea. Their homosexual leader will only put them in an army to be killed.
Great to see these two among the largest countries on Earth are doing the real projects, not a kind of financialization or other paper quacks as done by the banksters.
Dateline Washington: Today Barack Insane Obama countered the $400 Billion Russia-China natural gas deal by announcing he would fight to increase the minimum wage.
"We can raise $400 Billion dollars the old fashioned way...who needs a Keystone XL Pipeline when everybody can chip in an extra buck or two the next time you eat lunch at McDonalds!!"
It's nice in europe thanks to those fucking idiots in Brussels, we have to fucking worry now about having enough gas and electricity next winter ! Power generator companies can't keep up with sales. They keep extending the operational time of nuclear power plants, plants are sabotaged, it is just a matter of time untill we have a Fuckoshima over here, they are going to kill us all ! FUCKING STUPID SCUMBAGS !