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Page added on April 23, 2014
Russia China natural gas contract looks likely
Pricing remains an issue, but negotiations expected to be completed soon
Russia and China are highly likely to nail down a natural gas deal during Russian President Vladimir Putin’s visit to Beijing in May after years of negotiations, experts from both sides said on Tuesday.
Sergey Pikin, director of Russia’s Energy Development Fund, was optimistic about the deal, saying during a video interview that it’s “100 percent” possible that a bilateral agreement will be signed next month. However, Alexy Belogoriev, deputy director-general of the Institute of Energy Strategy in Russia, put the possibility at 50 percent. He said that even if the deal doesn’t happen during Putin’s visit, it might be finished by this autumn.
Putin has urged Russian companies to expand their exposure to Asia. Since Russia’s actions in Ukraine have strained relations with the West, the country needs to be less dependent on energy sales to Europe, he has said.
Russia exports about 160 billion cubic meters of natural gas to Europe annually.
Domestic and international conditions are ripe for completion of the deal, said Sun Yongxiang, a researcher with the Development and Research Institute of the State Council, which is the nation’s cabinet.
Pricing has been the core area of disagreement during the negotiations. Sun said the final price may be around $400 per 1,000 cubic meters.
Russia’s top natural gas producer, Gazprom OAO, plans to start supplying China with 38 bcm of gas annually starting from 2018. Russia has indicated it’s willing to increase the supply to 68 bcm, using both the western and eastern pipelines.
Sun said that any advance payment required won’t be a problem as long as the two can reach an agreement. “Russia can use the money on infrastructure construction related to gas supply,” he said.
Russian natural gas contract looks likely: ExpertsXia Yishan, senior research fellow at the China Institute of International Studies, said China is working on diversifying its energy supply structure and Russia will play an important role in this effort.
“The government plans to solve the smog problem in 10 years, which will mean a huge increase in natural gas imports,” said Xia.
“If Russia has the ability, it is possible that China’s natural gas imports from Russia will account for two-thirds of Russia’s total gas exports in future,” he said.
Evgeniy Konygin, chairman of energy policy and utilization with the Russian Federation League of Industrialists and Entrepreneurs, said the two can also cooperate on new energy projects, an area where China has many technological advantages.
22 Comments on "Russia China natural gas contract looks likely"
Arthur on Thu, 24th Apr 2014 3:07 am
Good news!
This will drive up fossil prices in Europe even more, accelerating the transition, while there is still fossil fuel.
Secondly, it will intensify the discussion about the value of being a second class member of the west. This conflict was initiated on purpose by the neocons of the State Department, against European and Russian best interests. Furthermore, being a member of the west means becoming a third world country. According to Paul Craig Roberts, the US will be a third world country by 2023. That’s not a club you want to be a member of. It’s about time to tell the Americans to dismantle their military bases in Europe and start to become serious about an independent European defense organisation, within NATO.
Makati1 on Thu, 24th Apr 2014 3:40 am
Arthur, we are on the same page on this one. Odds are very good that the trade will be in rubles and yuan, not dollars. And, it will not have to leave the continent. This stupidity on the part of the DC mafia will only push the dollar closer to the cliff. The BRICS countries are already forming an alternate to the Wests banking systems and will push it even faster now to hurt/contain the US.
rockman on Thu, 24th Apr 2014 6:32 am
What’s interesting is China and Russia have been negotiating this matter for years. Perhaps just a coincidence they are coming to terms now. But while the EU recently got a strong reminder of how dependent they were of Russian NG sales the Russian clearly understand how critical that cash flow is to them. If Putin truly does have the idea of resurrecting at least a portion of the Soviet Union he understands that he can’t be as dependent upon EU sales as he has been. And the EU has the potential for an addition significant problem beyond resource access: sales to Russia. If the Russians start stock piling yuan it gives the Chinese an advantage supplying Russia with products now being delivered by the EU.
And then there’s the further complication of food. China was in the process of leasing 5 million hectors in the Ukraine when the current situation developed. With Russia having the potential to influence (if not outright control) the Kiev govt China would have even great desires to align itself with Putin’s goals. And we shouldn’t forget how the US has been aligning itself with some of China’s goals such as the current US export of coal to them (a 500% increase in recent years) and the potential export of LNG. Despite misconception the EU has been a major beneficiary of US coal exports until now. In the Big Picture the EU would appear to be on the verge of losing much of its trading positions with the rest of the world on a variety of levels.
Davy, Hermann, MO on Thu, 24th Apr 2014 7:12 am
So What about a gas deal?? Just another business deal that has been going on for some time. So what if the deal is not done in dollars. Just another in a series of deals not done in dollars. This is a deal that is now being highlighted because of the current political situation nothing more. It is a comparative advantage for China and Russia to deal together.
Rock bilateral trade is complicated because often the partners are in partnership and agreements in the production and distribution. In effect they are in business together. China does not have all the products Europe does. The Chinese tend to have a range of cheap consumer products where Europe specializes in value added products and high end consumer products. Putin is smart and I do not think he will go too far with the China economic partnership he is just looking for balance. I have already read articles how the Chinese immigrants outnumber the Russian in many of the border regions of Russia. Creating a potential political issue. What is going to happen if the local population starts to have issue with all those Chinese?
Art, you and Mak are so excited about the fall of the US and the dollar that you fail to see the implication for the entire global system. The interconnectedness and complexity of this global relationship cannot be changed except through collapse of this global system. This means collapse in Holland too Art. Mak the Philippians is already in the initial stages of collapse so you can see it already with environmental degradation, food issues, slums, and social inequality issues. When the global collapse starts in earnest countries like the Philippines being severely in overshoot will implode. Art, the US may be tird world by 2023 but the rest of the world will be relatively worse off. The rest of the world better hope the US can still export basic farm products essential to the beginning of the modern food chain because food stress will turn to starvation and social collapse. Mak, the BRIC alternative to the west banking and currency is a joke and will go nowhere. Is there anything of substance now…NO… and there will be nothing of substance. The whole BRIC club is a club of basket case economies looking for some kind of influence in a world of heavy weights mainly western countries. Nothing wrong with that but nothing special has become of it or will.
rockman on Thu, 24th Apr 2014 10:03 am
Davy – That’s the correct but old perception and it’s slowly changing. Also bear in mind that a plant located in Germany might belong to a Chinese company. The Chinese are sitting on more than $3 trillion in foreign currency. They can buy anything anywhere that could be put up for sale. From: http://www.businessweek.com/articles/2012-04-05/chinas-export-machine-goes-high-end
“The phrase “Made in China” summons up images of cheap shoes, plastic toys, and electronics assembled in the vast factory complexes of Foxconn Technology Group. While China built its powerful export business—increasing 17 percent a year over the last three decades—on such light industry and electronics assembly, that is fast changing. Rising labor costs, up 15 percent annually since 2005, plus an appreciating currency, are putting new pressures on China’s cheap manufacturing model and driving textile, shoe, and apparel factories to close or relocate to Vietnam, Cambodia, or Bangladesh.
“China’s share of the world’s low-end exports has started to fall. This reflects a shift by Chinese producers into sectors where margins are higher rather than a failure to compete,” wrote U.K.-based Capital Economics in a March 28 note. While China’s new manufacturers are not competing in developed markets yet, already they are challenging Caterpillar , Siemens, General Electric, and other established equipment makers in places like South America and Russia. China’s construction-machinery industry is expected to overtake Japan’s and Germany’s soon, making it the world’s second-largest exporter in the category, behind the U.S.
Winning market share in the U.S. and Europe could take years, in part because of concerns over Chinese quality (the crash of a Chinese-built high-speed train in Zhejiang province in July hurt China’s reputation as a manufacturer). Sany says it spent $240 million last year upgrading its factories, including the installation of welding robots. As Sany expands overseas, it aims to improve its products to match the quality achieved by its newest acquisition, Germany’s Putzmeister, which will share engineering know-how and suppliers with its Chinese parent. Says Tang, “We know that ‘Made in China’ doesn’t have a great reputation. We want to change this through selling high-quality products.”
Davey on Thu, 24th Apr 2014 10:42 am
Rock I agree and disagree. Just like you say an old perception changing. It is now a situation where China has massive overcapacity in a variety of industries from poor investment choices. This is creating defaults and debt unwinds leading to lower expected growth and probably social unrest. Add to that increasing food, water, and soon energy insecurity. One more addition Rock severe environmental degradations. So they may be sitting on some foreign exchange losing value by the day but they will soon need to spend enormous amounts of money at home to solve some intractable problems that will soon be predicaments with no solutions. China’s golden age is nearly over. More or less ended nearly as soon as it started and ruined the world as we no it in the process. All issues of overshoot, AGW, PO, and Peak everything became a Chinese induced phenomenon.
rockman on Thu, 24th Apr 2014 10:54 am
All true Davey. Which is all the more motivation for China to expand their high end export base. Could they blow up? Sure. But name another country w/o real blow up potential. At the moment it seems like all countries are equally screwed. Just some more equal then others. Put another way who would you put your money on today if you only had one pick: the USA, the UK, Germany, China, Japan or Greece? And if you say Greece we’ll never chat again. LOL.
Davey on Thu, 24th Apr 2014 10:57 am
Rock, ask Art about Greece he compared the US to Greece. He must holiday there. Lol
ghung on Thu, 24th Apr 2014 11:44 am
rockman: “And if you say Greece we’ll never chat again. LOL.”
I’m not so sure Rock. We’ve been discussing the advantages of winning the race to the bottom for years now. While I see collapse playing out all over, mainly in some very subtle ways while being masked by ‘extraordinary measures’, especially in the west, Greek collapse is well underway. I doubt many Greeks are in denial as compared to folks in the US. Most of the recent word I get about Greece is that they are in the zone of “lay back and enjoy it as much as we can”.
Accepting the inevitable often leads to adaptation. Is this better than fighting reality to the bitter end? Not sure, but time will tell. Greece has some advantages: They are demographically more homogeneous for the most part; have a reasonably mild climate; they don’t have a whole lot that others want in terms of resources; they are practised at the art of not working simply for work’s sake (laid back), and they have a history of weathering millenia of collapses while staying relatively intact. In other words, they’ve seen it all before.
Conversely, folks in the US, for the most part, have no concept of severe decline and collapse. Most think it’s impossible. Their sense of entitlement is off the scale, and they are used to consuming 30%+ of the world’s resources. Indeed, their entire economy is reliant upon said levels of consumption. It may be a simple case of the proverbial ‘the bigger they are, the harder they fall’, and will eventually come down to how well (and quickly) a certain population can get its head around decline and move on.
Just some thoughts…
Davey on Thu, 24th Apr 2014 11:59 am
G, I have thought about Greek advantages of adapting to decent especially with a functioning BAU next door. I don’t quite agree with your US comparison. It is a very large country and many classes, ethnicities, regional cultures. I wholly agree with the harder fall for the upper middle class and 1%er’s. Yet here in the ozarks of MO people are already poor but manage quite well. Many other regions likewise. Many small towns already poor are adapting. So agree and disagree as is so often the. See in our complex world.
bobinget on Thu, 24th Apr 2014 12:03 pm
Davy writes:
“environmental degradation, food issues, slums, and social inequality issues” (relative to collapse)
Someone please tell me, when in history, even prior to the industrial revolution, have humans not been cursed with Religious Superiority, commutable disease and that entire litany of problems plus…. local and later extended warfare and finally inequitable wealth distribution.
Compare our situations:
The problem with inevitable collapse scenario seems to be in the numbers. Despite human’s pension for killing each other, populations keeps rising.
*compare Your Situations with folks in Syria or Iraq,
then tell me about a coming collapse. Explain how ones life could be more unbearable than starving on a
wrong side of a factious sectarian war without end.
Davey on Thu, 24th Apr 2014 12:38 pm
Bob, Syria represents some of the worst in store for many region. It does not get much worse but at least some aid is getting in. Imagine no aid and no relative security to migrate to!
ghung on Thu, 24th Apr 2014 12:46 pm
Davey – Perhaps I mingle among the masses more than you do, online and when I go out. I like to feel people out by dropping a few tards into a conversation. Even beginning to challenge American exceptionalism or things like energy independence, or suggesting that Obama is impotent and can’t be blamed for every woe that the US is experiencing will elicit some very confrontational and venomous responses.
That said, some folks clearly get it, but most folks I encounter are intellectually lazy and averse to having their preconceptions and prejudices challenged in any way. Confirmation bias is strong, even among folks I know who are educated. Their usual tactic is to shoot the messenger, at least, figuratively. I have a tough time finding like-minded critical thinkers, centrists, and moderates these days. I tend to avoid surrounding myself in a ‘bubble’ of only folks who think like I do; it interferes with objectivity, though can get lonely at times.
I know I may sound elitist or somesuch, but it’s actually more like the observations of a fly on the wall who buzzes through occasionally to see if he can stir up some
shittruth.ghung on Thu, 24th Apr 2014 12:51 pm
It’s a bit serendipitous that I clicked over to today’s ArchDruidReport (which I hadn’t read yet) and found this:
“They’re unprepared in practical terms, that is, for an era in which the five per cent of us who live in the United States will no longer dispose of a quarter of the world’s energy supply and a third of its raw materials and industrial products, and in which what currently counts as a normal American lifestyle will soon be no more than a fading memory for the vast majority. They’re just as unprepared, though, for the psychological and emotional costs of that shattering transformation—not least because the change isn’t being imposed on them at random by an indifferent universe, but comes as the inevitable consequence of their own collective choices in decades not that long past.”
Davey on Thu, 24th Apr 2014 12:52 pm
G, I agree with those points and more but around here and elsewhere these people are adapting. They will do alright without food stamps and Walmart also. My point is many poor Americans are already through initial stages of collapse. It is the better off who will see a rude awakening soon!
rockman on Thu, 24th Apr 2014 2:04 pm
ghung – I get where you’re coming from as a philosophical point of view. And then there’s the reality on the ground. My daughter has been working in Greece for the last 6 months. being one of those gregarious types she mingles with a lot of the folks on the low side of that pyramid. It is a country filled with very unhappy/angry people. Much of their lives is just subsisting from day to day. The wealthy…they never do without.
Hitting rock bottom and building back up is one thing. Getting that low and having little or no way to build back up is a very different matter. And there are many Americans in that same position but most folks either don’t see them or just avoid eye contact. Today despite their perceptions to the otherwise the vast majority of our fellow citizens are doing OK compared to the folks in Greece. I doubt I’ll still be around but I wonder how the country will respond if hey day comes when the majority is living like many Greeks today.
J-Gav on Thu, 24th Apr 2014 3:34 pm
Interesting discussion above, PO posters! I wasn’t expecting as much on the (inevitable given Western attitudes) upcoming Russia-China deal …
Rockman – I don’t know how old you are but you may yet get a chance to see how Americans fare, adaptation-wise, to rapidly evolving circumstances. Compared to, say, Greeks, Argentines, Vietnamese, etc. Not that I pretend to have the answer, and I’m aware that the U.S. is still home to a number of very resourceful people, but the gross-excess habits of the many don’t plead in our favor. I’m not sure I’d go as far as Dmitry Orlov in writing off the potential for transition in the country, albeit less than smooth, but, like you, I wonder …
rockman on Thu, 24th Apr 2014 4:16 pm
J-Gav – I just turned 63 with my MS slowly chipping away at me so I don’t really care too much about the Big Picture. OTOH it’s difficult to not get various anxious thinking about the future for my youngest: a 13 yo daughter. The older ones in their 30’s: a master electrician and a govt employee with the State Dept. Them I worry a little but not too much.
The good news I probably won’t have that many more years to look back with disgust for all the dumb ass decisions I’ve made in my life. LOL. And you already know what a smart ass I can be so you probably understand the fun I have when I tell folks that while I may have MS with a little luck something else will kill me first. LOL.
In the last couple of hundreds years mankind has shown how it reacts to bad times. Knowing that history gives me the willies sometimes thinking about the future. I wonder how many young farts here know that WWI was originally called “the war to end all wars”. And then just a couple of decades later we had to start numbering them. LOL.
Makati1 on Thu, 24th Apr 2014 11:51 pm
A lot of put-downs on the places not American, but that is ok. I happen to like where I live and happen to see first hand the local conditions. I don’t need a talking head on the MSM to tell me, in 20 second sound bites, what to think or say.
The Philippines are on track to grow their GDP by 6.7% this year. Hardly a ‘failing’ country. The US would be happy to have a REAL 0.7% GDP increase or anything on the plus side.
Arthur on Fri, 25th Apr 2014 2:21 am
Rock, ask Art about Greece he compared the US to Greece. He must holiday there. Lol
I was merely parroting Laurence Kotlikoff and the very America-friendly German newspaper die Welt.
Davy, Hermann, MO on Fri, 25th Apr 2014 5:09 am
Art, I was being good humored. I enjoy bantering you and your good nature. I can picture you in that large chair fit for a king on your Ipad with the large library behind you gazing out into your “Garden of Eden” in a wonderful country of Holland!
Arthur on Fri, 25th Apr 2014 10:50 am
Davey, I know, thanks for your kind words.