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Page added on May 18, 2014
Russia’s “Holy Grail” Gas Deal With China Now “Only One Digit Away”
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.
11 Comments on "Russia’s “Holy Grail” Gas Deal With China Now “Only One Digit Away”"
BillC on Sun, 18th May 2014 10:40 pm
Big story. Maybe my great grand children will speak Chinese or Russian. I guess the US is tired of being number one. After all we’ve been there for 70 years. Will these gas sales affect West Europe? What the hell is going on?
Can we like maybe get a president here?
Makati1 on Sun, 18th May 2014 10:45 pm
The US pivots towards China and Russia pivots towards China. Interesting? No?
The largest country that has resources to spare and the largest consuming country partner against the Western Dollar.
Plantagenet on Sun, 18th May 2014 11:53 pm
Obama’s bumbling Russia policy has so far resulted in six years of unnecesary war in Afghanistan, the restart of the Cold War and the renewal of ties between of China and Russia.
What other marvels will we see in the next two and half years?
GregT on Mon, 19th May 2014 12:15 am
We will continue to see the same geopolitical crap that we have seen for decades before Obama was born, until long after Obama is dead.
Obama is not in control of foreign policy. He is not in control of the industrial military complex, he is not in control of monetary policy, and he is not in control of the Billderbergers, The CFR, the Trilateral commission, APAC, The project for a new American Century, the IMF, the UN, or NATO,
Makati1 on Mon, 19th May 2014 6:10 am
In other news:
“Russia-China to sign 30 agreements next week”
“… Beijing and Moscow will consolidate growing ties by signing a raft of agreements from economy, trade and energy to humanitarian aid, said a Kremlin aid on Friday.
A record 30 agreements are expected to be inked during Russian President Vladimir Putin visit to China May 20-21, Yuri Ushakov said Friday.
Ushakov said the package lists 43 various documents, and 30 of them, both intergovernmental and corporate are expected to be signed. …
And the beat goes on…
Davy, Hermann, MO on Mon, 19th May 2014 6:20 am
OH, Mak, Chill! You are being hypocritical again with your MSM message now that it suits you and your Russia/China propaganda fetish. These agreements and deals have been in the works for a long time. These things just don’t materialize in hours and days. You remind me of the crazies looking for any news of the coming end of the world and broadcasting any news as proof the end is near.
bobinget on Mon, 19th May 2014 8:37 am
Blaming Obama for Russian/Chinese trade deals is akin to blaming tectonic plates. Are Republicans too shy to look at a globe for fear we many need to project military ?
Again, Zero Hedge’s right wing credentials are showing.
As long as oil and illicit drugs are traded internationally, USD will remain the currency of choice.
mack on Mon, 19th May 2014 10:01 am
I never understood the de dollarization thing. If the Russians sell their gas for Yuan then they can only spend that money in China. No, the world trade requires a common currency. The dollar makes sense because the U.s. has the largest most diversified economy. The dollar will remain the reserve currency. Once a system is set up it tends to keep going because now everyone is invested in that system.
GregT on Mon, 19th May 2014 11:47 am
“I never understood the de dollarization thing.”
And apparently you still do not. The US dollar was chosen as the world’s reserve currency because it was backed by gold, and therefore not able to be manipulated. That ceased to be the case in 1971 when Nixon ended the gold standard, and the Bretton Woods agreement. Currencies have been in free fall ever since, as the Fed has inflated the USD.
http://en.wikipedia.org/wiki/Bretton_Woods_system
rockman on Mon, 19th May 2014 3:00 pm
Mack – As far as I understand the dynamics: if you want to buy X bbls of oil with your currency you first have to convert it to US denomination. That’s what you wire to the oil seller. Thus how many bbls you get depends not only on what the price of oil might be but what the exchange rate of your currency is with the US dollar. If your currency has lost value to the $ then you get fewer bbls. If it has increased you get more bbls. But if you’re buying Saudi oil and paying them in your currency then how many bbls you get will depend upon your exchange rate with the KSA currency. And who determines what that rate is…you, the KSA or the international market place?
GregT on Mon, 19th May 2014 3:50 pm
Since the abolishment of the gold standard in 1971, the US dollar has been inflated and has lost over 90 percent of it’s value. In that same period of time, gold has increased in terms of US dollars by around 3700%.
The US is exporting it’s inflation internationally, while reaping the benefits of a higher standard of living through this hidden tax on every US dollar in circulation.
A stable currency as an international standard of trade was meant to stop economic warfare, which has led in part, to two world wars. The USD is no longer stable, and international players are now demanding a new reserve currency based on a basket of currencies, and gold.
Just as high taxation leads to an underground economy, an unstable reserve currency, is leading countries to demand trade in currencies other than the USD.
The less US dollars used in international trade, the higher the rate of inflation to service the debt load will be felt at home. When the USD is no longer recognized as the standard of trade, the US economy will collapse, and the 18 trillion dollar debt will need to be serviced solely by the American people.
It is in the best interest of the US citizenry, for an international agreement to be reached for a new reserve currency, before this is allowed to occur. Either that, or there will more than likely be a 3rd world war. Which is increasingly becoming a very real possibility.