by MrBill » Tue 08 Aug 2006, 10:17:58
Petrorubles versus renminbi remittances or is that petrol troubles and renminbi pittances....
$this->bbcode_second_pass_quote('', ' ') China is expected to import 15 million tons of crude oil from Russia this year, predicted Vice Minister of Commerce Yu Guangzhou on Monday.
Last year, China imported 12.78 million tons of crude oil from Russia, accounting for 10.1 percent of its total imports.
Energy resources are key to bilateral trade and economic cooperation between China and Russia, said Yu during an on-line chat with netizens of the Xinhuanet.com.
A new pipeline that will carry 30 million tons of crude oil a year is currently being studied. It would be 1,030 kilometers long and only 70 kilometers of it are in Russia.
Yu says that China's goal of investing 12 billion U.S. dollars in Russia by 2020 will be realized.
He said China had invested in 700 programs in Russia at the end of July with contracted capital of 1.34 billion U.S. dollars.
Russia has launched 1,912 companies in China with a contract value of 1.52 billion U.S. dollars and actual investment 570 million U.S. dollars.
China would continue to support Russia's application for entry in the World Trade Organization (WTO), said Yu, adding that it would create better conditions for bilateral cooperation with China.
China's crude oil imports from Russian on the rise As I said earlier, although trade between China and Russia is a natural and growing, Russia supplying China with the base metals and crude oil for manufacturing, but for the time being this trade is likely to be conducted in dollars only.
China has a dollar surplus that is growing at $250 billion per year that at the moment is flowing in its central bank reserves. Rather than open up a foreign exchange postion, by say denominating trade in euros, it makes sense for China to pay for Russian imports in dollars decreasing their exposure to a weaker US dollar.
Also, as China spend much of that $250 billion trying to keep the yuan low against the dollar it makes sense to use those funds for strategic imports.
It would not be good for Russia to denominate exports to China in rubles as Russia is already trying to sterilize flows of foreign currency into rubles to keep domestic money supply under control. And denominating oil exports in rubles would force the ruble to appreciate and that would undermine non-oil exports, in pulp & paper for example, in essense creating the Dreaded Dutch Disease.
Also a stronger ruble would stimulate imports from the eurozone, and surrounding countries like Poland, in such areas as agricultural products, again competing head to head with Russian producers such as Wim Bill Dann, a maker of dairy products that compete with foreign competitors such as Danone.
The size of the Russian economy and capital markets simply cannot tolerate large inflows of hot money, so they need to carefully manage the strength of the ruble against the dollar, and against the euro especially for competitive reasons.
Whereas sales of oil & natural gas in euros would offset imports to Russia in euros. And excess euros can be held by the CBR in euros without subjecting Russia to any falls in the dollar. Likely why Russia has increased their holding of euros and pounds in their foreign exchange reserves in any case. A trend that is likely to continue as the CBR is definately not buying a lot of US treasury bills. Excess reserves held in euros would not force the ruble to appreciate, eroding Russia's exports to Europe and abroad.
RE state controlled oil majors dominate Russian oil industry
$this->bbcode_second_pass_quote('', 'T')he Kremlin's drive for greater control over Russia's energy sector will accelerate but, in contrast to other resource-rich countries, will involve fierce rivalry between two state champions, analysts said.
Western oil investors seeking a foothold in Russia have accepted the idea that they will have to partner either state oil firm Rosneft (ROST.RTS: Quote, Profile, Research) or gas monopoly Gazprom (GAZPq.L: Quote, Profile, Research) in any big future projects.
But they would not dream of pulling out of Russia -- where booking substantial oil reserves or buying minority stakes in sizeable producers is still possible -- unless the Kremlin launches a direct attack on their interests.
"It has become clear that it will be increasingly difficult to implement major energy projects in Russia without the involvement of state champions," said Elena Anankina from Standard & Poors.
So again back to a fair, free and open oil market on which to base a ruble denominated crude futures contract on the RTS. Who is going to line-up against the state controlled oligolopies? A futures exchange needs equal numbers of buyers and sellers in order to function efficiently as well as many smaller speculators. What it does not need is a few insiders who control all the choke points like pipelines and export facilities. IMHO.
But being a baby in terms of knowledge in this area I could be wrong.
