Alert: Putin Prepares To Announce "Holy Grail" Gas
Deal With China
By Tyler Durden
March 22, 2014 "Information
Clearing House - "ZeroHedge"-
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."
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
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
what will likely happen next, as
explained by Reuters:
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
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.
details on the revelation of said "Holy Grail":
State-owned Russian gas firm Gazprom hopes to
pump 38 billion cubic meters (bcm) of natural
gas per year to China from 2018 via the first
pipeline between the world's largest producer of
conventional gas to the largest consumer.
"May is in our plans,"
a Gazprom spokesman
said, when asked about the timing of an
company source said: "It would be logical to
expect the deal during Putin's visit to China."
what should be and is painfully obvious to all, but
apparently to the White House, which keeps prodding
at Russia, is the following:
worse Russia's relations are with the West, the
closer Russia will want to be to China. If China
supports you, no one can say you're isolated,"
said Vasily Kashin, a China expert at the
Analysis of Strategies and Technologies (CAST)
now add bilateral trade denominated in either Rubles
or Renminbi (or
gold), add Iran, Iraq, India, and soon the
Saudis (China's largest foreign source of crude,
whose crown prince also
happened to meet president Xi Jinping last week
to expand trade further) and wave goodbye to the
previoisly, China has already implicitly backed
Putin without risking it relations with the West.
"Last Saturday China abstained in a U.N. Security
Council vote on a draft resolution declaring invalid
the referendum in which Crimea went on to back union
with Russia. Although China is nervous about
referendums in restive regions of other countries
which might serve as a precedent for Tibet and
Taiwan, it has refused to criticize Moscow.
The support of Beijing is vital for Putin. Not only
is China a fellow permanent member of the U.N.
Security Council with whom Russia thinks alike, it
is also the world's second biggest economy and it
opposes the spread of Western-style democracy."
culminated yesterday, when as we
reported last night, Putin thanked China for its
"understanding over Ukraine." China hasn't exactly
kept its feelings about closer relations with Russia
under wraps either:
President Xi Jinping showed how much he values
ties with Moscow, and Putin in particular, by
making Russia his first foreign visit as China's
leader last year and attending the opening of
the Winter Olympics in Sochi last month.
Western leaders did not go to the Games after
criticism of Russia's record on human rights. By
contrast, when Putin and Xi discussed Ukraine by
telephone on March 4, the Kremlin said their
positions were "close".
punchline: "A strong alliance would suit
both countries as a counterbalance to the United
States." An alliance that would merely be
an extension of current trends in close bilateral
relations, including not only infrastructure
investment but also military supplies:
However, China overtook Germany as Russia's
biggest buyer of crude oil this year thanks to
Rosneft securing deals to boost eastward oil
supplies via the East Siberia-Pacific Ocean
pipeline and another crossing Kazakhstan.
Russia is isolated by a new round of Western
sanctions - those so far affect only a few
officials' assets abroad and have not been aimed
at companies - Russia and China could also step
up cooperation in areas apart from energy.
CAST's Kashin said the prospects of
Russia delivering Sukhoi SU-35 fighter jets to
China, which has been under discussion since
2010, would grow.
is very interested in investing in
infrastructure, energy and commodities in
Russia, and a decline in business with the West
could force Moscow to drop some of its
reservations about Chinese investment in
strategic industries. "With Western sanctions,
the atmosphere could change quickly in favor of
China," said Brian Zimbler Managing Partner of
Morgan Lewis international law firm's Moscow
Russia-China trade turnover grew
by 8.2 percent in 2013 to $8.1 billion but
Russia was still only China's seventh largest
export partner in 2013, and was not in the top
10 countries for imported goods.
The EU is Russia's
biggest trade partner, accounting for almost
half of all its trade turnover.
And as if
pushing Russia into the warm embrace of the world's
most populous nation was not enough, there is also
the second most populated country in the world,
did take time, however, to thank one other
country apart from China for its understanding
over Ukraine and Crimea - saying India had shown
"restraint and objectivity".
called Indian Prime Minister Manmohan Singh to
discuss the crisis on Tuesday, suggesting there
is room for Russia's ties with traditionally
non-aligned India to flourish.
Although India has become the largest export
market for U.S. arms, Russia remains a key
defense supplier and relations are friendly,
even if lacking a strong business and trade
dimension, due to a strategic partnership dating
to the Soviet era.
moves to assert Russian control over Crimea were
seen very favorably in the Indian establishment,
N. Ram, publisher of The Hindu newspaper, told
Reuters. "Russia has legitimate interests," he
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.