China and Russia Reach Agreement on Gas Plan

[Roma_Victrix]

Source: New York Times

By JANE PERLEZMAY 20, 2014

BEIJING — President Xi Jinping of China and the Russian leader, Vladimir V. Putin, were unable to announce an agreement on a natural gas deal on Tuesday, despite high expectations that mutual political interests would help finally push through the project.

Instead, commercial concerns continued to dominate — specifically, the price of the gas, which China and Russia have been haggling over for nearly a decade. After the meeting between the two leaders, Mr. Putin’s spokesman, Dmitri S. Peskov, said that talks were continuing.

According to Xinhua, the Chinese state news agency, after meeting Mr. Xi in Shanghai, Mr. Putin said, “I’m glad to be informed that the two sides have made significant progress in the price negotiation of the east route of the natural gas project.”

A joint statement said that Russian natural gas supplies would start flowing “as soon as possible,” a phrase used after many previous negotiations between Gazprom and the China National Petroleum Corporation, and an indication that the two sides could not close the gap on price in time for the two leaders to announce the deal at their meeting.

Energy analysts had predicted that there would finally be an agreement, partly because Russia might have been willing to accept China’s hard bargaining in order to diversify Gazprom’s natural gas sales into Asia and away from a stagnant market in Europe.

Some analysts believed that the countries’ political imperatives were also aligned. By this reasoning, China was willing to help Russia at a time of American and European sanctions over Ukraine, and China was interested in siding with Russia during a tense period in relations between Washington and Beijing.

“Given the political and commercial catalysts, this is a surprising result for everyone and for Gazprom,” said James Henderson, a senior research fellow at the Oxford Institute for Energy Studies in Britain. “There was an expectation that with Putin arriving in China and with the political issues with Europe — that would be the trigger to get it over the line.”

Mr. Putin had also been expected to agree to China’s demands on price in part because of the weak Russian economy. The International Monetary Fund projects Russia’s economic growth in 2014 will be 0.2 percent.

But China was in no hurry to sign a deal, said Shoichi Itoh, a senior analyst at the Institute of Energy Economics in Tokyo. “China already has enough gas from Central Asia, and now Myanmar, until the mid-2020s,” he said. “Unless Russia made a compromise on price, China has no reason to sign it.”

In recent weeks Mr. Putin has stressed repeatedly that Russia sees its economic future with China, which is on a trajectory to surpass the United States as the leading global economic power. Mr. Putin’s emphasis on China also is consistent with his conservative nationalist ideology, emphasizing family values and patriotism and criticizing what he views as the West’s moral decadence.

Mr. Putin arrived in Shanghai on Tuesday to attend a conference of Asian countries hosted by China. Mr. Xi seized the opportunity to give Mr. Putin a warm welcome, even though it was not a state visit, by making sure ships from a Russian-Chinese naval exercise in the East China Sea berthed in Shanghai and by meeting Mr. Putin one-on-one at the start of the gathering.

After the leaders’ meeting, Xinhua said that Russia and China had proposed establishing a comprehensive energy partnership, and that the two sides would deepen their cooperation in the oil sector.

China has maintained an official neutrality on Russia’s actions in Ukraine, but that position has begun to tilt in favor of Moscow because of the “quite bad” atmosphere between China and the United States, said Shi Yinhong, a professor of international relations at Renmin University in Beijing.

If the gas deal went ahead in the coming period, Mr. Shi said, it would be “a Chinese financial assistance contract for Russia in guise of commercial payment.”

Dromikaites sparked my interest in this idea after relating in the Russia-Ukraine development thread that Turkmenistan supplies the PRC with 45% of its gas. That's an astonishing figure for a country as huge as China. It seems that, although receiving Putin warmly for the sake of diplomatic niceties and a good public relations image, President Xi Jinping and the Chinese government disagreed entirely on the substance of the meet. That does not spell well for the Russian economy should Western sanctions start to take their toll as predicted. It looks like Russia will eventually have to sign a deal completely in China's favor. However, this professor Shi Yinhong makes an interesting suggestion about the proposed project potentially serving as a big economic aid package that Russia will desperately need when its economy starts tanking.

Meanwhile, it looks like Russia's new territory in Crimea is about to experience some economic hardship.

[conon394]

The dance is always interesting - the Burma option for China is kind of fascinating. China has certainly seen benefits of 'friendly' state there but the sudden change away must be troubling and the aggressive US push to capitalize on it with rose colored glasses is likely troubling. I wounder how the China would feel about US investment building LNG terminals in Burma?

In any case I case Putin can't walk on water nice to see some evidence of that... I imagine some here will argue the what the NSA or CIA planted a bad translator to screw up the deal rather than admit nations have interests (a lot) but not friends (or only very rarely)

[Geronimo2006]

China doesn't want to be the next country to have its gas switched off when it has a row with Putin.

[Love Mountain]

China doesn't want to be the next country to have its gas switched off when it has a row with Putin.

Sure, if you completely ignore all realities of International Relations that explanation makes sense.

[Condottiere 40K]

I think that Putin may find that when that time does come, it won't be up to ether himself or Russia if the pipeline gets shut down.

[Roma_Victrix]

I think that Putin may find that when that time does come, it won't be up to ether himself or Russia if the pipeline gets shut down.

Indeed. What's he going to do? Shoot himself in the foot too with a Makarov pistol, just for fun?

[Lord of Nihilism]

Interesting article, but it didn't mention that the CEO's of Russia's major oil companies(Gazprom is the most prominent one) were also present during Russia's visit to The People's Republic. While nothing concrete came from this meeting, the possibility of a petrol deal is still there but it's most likely going to be in The People's Republic of China's favour. I personally welcome a strong Chinese-Russian alliance and I have no doubt Russia and China will be forging closer ties in the near future. One thing China has over every other country in the world is the fact that they're the most powerful economy, and they have the largest ground Army(A modern Wehrmacht essentially). Having China join your alliance can only benefit you and if you're a non Security Council Member of the UN, you'll most likely have China blocking any UN resolutions that harm your country.

[Dromikaites]

What I believe it happened was this: China already sources her gas from Turkmenistan (45% of the total needs) and according to the agreement the quantity would double in the next 5 years. So basically China can count on sourcing almost all her gas from there.

But China didn't stop at that and secured also a secondary supply from Myanmar (Burma). That way she is pitting those two suppliers against each other. If another Tunguska meteorite hits Russia tomorrow the Chinese would still get 100% of the gas they need.

In such context Putin comes to Shanghai hat in hand. China has already killed a Russian pipeline project which would have allowed Gazprom to supply both the EU and China. The Chinese demanded instead that Russia invests 33+ billion USD in another pipeline which can only supply them and them alone. Putin was therefore supposed to agree today to both sinking 33+ billion dollars into something which is only useful if China buys gas from him and to agree to sell that gas at a price set by the Chinese.

The fact there was no signing today means the Chinese probably wanted to get the Russian gas for free

[hellheaven1987]

Who does not want free gas?

In the end the Crimean incident more or less destroy Russia's potential relation with Europe; many people praise how "smart" Putin is but all I see is Putin is falling into same typical Russian cultural flaw again.

[Lord of Nihilism]

European's never liked Russia anyways so I don't see the major problem. Russia has always been that one country that's neither Asia nor Europe, and thus are not trusted/hated by both. In fact, Russia shares many similarities to the British Empire; Britons themselves didn't/don't consider themselves to be equal to European's but rather better(And rightfully so). Quite a few countries didn't trust the British even though they were right next to Europe. Russia seems to fall into this category as well.

[The Despondent Mind]

European's never liked Russia anyways so I don't see the major problem. Russia has always been that one country that's neither Asia nor Europe, and thus are not trusted/hated by both. In fact, Russia shares many similarities to the British Empire; Britons themselves didn't/don't consider themselves to be equal to European's but rather better(And rightfully so). Quite a few countries didn't trust the British even though they were right next to Europe. Russia seems to fall into this category as well.

Only they never got hang of the " World Domination " thing.

[Roma_Victrix]

Except for the fact that the English - and by extension the other Brits, the Welsh and Scots (and Northern Irish) - were far more integrated into the same continental European culture of Western Christendom, its social life, commerce, and politics, than the Russians ever were (being Orthodox for starters), even after Peter the Great reformed the Russian Empire on Western models. The Protestant Reformation allowed the Anglican English (and Presbyterian Scots) to distance themselves from Catholicism, one of the main structures that bound England to the continent, but even then the British Isles never became fully divorced from interacting with continental Europe and being heavily affected by the further social, scientific, and technological trends that occurred there. They also had allies on mainland Europe, usually Protestant until the modern age when the importance of religion was trumped by popular nationalism.

The Russians on the other hand, whose influence in Europe was restrained to the Baltics and fighting Sweden, had very little interaction with Western, Southern, and Central Europe until the Napoleonic War dragged the Russians into the fray. Although they once fought Napoleonic France, the two countries were obviously key allies during WWI. I suppose it all boils down to a matter of who you ask in Europe about Russia and if they trust it or not. If you asked a Serbian that question, his answer might be radically different from that of a Pole.

[hellheaven1987]

The Russians on the other hand, whose influence in Europe was restrained to the Baltics and fighting Sweden, had very little interaction with Western, Southern, and Central Europe until the Napoleonic War dragged the Russians into the fray. Although they once fought Napoleonic France, the two countries were obviously key allies during WWI. I suppose it all boils down to a matter of who you ask in Europe about Russia and if they trust it or not. If you asked a Serbian that question, his answer might be radically different from that of a Pole.

That does not matter, because Russians never think about be recognize as part of West nor want to be integrate into "Europe". What it always wants since Peter the Great is to be recognized by West as equal and separated "civilization" - similar as how Russia and India's relation today. It is notable all rising Great Powers today - India, China, Brazil, also holding the same view (hence why Brazil made a big fuss last year complaining White House not "treating" it equal).

[Lord of Nihilism]

That's the complicated part regarding Russia; they're considered a Western(In terms of geographical location) country, and they've also played a major part is shaping Western/Eastern Europe, and they've adopted British/French traditions/cultural traditions/scientific methods of research and etc, but they're not trusted by anyone. The British were the same as in they had roughly the same amount of interaction with mainland Europe as the Russians, and it's why I originally mentioned the British; they for the longest time had little allies and weren't trusted by most countries. Russia is the same since they've had quite a bit of interaction(Pre-Soviet era) with mainland Europe but were also not trusted/hated by mainland Europe. It even somewhat happening right now; Europeans in the EU don't trust the British since they're seen as a US puppet, and Asian nations don't really trust the British as well.

I thought it was interesting, since from my view the Russians right now share many similarities to the British Empire, except for the fact that Russia doesn't control the World economy like the British did. If there's anything that can be stated as fact, it's that Asians nor Europeans trust Russia, and many hate Russia so I doubt Russia breaking off ties(bi-lateral projects, military exercises, economic dependency and etc) will hurt Russia in the long term, not when there's rising economic superpowers such as India, Iran, Brazil and etc.

[Roma_Victrix]

Any Chinese qualms with the Russians are relatively speaking rather new.

Yes, Czarist Russia and Qing China did have a clash over borders in the 17th century, but that was more or less quickly resolved with a treaty in 1689. The 19th-century Western and Japanese carving of spheres of influence with "Unequal Treaties" in Qing-dynasty China also included Russia in the party of benefactors, since they took Vladivostok. The Republic of China had sided with the Whites in the Russian Revolution of 1917, so the victorious Reds weren't exactly in good relations with China after that, but the 1949 downfall of the Republic of China to the communist People's Republic signaled a new era of cooperation and friendship between them and the Soviet Union. In fact, the Soviets had sent advisers to help Mao in his civil war against Chiang Kaishek. Of course, doctrinal differences about communism led to the Sino-Soviet split from 1961 onwards (pitting Mao against Khrushchev ideologically), and during China's Cultural Revolution of the 1960s relations soured even more. Then the United States reached out diplomatically and eventually President Richard Nixon made a historic visit to China in 1972. With the economic reforms of Deng Xiaoping starting in the late 70s, China pushed away from the Soviet Union even further ideologically, until Gorbachev's "Perestroika" reforms of the Soviet economy and political system.

After the fall of the Soviet Union, the PRC and the new Russian Federation more or less "buried the hatchet," so to speak. They have disagreements now and then, but they are no longer fundamentally aligned against each other like during the Sino-Soviet split. Communism is truly irrelevant now despite the CCP still retaining control over China as a one-party oligarchy ruling from Beijing, which is today filled with modern skyscrapers packed with private companies engaging in the capitalist free market of the world. Yes, the state still has various industries under its control and heavily regulates some private markets, but others are nearly Laissez-faire in their ability to avoid central government scrutiny or any interference to ensure against abuse (to the point that companies involved in infrastructure who skim from the top, ignore safety standards and cut corners end up endangering people's lives like in the 2008 Sichuan Earthquake). The kleptocratic governments of Russia and China have much in common, so ideologically speaking they don't have a problem with each other. What they do have are some very different economic interests as close neighbors, especially in regards to natural resources and how they should be traded equitably or to the major benefit of one and not the other. That's what we're seeing in this article here.

[hellheaven1987]

Comintern had sent advisors to CCP as early as 1920s, and Mao, during Long March, purged Comintern/Soviet advisors, caused considerable crack between CCP and Moscow.

Currently Russia does have a few major concerns about China; one is increasingly Chinese influence in Siberia, which may turn Russian Asia into a Chinese Canada, and the other is Chinese invasion of so called "Russian sphere", mainly the Central Asia. There is also a hidden concern about whether China would try to "get back" lands lost during Treaty of Beijing (yes Vladivostok), as there is increasing voice among Chinese public in past few years that want to claim those "lost lands".

[Condottiere 40K]

If I recall correctly, Mao felt that Stalin screwed him over the Korean intervention.

[hellheaven1987]

If I recall correctly, Mao felt that Stalin screwed him over the Korean intervention.

Oh well, he did feel Stalin cheat on him, but a close look would suggest since Stalin promised nothing, it was Mao himself assuming too much. In the end, Soviet did provide more assistance to Chinese than what Stalin's promise first, so Mao should just shut up and be happy about it.

[Love Mountain]

Yeah, well try telling that to Mao's face and millions of Chinese fanatics. Russian brushes with Chinese diplomacy are self-explanatory. Allies in times that require it, bitter rivals in "unclaimed" territory otherwise.

[Exarch]

man do those people at NYT and the WaPo who touted this deal's so called 'failure' this morning, look like fools
USA, umad?

The thing about globalization is that it involves the whole world. Hence Russia exercises its option to pivot East when faced with an obdurate West.Bubbles share a core attitude of mind: complete incapacity to recognize that the real world may not correspond to your immediate surroundings. Thus investors become absorbed by manias from tulip bulbs to the South Sea, the internet et al, and fail to realize that ‘asset’ values have fundamentally decoupled from reality.
Likewise the trappings of government, those lovely limousines, endless fawning staff and a general lack of exposure to, well, normal people as opposed to sycophants, challenges the ability to readily appreciate the real world. Thus from the gilded techno-splendor of Air Force One/Two, the US government ‘led’ (for want of a better term) by Messrs. Obama and Biden, have of course lost touch after a lengthy spell in Washington has erased their ability to see beyond the DC bubble.
Similarly, the Brussels EU bubble is an interesting place to spend a bit of time, but it’s no long-term substitute for real life.
In political bubbles groupthink prevails. Few folk on the greasy pole of advocacy demonstrate the strength of character to challenge that wondrous oxymoron ‘the prevailing wisdom’. The concentration of like-minded linear thinkers in the governing clique only exacerbates the turn towards remarkably one-sided ‘solutions’.
Increasing sanction threats heaped upon Russia demonstrate the clear failure of current Western governments to appreciate even basic economics. (Hardly surprising given their misguided bank bailout, funny money QE and euro folly). Moreover, it is not difficult to spot that the US and EU are a declining share of the world economy.
Globalization favors the brave, not the reactionary EU, which is regulating its way to being the next Argentina - a fashionable but faded apology for commercial success destroyed by government intervention. Nevertheless, the US remains an incredible powerhouse, the world’s biggest economic superpower by a long way, despite the failings of the Obama era. However, even the mega-power of the US economy is only 18 percent of the world economy - and China is rising fast at 15 percent, with huge momentum.
The tragic legacy of Obama is to have seen the USA flatline while China grew over 50 percent between 2008 and 2013. The EU declined in relative and absolute terms - quelle surprise! (Before the Warsaw Pact collapse invigorated the rise of the East, the US was almost a third of the world economy in 1985).
Magnificent success stories like South Korea are helping drive the world economy eastwards and now India has a reformist government focused on growth, its possibilities remain simply incredible under Narendra Modi. Few Eastern nations see the total solution to their future trade as lying with the US or EU - why limit yourself in a world with over 200 sovereign nations?
Meanwhile the Western world at best pays lip service to the concept of Asia rising, but remains in denial about the realpolitik of a much more multipolar 21st-century world.
Thus Gazprom has negotiated a deal which is equivalent to roughly 20 percent of its gas sales to Europe. At a single stroke it neatly rebalances the business and its risk to knee-jerk Western sanctions. The US might seek to replace Russia’s westerly flow, but the risk of seriously damaging the Russian economy has nevertheless been hugely diminished.
In total the deal is expected to encompass some 38 billion cubic meters of gas flowing through a new pipeline to China for 30 years with a price tag of $400 billion.
Price was a key negotiating issue: China wanted to drive a hard bargain with Russia exposed to Western sanctions while Gazprom knew China must reduce its dependency on coal to alleviate the often stifling smog in its major cities. Meanwhile, China’s smaller current gas suppliers in the region levy lower prices than Russia has traditionally received through its various agreements based on a template dealing with EU states.
Placed in perspective, while a massive deal it is only expected to be around 10 percent of Chinese demand by 2020 (according to Nomura). That means there is much more scope for Russia to increase its supply in due course. Russia’s pivot to the growing markets of the east is in full swing.
The West may yet rue the day it sent its politicians to address the crowds of the Maidan.

Source: http://rt.com/op-edge/160212-russia-...gas-deal-east/

the Chinese ought to be thanking Washington for delivering Russia into Chinese arms; you've got what amounts to a Sino-Russian alliance in the making, what with the sale of those Sukhois and more co-ordination over Ukraine and Syria.

i should also add that Obama, Nuland, Hilary Clinton, and all those ppl who wanted the pivot to contain China had this coming and should've seen this coming.

What did you expect? Attacking not one but two emerging superpowers at the same time amounted to them joining forces against you. Antagonizing one who also happens to hold your economy by the balls by making a point of bringing war to their shores ensures that your days as the sole superpower are numbered.

So let's look at what we have here; China gets a dedicated source of energy, Russia gets a dedicated source of funds for its own development, Chinese reliance on the Malacca straits is greatly diminished, Sino Russian mil-mil cooperation is greatly enhanced (a if the intel agencies aren't already)-to the point where the Russians will sell their aviation crown jewels to the Chinese, fully knowing the Chinese will reverse engineer the engines and produce superior designs.
One day people from the future are going to look back on this day and wonder how the politicians in the beltway got it so wrong in such a disastrous way.

Addendum:
About the second part of the thread:

In a symbolic blow to U.S. global financial hegemony, Russia and China took a small step toward undercutting the domination of the U.S. dollar as the international reserve currency on Tuesday when Russia’s second biggest financial institution, VTB, signed a deal with Bank of China to bypass the dollar and pay each other in domestic currencies.

Source: http://america.aljazeera.com/article...-bankdeal.html