China and Russia ink $400 billion gas deal

[GeorgeGist]

Source: USA Today

EIJING — China and Russia signed off on a huge gas deal worth $400 billion Wednesday that heralds a pivot east for Russian business amid ongoing tensions with the West over Ukraine.

The 30-year gas-export contract, seen as a move by Russian President Vladimir Putin to aggressively shift the country's commercial interests east amid mounting sanctions from the the United States and Europe, was signed as the Russian leader has enjoyed a warm welcome in China, where the two countries have signed a raft of agreements during his ongoing, two-day visit.

The news was carried by Russia's state-owned news agency Interfax.

Earlier, there were suggestions the deal would not go ahead following a report in The Financial Times.

Read more: http://www.usatoday.com/story/news/world/2014/05/21/china-russia-gas-deal/9365155/

[dipsydoodle]

1. Done deal then.

Remained in doubt yesterday. Figure mentioned elsewhere exceeded a trillion US$s lon term : not that the trade will be conducted in US$s..................straight forward Yuan Renminbi / Roubles.

Thanks for posting.

See also :

China, Russia ink mammoth $400 bn gas deal

China and Russia on Wednesday inked a landmark $400 billion gas deal in Shanghai after a decade-long gas supply talks between the two countries.

Despite many Western media reports that said the two sides had failed to resolve differences, the historic gas deal came on the second day of Russian President Vladimir Putin’s visit to China.

Putin had said on Tuesday that “significant progress” had been made over the price in the lengthy talks.

Russia’s state-owned Gazprom will now supply China National Petroleum Corp (CNPC) with 38 billion cubic meters (bcm) of natural gas a year for 30 years.

http://thebricspost.com/china-russia-ink-mammoth-400-bn-gas-deal/#.U3yDpHamWnw

[muriel_volestrangler]

2. What's straight forward about "Renminbi / Roubles"?

Conducting trade in 2 different currencies, one of which should be fully floating on the world's exchanges by 2015, while the other is maintained at levels set by its government largely to control its trade with developed countries, doesn't sound 'straight forward' to me.

ITAR-TASS expresses the price in dollars:

Gazprom expected to get $400 as a starting price for 1 thousand cu. m. of gas for China. The Chinese side wanted to buy gas for $350-360.

http://en.itar-tass.com/economy/732449

More: http://en.itar-tass.com/economy/732347
Are you sure they didn't denominate this in dollars after all?

[dipsydoodle]

3. They agreed exchange rates for trade between the two countries 2010.

China and Russia abandon the dollar in new bilateral trade agreement

China and Russia are renouncing the U.S. dollar for trade, their premiers have announced.

Chinese Premier Wen Jiabao and his Russian counterpart Vladimir Putin said they will now use their own currencies for bilateral trade.

Chinese experts told the China Daily that the move reflects closer relations between the two countries and is aimed at protecting their own domestic economies rather than challenging the dollar.

'So far we have been paying each other in foreign currencies, first of all in dollars. Now, and this is only the first step, trade in the rouble has started in China. In December the yuan will be traded in Moscow,' Putin said.

Read more: http://www.dailymail.co.uk/news/article-1332882/China-Russia-abandon-dollar-new-bilateral-trade-agreement.html#ixzz32LdJ7A3d

I think the current situation is most likely expressed in US$s for the purpose of value comparison.

The birth of a Eurasian century: Russia and China do Pipelineistan:

A specter is haunting Washington, an unnerving vision of a Sino-Russian alliance wedded to an expansive symbiosis of trade and commerce across much of the Eurasian land mass - at the expense of the United States.

>

Exit the Petrodollar, Enter the Gas-o-Yuan

And then, talking about anxiety in Washington, there’s the fate of the petrodollar to consider, or rather the “thermonuclear” possibility that Moscow and Beijing will agree on payment for the Gazprom-CNPC deal not in petrodollars but in Chinese yuan. One can hardly imagine a more tectonic shift, with Pipelineistan intersecting with a growing Sino-Russian political-economic-energy partnership. Along with it goes the future possibility of a push, led again by China and Russia, toward a new international reserve currency -- actually a basket of currencies -- that would supersede the dollar (at least in the optimistic dreams of BRICS members).

http://rt.com/op-edge/160160-pipelineistan-brics-economy-deals/

Russia’s Petro-Ruble Challenges US Dollar Hegemony. China Seeks Development of Eurasian Trade.

Russia has just dropped another bombshell, announcing not only the de-coupling of its trade from the dollar, but also that its hydrocarbon trade will in the future be carried out in rubles and local currencies of its trading partners – no longer in dollars – see Voice of Russia

Russia’s trade in hydrocarbons amounts to about a trillion dollars per year. Other countries, especially the BRICS and BRCIS-associates (BRICSA) may soon follow suit and join forces with Russia, abandoning the ‘petro-dollar’ as trading unit for oil and gas. This could amount to tens of trillions in loss for demand of petro-dollars per year (US GDP about 17 trillion dollars – December 2013) – leaving an important dent in the US economy would be an understatement.

http://www.globalresearch.ca/russias-petro-ruble-challenges-us-dollar-hegemony-china-seeks-development-of-eurasian-trade/5377086

The upside its that it will reduce the ability of the US to fund wars which are in its own selfish interests.

Aside from that Europe doesn't use petrodollars to buy gas from Russia so why should China ?

[muriel_volestrangler]

4. The Mail is about the currencies being traded in each country

and a claim that they would start using their own currencies - but that doesn't mean it happened (and the trade of currencies would indicate there is no agreed exchange rate at all). The RT op-ed about a possibility of trading in either of the currencies, and GlobalResearch is completely unreliable; the actual quote in the Voice of Russia piece is:

" I've spoken to Gazprom, to Rosneft and Rosoboronexport management and they don't mind switching their exports to rubles. They only need a mechanism to do that "
Read more: http://voiceofrussia.com/2014_04_04/Russia-prepares-to-attack-the-petrodollar-2335/

So there is a need for a mechanism.

And in no case is it clear whether the price is denominated in roubles, the renminbi or some formula to allow for currency fluctuations between the 2. Instead, the Russian agency just talks about it in dollar terms. That's why this is not straightforward.

[dipsydoodle]

5. They most likely agreed the figure using the US$ as a reference point

at least for the time being. Using that as a reference enables easy currency conversions. The only one of the the two which matters is the Yuan Renminbi : US$ one given that China is the buyer. Were for the example the Deutsche Mark to be reintroduced and that became the world reserve currency then they would re-price accordingly. As I said before : all that's needed is a reference point with no need to actually pay in that currency.

Although not mentioned there is also likely to be a volume agreement tied to the price.

More news from yesterday here :

Russia’s VTB and Bank of China agree on domestic currency settlements.

VTB, Russia’s second biggest lender, has signed a deal with Bank of China, which includes an agreement to pay each other in domestic currencies.

“Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions,” says the official VTB statement.

The deal underlines VTB Group’s growing interest in Asian markets and will help grow trade between Russia and China that are already close trading partners, said VTB Bank Management Board Vasily Titov.

An Agreement on Cooperation was signed by Titov and Bank of China President Chen Siqing in Shanghai on Tuesday in the presence of Russian President Vladimir Putin and Chinese President Xi Jinping.

http://rt.com/business/160124-vtb-bank-china-currencies/

[jakeXT]

6. China will lend them whatever they have

China will lend money to Russia for Gazprom to build two pipelines from Siberia to Northeast and Northwest China, transporting a maximum of 60 billion cubic meters of gas per year. The two countries have recently haggled over price and are likely to settle on $360 to $400 per 1,000 cubic meters, roughly comparable to what Germany is paying and importing.

...

Trade Currency

As icing on the cake, China will likely pay Russia either in rubles or in yuan for the gas it consumes. This is important, as resource transactions usually settle in U.S. dollars, the reserve currency of the world.

The reader will have noticed that all figures have so far been given in dollars—nobody would even understand the price in yuan or rubles and would have to convert them back to dollars for reference.

However, it is perfectly possible for China and Russia to use the world reference price in dollars to settle their trades in yuan or rubles.


http://www.theepochtimes.com/n3/684771-china-russia-gas-deal-doesn-t-mean-end-of-dollar/

[ballyhoo]

7. The dollar will merely be a reference point for

the facilitation of the eventual real switch to another currency, which may be an entirely new currency. But the dollar is on its way out. It will be interesting what happens when HR 2847 goes into effect 7-1-2014 and how this all impacts the other big rush--TPP. In retrospect more will understand why this was fast-tracked, particularly so if it does not eventually pass. Investmentwise, I will be watching Germany very closely.

[joshcryer]

16. Surprised, they're taking a big hit.

They need to make $12/mcf to break even, as it looks now it's closer to $10/mcf. I'm guessing they're thinking long term, with hopes to get South Korea and a non-nuclear Japan in on the mix.

[bemildred]

8. China, Russia sign $400 billion gas deal

BEIJING — China signed a long-awaited deal for Russian natural gas Wednesday, giving China a new energy source and Russia a diplomatic boost in the face of sanctions and condemnation for its aggressive actions in Ukraine.

Announced after meetings between Chinese President Xi Jinping and Russian President Vladimir Putin at an Asia security conference, the 30-year deal is worth an estimated $400?billion, according to comments in Russian media by Gazprom chief executive Alexei Miller.

http://www.washingtonpost.com/world/europe/china-russia-sign-400-billion-gas-deal/2014/05/21/364e9e74-e0de-11e3-8dcc-d6b7fede081a_story.html

[bemildred]

9. Putin says troops withdraw to help Ukraine vote

MOSCOW (AP) -- Russian President Vladimir Putin said Wednesday he ordered troops to pull out from the regions near Ukraine to help create a positive environment ahead of the nation's presidential vote, but added the continued fighting will make it hard for the Kremlin to deal with the winner.

http://hosted.ap.org/dynamic/stories/E/EU_UKRAINE?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2014-05-21-07-55-22

[daleo]

10. Obviously China and Russia want to by-pass western political pressure

The West's talk about boycotting Russian gas and replacing it with North American LNG in Europe probably helped seal this deal. It is interesting that Russia and China seem to be getting along better as quasi-capitalist states than they did as quasi-Marxist states.

[pampango]

11. And Europe will get a supply of gas that is less susceptible to shifting political winds though more

expensive due to extra transportation costs. This seems like a win-win-win deal for Russia, China and Europe. Russia has plenty of resources to export and China has to import lots of resources. And the two countries are "getting along better as quasi-capitalist states than they did as quasi-Marxist states."

[LittleBlue]

12. So much for isolation

That's a $400bn finger in the eye of the US

[joshcryer]

18. Nah, the US is eyeing coal exports:

[LittleBlue]

19. Wrong thread?

Was that reply to my post? It doesn't make any sense.

[joshcryer]

20. "That's a $400bn finger in the eye of the US"

The US doesn't care.

[LittleBlue]

21. The two have nothing to do with one another

What do US coal exports have to do with Russian economic isolation?

That response is basically a Team America non-sequitur

[joshcryer]

22. The US wanted this situation. Look at TPP.

Isolating Russia and China is the #1 goal.

[dipsydoodle]

13. Russian Gas Price for China to Exceed Preliminary Estimates – Source

MOSCOW, May 21 (RIA Novosti) – The price of gas under a new contract between Russian energy giant Gazprom and China National Petroleum Corporation exceeds analysts estimates of $350 per thousand cubic meters, a source acquainted with the terms of the contract told RIA Novosti Wednesday.

“The gas price under the contract is over $350,” the source said, refusing to name the exact figure citing commercial confidentiality.

Gazprom CEO Alexei Miller earlier declined to reveal the contract price for gas for the same reason. He did, however, say that the value of the entire contract was $400 billion, which if calculated against the expected flow amounts, comes to around $350 per thousand cubic meters.

Russian President Vladimir Putin later specified that the price was tied to the market price of oil and oil products and had satisfied both parties.

http://en.ria.ru/russia/20140521/190015610/Russian-Gas-Price-for-China-to-Exceed-Preliminary-Estimates-.html

[NickB79]

14. And the fucking of the planet's climate is assured

China has already been combating air pollution in their country, not by abandoning coal consumption, but rather gasifying the massive coal reserves in the northern portion of the country with truly massive industrial centers. One is 400 sq. miles, the size of LOS ANGELES!

And, they're also exploring fracking their large unconventional natural gas reserves, much as the US is currently doing.

And now, they'll have Russian gas as well to feed into the massive national gas pipeline system that will inevitably follow.

The carbon emissions from the extra coal burned to gasify coal and the fugitive methane escaping from their frack wells will doom this planet in our lifetimes.

[quadrature]

15. China got ****ed

what a bunch of clowns.
or maybe thieves.

here are the numbers,
you can do the math yourselves.

price of commodity NG in the US
USD 4.49 per million BTU of heat

one cubic meter is 35.3 cubic feet

the heat value of a cubic foot of
NG varies between 1010 and 1040 BTU

does it really matter what currency is used
when you pay twice the going rate?

[joshcryer]

17. Where are you seeing that price? I think you've confused NG with LNG.

http://www.eia.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm

LNG is between $11 and $15 for the US.

[quadrature]

23. why are you bringing up LNG?

LNG is not being discussed here.

the price I mentioned is from ...


http://www.bloomberg.com/markets/commodities/futures/

[dipsydoodle]

24. Its LPG which China will have piped from Russia.

.

[quadrature]

25. propane? really?

sorry, I am having trouble reading the OP
because the text, gray, is printed on
a gray background.

does it really say that?

[dipsydoodle]

26. Well now.............

A comparison is being drawn between this contract price and Europe's prices - see reply #13. Europe's supply via Ukraine and Nord Stream is LPG to the best of my knowledge so I took it as read that given the price comparison China's would be too.

[dipsydoodle]

27. Russian Finance Ministry to Consider Tax Breaks on Gas Deliveries to China

ST. PETERSBURG, May 22 (RIA Novosti) – The Russian Finance Ministry will consider the possibility of nullifying extraction taxes for gas deliveries to China based on the effectiveness of the contract, Finance Minister Anton Siluanov said Thursday.

“The government is developing separate elements for gas deliveries to China. There is an issue on taxes, including extraction taxes. We’ll work on that. We need to look at the figures, we just can’t say that we’ll support it or not,” Siluanov said.

Siluanov said the ministry needs to look at the effectiveness of Gazprom’s supplies so that both the interests of the company and the budget are taken into consideration.

“Everything needs to be weighed,” the minister said.

>

Russian President Vladimir Putin suggested nullifying the extraction tax for gas fields delivering fuel to China, while Chinese officials expressed their readiness to cancel import taxes on gas from Russia, Rosneft CEO Igor Sechin said Tuesday after talks in Shanghai.

http://en.ria.ru/russia/20140522/190038401/Russian-Finance-Ministry-to-Consider-Tax-Breaks-on-Gas.html

[pampango]

28. "Mr. Putin was desperate to get the deal done, energy experts said."

China and Russia Reach 30-Year Gas Deal

The impetus to complete the gas deal, which has been talked about as a game-changing accord for more than a decade, finally came together after the Ukrainian crisis forced Russia’s president, Vladimir V. Putin, to urgently seek an alternative to Europe, Moscow’s main energy market. Europe has slapped sanctions on Russia and sought ways to reduce its dependence on Russian energy.

Russia had been holding out for a price close to what European countries pay, and China for a price akin to the cheaper gas it buys from Central Asia, energy experts who tracked the talks said. With Russia’s economy near recession and the International Monetary Fund projecting 0.2 percent growth this year, Mr. Putin was desperate to get the deal done, energy experts said.

Morena Skalamera, a fellow at the Geopolitics of Energy Project at Harvard, said Mr. Putin was more willing to concede on price than he had been before the Ukraine crisis. “If the European market was a question mark before the Ukrainian crisis, now with sanctions, Putin needed China even more,” she said. “Politically, it is important for Putin to show that the ‘Greater Russia’ is back on the international scene and that it has other, non-Western options to restore its rightful place.”

The production of American shale gas also gave Russia incentive to rapidly complete the deal with China and to seek other markets in Asia, Ms. Skalamera said. “The rapid rise of U.S. natural gas is giving Europeans genuine market options,” she said. “Many are opting out of the grip of Gazprom. The result? Russia is looking for a new cash cow, turning its gaze east.”

http://www.nytimes.com/2014/05/22/world/asia/china-russia-gas-deal.html