So. Russia and China just signed a major natural-gas deal.
posted at 8:01 pm on May 22, 2014 by Erika Johnsen
Just as Europe has lately been reevaluating its options for energy suppliers in the event of a Russian-Euro falling out, Russia has for some time been reevaluating its options for energy buyers. Natural gas accounts for almost 60 percent of Russia’s total exports, and Russia couldn’t very well yank any supplies from Europe without sustaining a major blow to their revenue stream, and there is security in diversity…
…which is one of the reasons why the Russians have been putting their energy (literally and figuratively) into making a deal with their more — ahem — philosophically amenable neighbors to the south. The deal has been in the works for going on a decade now, but you can bet that that little incident with Crimea lit a fire under the whole thing. Putin very much wants to let the world know that he has other options if the West keeps up with sanctions, via the Telegraph:
Russia’s President Vladimir Putin has pulled off a major political coup by securing a landmark $400bn (£236bn) gas agreement with China, a move that will come as a blow to US efforts to isolate the Kremlin.
Few details were available for the deal – one of the world’s biggest energy pacts – but state-owned China National Petroleum Corp said that it had signed a 30-year agreement to buy up to 38bn cubic metres a year of gas from 2018.
The deal is a coup for Mr Putin as he seeks to open up new markets for Russian gas as the US prepares to begin exporting to Europe, currently Russia’s main market. It also sees Russia move closer to Beijing at a time when the Kremlin is a loggerheads with the US over the political situation in Eastern Ukraine following its annexation of Crimea. …
A new pipeline linking Siberia’s gas fields to China’s main coastal cities will be built as part of the agreement and Russia plans to invest $55bn in exploration and pipeline construction. …
In China, annual demand for gas is expected to reach 420bn cubic metres by the end of the decade and sustain a rate of 14.3pc growth through to 2030. Under Beijing’s natural gas policy unveiled in 2012 gas will increasingly be used to run cars, trucks, trains and ships.
It isn’t enough to displace all of the cash they get from the European market (and Russia still has serious work to do before it can replicate the production boom in the United States that has caused the Russians so much grief), but it’s a good deal for both of these newfound Eastern energy partners: Russia gets a major new market for its main export to better support its energy-dependent economy, while China gets a lot more nicely-priced and cleaner-than-coal natural gas to combat their insane pollution problems — and hey, why should China bother getting all judgmental about a little ol’ thing like annexing one of your neighbors?