Beijing and Moscow said they signed a much-anticipated contract to supply China with hundreds of billions of dollars worth of Russian natural gas following a decade of difficult talks.The deal is not just about energy supply it is also about payment for that supply, we will get to that most important point. Read on.
|Putin & Xi Jinping|
China and Russia signed a long-awaited natural gas supply deal on Wednesday, securing the world's top energy user a major new source of the clean-burning fuel and opening a market to Moscow
After 10 years of negotiations, Russia's Gazprom and China's CNPC have finally signed a historic gas deal which will provide the world's fastest growing economy with the natural gas it needs to keep pace for the next 30 years
Russian President Vladimir Putin and Chinese counterpart Xi Jinping witnessed the deal in Shanghai between Russian state-controlled company Gazprom and (state controlled) China National Petroleum Corp (CNPC).
The deal would see Russia supply 38 billion cubic meters (bcm) of gas to China each year for 30 years under a contract valued in excess of $400 billion overall.
Infrastructure investment from both sides will be more than $70 billion and will be the world's largest construction project, with Russia providing $55 billion up front and China $22 billion. This is Gazprom's biggest contract to date.
That pipeline is the "Power of Siberia" pipeline
The gas will be transported along a new pipeline linking Siberian gas fields to China's main consumption centers near its coastline.
A separate route that could deliver gas to China's western provinces and provide diversification is also in the works, according to Putin.
A memorandum of understanding was signed in the presence of Russian President Vladimir Putin and President of China Xi Jinping on the second day of Putin’s two-day state visit to Shanghai.
Now, let's get down to the nitty gritty, brought to us by AlJazeeraAmerica
URL tells us what the original headline was - russia china bank deal?
Did that give away too much?
Analysis: The agreement is a symbolic blow to US global financial hegemony and a signal of Russia-China rapprochementIs it just a symbolic blow? Or is it an actual blow to US global financial hegemony?
While this deal will not bring about immediate change, in the not so distant future the deal could change much.
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.
The so-called Agreement on Cooperation — signed in the presence of Chinese President Xi Jinping and Russian President Vladimir Putin, who is on a visit to Shanghai — could be followed by a long-awaited announcement this week of a massive natural gas deal 10 years in the making. (The gas deal was signed- see news article above)
“Our countries have done a huge job to reach a new historic landmark,” Putin said on Tuesday, making note of the $100 billion in annual trade that has been achieved between the two countries.
Demand for the dollar, which has long served as a safe and reliable reserve currency in international transactions, has allowed the U.S. to borrow almost unlimited cash and spend well beyond its means, which some economists say has afforded the United States an outsize influence on world affairs.
But the BRICS countries — Brazil, Russia, India, China and South Africa — a bloc of the world’s five major emerging economies, have long sought to diminish their dependence on the dollar as a means of reshaping the world financial and geopolitical order.
In the absence of a viable alternative, however, replacing it has proven difficult.
For its part, “China sees the dominance of the dollar in international trade transactions as remnant of American global dominance, which they hope to overthrow in the years ahead. This is a small step in that direction, to reduce the primacy of the dollar in international trade,” said Michael Klare, a professor of peace and world security studies at Hampshire College.
Some have been tempted to view Tuesday's deal in the context of Putin's showdown with the West over the crisis in Ukraine. (This deal has nothing to do with the present day crisis created in Ukraine so I believe that view can be discarded) After the U.S. and Europe imposed sanctions on Moscow for its annexation of Ukraine's Crimean Peninsula, Putin may have finally come good on promised retaliation against what he views as Western hegemony in Russia's near abroad.
“Breaking the dominance of the U.S. dollar in international trade between the BRICS is something that the group has been talking about for some time,” said Chris Weafer, a founding partner of Macro-Advisory, a consultancy in Moscow. “The Ukraine crisis and the threats voiced by the U.S. administration may well provide the catalyst for that to start happening,” he added. (The deal was ten years in the making, so, Ukraine is not a catalyst. As mentioned in yesterday's post , this spin is being put forth "As if to conjure the omnipotence of western sanctions as opposed to the impotence of them")
To be sure, the Russia-China bank deal is mostly a symbolic step. Liza Ermolenko, an emerging markets economist at Capital Economics Ltd. in London, said the deal was still “a very small one, in the grand scale of things” and that it wouldn’t change Russia’s reliance on the dollar “overnight.” Most of Russia’s export contracts in the oil and gas markets are still priced in dollars, she noted, and on a wider scale, replacing the dollar with the ruble is much too risky to even consider.