Wednesday, May 21, 2014

Russia & China make energy AND banking deal- bypassing US dollar

First we will read bit and pieces from WSJ- BBC and Reuters

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.

The gas will be transported along a new pipeline linking Siberian gas fields to China's main consumption centers near its coastline. 
That pipeline is the "Power of Siberia" pipeline
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.
Last link RT covering the deal in detail

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 rapprochement
Is 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.


  1. McGowan on Rense tonight at 11:00 PM our time.Be there or be square.

    1. Hey Peter

      I got two copies of the book- one autographed and one to read
      going to lend it to one of my siblings as soon as I am done
      also bought the mighty wurlitzer as an accompanying read sense it seems to go along so well with it
      and since I have already read programmed to kill some time ago
      can anyone listen to rense? I don't have a membership so is it possible?

  2. @Is it just a symbolic blow?

    It is hilarious to view the casual belitteling of the deal by all the "experts", after they were cocksure that it won't go through.

    1. Oh I noticed the belittlement wizoz

      A' symbolic blow' wouldn't have the US so hot and bothered
      Also the fact that the NATO media continues to spin on this being about Ukraine- creating that omnipotence perception- tells us the direction they want us to go in- The US pushed Russia and China into this because Russia was being so hurt by the crushing sanctions
      When that is not the case
      The deal was ten years in the works, the banking deal was signed ahead of the energy deal, which makes sense and foretold the inevitability of the energy deal signing and if anything can be taken away from all this
      Both Russia and China are continuing on there own paths despite US bullying

      Another interesting bit of baloney was this from Liz Ermolenko
      "replacing the dollar with the ruble is much too risky to even consider"
      Who is even talking about that?
      I don't think Russia ever has?
      It's like building a strawman to tear it down, silly

    2. Dear Penny,

      No doubt you are right as everybody else who has even a cursory knowledge of geography, history, politics (I avoid the term of geopolitics, sounds to ex cathedra).
      But I can say with some immodesty that I was seeing it in the making since the... past century! At the time I was conversing with friends who were very much in the Fukuyama's "end of history" mood. I loved to tease them saying that they should not dismiss Russia. They were splitting their sides with laughter. Who can stand against the americans??? Russia and China, I was musing. Laughters became homeric.
      In 1999, after the scandal of the Echelon it was discretely announced the initiation of the Galileo system of navigation. The most surprising element was that China was to finance it (the fantastic developement of China was not yet as visible)! I again told people, don't you realize that Russia and China are in the process of raprochement and that sooner or latter the oil and gas of Russia will start to flow towards China and that will happen by land liberating China of the stranglehold of maritime communications and Russia of the blackmail of a gas boycot from Europe? They stopped laughing loudly but they still were convinced that Russia is finished and the GDP of China is far behind that of USA, therefore they are on the wrong side of history.

    3. WizOz;

      wow, if you could 'see' the winds of change blowing back then, my hat is off to you.

      I think people often lack foresight because they lack knowledge and understanding- willfully or not?

      One can't know it all, but, one should not cover their eyes either
      Or block their ears to not hear
      You know what I mean?

      The Galileo? I am going to have to look into that?!

      It's odd in that there is this entire history of empires failing and yet, I suppose like citizens of those that fell before, the inevitable appears impossible until one is in the death throes of that failing system

      What is very interesting, and this info appears in the newest post, the pipeline is already halfway there- it seemed all China and Russia had to do was sort out who was paying for constructing the detour out of Uighur territory. This pipeline has been being built for years now...

      It's a definite extra burden for Russia on some counts, but, on others it's a definite benefit

    4. Oh, Thank you Penny,

      My ego is tickled, though it was not so much of foresight but the fact that at school I loved to draw maps and being attentive at the hours of history (right, I was doing a bit of extra home work).
      But now I remember that in discussion with my friend (around the turn of the century - how time passes!) I uttered that memorable phrase: Russia has her hands on the gas tap! I was actually trying to remind them of the Urengoy–Pomary–Uzhgorod pipeline (also known as the West-Siberian Pipeline, or Trans-Siberian Pipeline). The construction started in 1978 and was considered a threat to the balance of energy trade in Europe, and for that reason was strongly opposed by the Reagan administration. The efforts by the U.S. pressure to prevent the construction of the pipeline, and its export embargo of supplies for the pipeline (1980–1984) constituted one of the most severe transatlantic crises of the Cold War (the crisis of the cruise missiles and Pershing II balistic missiles). Reagan promised to flood Europe with LNG, but Mrs Thacher did not budge.