Today, Vladimir Putin travels to Shanghai to finalize a huge gas deal with China. The agreement, ten years in the making, guarantees the sale of 38 billion cubic meters of natural gas per year to China for the next 30 years.
Russia most likely will sell the gas at $350-380 per 1,000 cubic meters, a slight discount from the price Gazprom quoted last January.
‘Of course Russia wants to sell gas and resources at the highest possible prices. But because of the sanctions from European partners, we need to find a partner that can buy our gas long-term, which is why at the moment China looks very attractive to us,’ Aleksandr Prosviryakov, a partner at Lakeshore International, a Moscow-based asset management firm, told RT at a Confederation of Asia Pacific Chambers of Commerce and Industry (CACCI) in Moscow ahead of the big meeting on Tuesday.
A 2009 gas deal between Russia and China to supply 30 billion cubic meters of gas to China’s Xinjiang province was never implemented when construction on a pipeline was halted to shift resources to completing the Power of Siberia Pipeline instead. That pipeline will supply gas to China’s populous northern region with natural gas from the deal to be signed in Shanghai. Should both piplines be completed, Russia will be shipping 68 billion cubic meters of gas to China per year.
Perhaps more concerning to Washington is an April 24 meeting of Russian government officials to discuss “De-Dollarization” of Russia’s export operations. Recently, Russia flirted with the idea of doing more business in Yuan. A massive new gas deal done in rubles or yuan rather than dollars could massively impact the global financial status quo.
While Europe is furiously scrambling to find alternative sources of energy should Gazprom pull the plug on natgas exports to Germany and Europe (the imminent surge in Ukraine gas prices by 40% is probably the best indication of what the outcome would be), Russia is preparing the announcement of the ‘Holy Grail’ energy deal with none other than China, a move which would send geopolitical shockwaves around the world and bind the two nations in a commodity-backed axis. One which, as some especially on these pages, have suggested would lay the groundwork for a new joint, commodity-backed reserve currency that bypasses the dollar, something which Russia implied moments ago when its finance minister Siluanov said that Russia may refrain from foreign borrowing this year. Translated: bypass western purchases of Russian debt, funded by Chinese purchases of US Treasurys, and go straight to the source.
‘This deal with Gazprom and cooperation with Russia shows that China is expanding, becoming bigger and bigger, and that this part of the world is dominated by China, India, and Russia, the US role is shrinking,’ said Aleksandr Prosviryakov.
This is exactly what the US has been trying to prevent. Yet, it appears that the US plan to contain Russia by expanding NATO into Ukraine and by imposing sanctions may have backfired. Instead of isolating Russia, the US has provided one more reason for Putin to look east to China. If Brazil, India and South Africa — the remaining members of BRICS — join up for De Dollarization, the future of American Empire will be different than what the neocons expect.
As always, Off Topic is welcome and lurkers are encouraged to join the chat. See you in the comments.
Update: Pepe Escobar writes about the Russia/China gas deal and the challenge to the dollar.
Public domain photo by LosAngelesT on Wikimedia Commons.