Sunday - Sep 24, 2017

Putin pulls of a last minute coup on China gas deal.


China put the brakes on the gas deal with Russia

It looked like Russia’s President Vladimir Putin would be returning home empty-handed from his state visit to Shanghai, but it now appears that thanks to a combination of flexibility and determination, a face-saving multi-billion contract was signed, virtually as Putin’s aircraft was warming up on the runway.

As is  common practice when doing business with the Chinese the financial details are a “commercial secret”, exact details of how much the per cubic matter Chinese will be paying for the gas, but all indications are that it is much less than the Russians were hoping for, although most economic correspondents agree that Putin will be pleased at having succeeded in signing trading agreement with China, which, in the long-term, could be highly beneficial, with part of the deal involving the powers that be in Beijing making significant investments in Russia’s power and transport infrastructure.

With Russian gas not due to start flowing through the  “Power of Siberia” pipeline until 2018 at the earliest, little long-term effects will be felt, apart from a quick fix on Russian relations with the West, which have deteriorated rapidly over the events taking place in the Ukraine, reportedly President Putin was reportedly anxious to put on a show that it was business as usual with the rest of the world and probably less important with the Russian people.

Gazprom  have been negotiating for a long time on a  $456 billion deal phased over 30 years to sell natural gas to the Chinese, and were reportedly very much on the verge of signing with Russia’s deputy energy minister Anatoly Yanovsky being  courted in the Russian press stating the deal was “98 per cent ready”.

However the message coming out of Shanghai in the last few days was that the price may still be too high, with the Chinese are unhappy about the amount of money they are being asked to pay for imported gas, as the economy begins to show signs of stuttering a little, with  a number of European countries have been checking out your options to reduce rethinking levels of their dependence on Russian gas.

For that reason Putin and Gazprom were really anxious for the deal to go ahead with China, making for a powerful and positive indication  of Russia’s ability to reduce its reliance on gas exports Europe, by far and away the largest importer of Russian energy.

Apart from the intended grand finale of the gas deal signing, President Putin’s state visit has been marked with a lot of symbolism weighted to indicate the deepening relationship between the two superpowers, when even the Chinese describing it as being the most substantial in their history.

According to economic forecasters, after negotiations running for more than a decade, during which time China, have been developing their already considerable natural gas sources, the demand for piped gas from Gazprom is nowhere near as critical to their domestic energy demands as it once was.

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