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Russia-China Gas Deal, May 2014

For discussions of events and conditions not necessarily related to Peak Oil.

Re: Russia-China Gas Deal, May 2014

Unread postby Sixstrings » Wed 28 May 2014, 02:31:32

Posting from my phone so i cant quote or write rants. I'll just say to agent: you give the best pro russia spin i have seen anywhere.

I know youre genuine, youre not trying to bs, but youre still wrong. Youre just a good advocate and you make a great case.

US and Nato have not been trying to "destroy" Russia as a power. Agent -- france just sold them multibillion dollar warships. German trade is massive, and brits and germans both sell military gear to Russia.

Anyhow nobody is about making Russia weak -- the half century + hope is that Russia becomes like us. Democracy. Western. Human rights. Modern. Its what peter the great wanted, and its still a good idea now in 2014.

Chinese are culturally alien to us, so it feels okay if they stay totalitarian. Nobody cares so much. But Russia is european -- they're better than this, or should be. Anyway, they WILL westernize, and democratize, eventually. It'll be the Russian people that force it. They dont really like how things are, anymore than you or I would.

(You sound convincing agent, but youre wrong and dont really understand. I think diss and radon both know the historical tensions with China are there for very good reasons.

USSR was always careful about China.

Putin will be, too. For one thing russians are xenophobic, they dont want to be awash in Chinese, chinese owning these new pipelines, china buying their farmland, it never ends.

If they dont have the West as a hedge then they wont be able to saynno to china sometimes, as Australia is able to.

So agent, watch for me to be right again -- if putin makes big deals with china, you'll suddenly see him making nice with the west.)
Last edited by Sixstrings on Wed 28 May 2014, 03:14:13, edited 1 time in total.
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Re: Russia-China Gas Deal, May 2014

Unread postby Ulenspiegel » Wed 28 May 2014, 03:12:04

ROCKMAN wrote:"Russia is dependent on Europe for goods to keep its population contented." Which also means the EU depends a lot on revenue from sales to Russia. Especially Germany: saw a report that claimed 4,000 German companies did business in Russia. It will be interest to see if Russia and some EU countries begin trading oil in non-US denominated prices as the Chinese intend to do. Given the relative weakness in the ruble these days probably not in Russia's best interest now.


Ok, the Russian market represents a meager 3% share of the German exports. Russia is on rank eleven of the export list behind countries like Austria and Switzerland (each with 8 million citizens). :-)

The exports to Russia in Q1 2014 were around 15% lower than in Q1 2013 (and 2013 already 9% lower than 2012), the overall German exports increased by 3 percent yoy, the only conclusion is that Russia is quite unimportant in respect to German exports. :-)

The Russian market is only relatively important for the export of machinery (it hold ranks four or five instead of eleven) and the affected companies run a quite good PR, that is all. The real substance is quite sobering - for Russia.
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Re: Russia-China Gas Deal, May 2014

Unread postby Ulenspiegel » Wed 28 May 2014, 03:54:59

addendum

A very good series of articles covering the interesting situation of Russian NG export via Ukraine is found here:

http://www.eurotrib.com/story/2009/1/13/73426/3180

The author wrote most of the stuff around 8 years ago, his take was then very solid and only need to be recycled. Most aspects are very old and his description of Russian options is entertaining.

His articles are a nice contrsat to the staregic hyperventilation we see on thsi board too. :-)
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Re: Russia-China Gas Deal, May 2014

Unread postby radon1 » Wed 28 May 2014, 05:14:39

Ulenspiegel wrote: the only conclusion is that Russia is quite unimportant in respect to German exports. :-)



That's a question of a glass half empty or half full. The Netherlands appear to be the largest Germany's trading partner in terms of turnover (or may be slighlty behind France). Looks like Germany and the Netherlands could easily trade with each other and forget about the rest of the world.

China's share in Germany's exports is double Russia's, but China's population is ten times Russia's.

Russia runs a surplus in trade with Germany, by the way. And exports to Russia have potential for growth, presumably, while this potential in the saturated markets is limited. If current exports to Russia are lost, then this potential is also lost.

Machinery (and vehicles) are by far the largest export sector in Germany, and it gives the country the competitive specialisation edge (along with chemicals) which makes it special. Like fashion products for Italy or watches for Switzerland. If lost or reduced, the country will become just one of many, competing with Vietnam over sales of wooden souveniers. May be you are able to find new markets for the expansion of this sector, as the exports appear to be growing - that's nice, and good luck with that. But the fact that, according to you, the industry bother to run a powerful "pro-Russia" PR campaign, says something.

From Russia's perspective, where it gets it imports from is not a key priority. If unable to buy something from Germany or EU, it can buy it from Japan, Korea, China, or even US or Brazil. Note that we, as the world, are at an advanced stage of the malthusian cycle, at which the "landlords", rentiers holding the best marginal natural resources hold the commanding position and tend to become relatively richer, while the "artisans", producers of manufactured goods tend to lose their bargaining power. It has been like this a number of times throughout the history.

Russia's key priority is security. The fact that the Russian leadership appeals to economic ties should not shade it. If the economic arguments fail, then at some point we all (including Germany) may just find ourselves with tactical nukes next door to us. Whom is it going to benefit, except egos of a handful of fool-spectre-dominating grand-chessborders.
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Re: Russia-China Gas Deal, May 2014

Unread postby Ulenspiegel » Wed 28 May 2014, 06:16:23

The basic assumption was, that the reduction of German exports to Russia would really damage the German economy, that is wrong.

Growth of German exports happens even without Russia, that is the obvious conclusion of the hard data of 2011-2013.

That some of the German products could be substituted with product from other sources is clear, but does not change the picture, sorry. The volume of German exports to Russia is simply too small to have an huge impact.

Whether Russia has a positive trade balance with Germany is also not interesting as Germany has still a huge positive overall balance. Even with complete loss of exports to Russia it would be huge.

As German I have lived most of my live with tactical nukes next to me. :-)

The basic point is, that Russia's options in a economic war are much more limited because a reduction of NG exports to central Europe are not easy and would be the economic equivalent of a HIC, in which European countries have some ugly options to strike back. You have only to check how Russia exports most of its oil.

OTOH an more unproblematic economic LIC is for Russia not possible, here the western countries are economically much stronger and can, in addition, fight in a very asmmetric way using the obvious Russian weaknesses.

At the moment one get the impression that Putin is quite good in some secret service operations, but has surrounded himself only with KGB guys who simply ignored the basic economic problems which are biting Russia now: Russia already is in danger of sliding into a recession without real actions by her oponents. Something went IMHO wrong.
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Re: Russia-China Gas Deal, May 2014

Unread postby radon1 » Wed 28 May 2014, 06:56:47

Ulenspiegel wrote:As German I have lived most of my live with tactical nukes next to me. :-)


No problem. Let's do it again then.

There are all sorts of ways to enjoy life. Some people stick the heads over the tube edge watching approaching trains in the underground, despite having been hit and sustained a head injury while practicing their hobby on previous occasions.

The basic point is, that Russia's options in a economic war are much more limited because a reduction of NG exports to central Europe are not easy and would be the economic equivalent of a HIC, in which European countries have some ugly options to strike back.


Don't think Russia (Putin+) are either going to wage an economic war, or are in position to do so. They are simply reacting. Just diversifying their trade.

And how are you going to wage an economic war on Russia? Ban imports of Mercedes? Or deny use of Windows 8?

Russia has already been in recession for quite a while (despite official numbers), talk of "sanctions" helps Putin+ as it provides a bit of excuse for them in the face of the general population.
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Re: Russia-China Gas Deal, May 2014

Unread postby AgentR11 » Wed 28 May 2014, 07:57:25

Sixstrings wrote:Anyhow nobody is about making Russia weak


Indeed they aren't... because they failed to take Sevastopol and the Crimea from Russia.

But Russia is european -- they're better than this, or should be.


You mean, more obedient to the stated desires of the West. Russia's always danced with Europe and pulled back when they got too close. The Siege of Leningrad taught them what Europeans are like. They have good reason to desire a strong defense against European encroachment.

Anyway, they WILL westernize, and democratize, eventually. It'll be the Russian people that force it.


Don't recall saying they wouldn't. Its irrelevant to me. What they will not do, is ever relinquish the Crimea, it is worth trillions of dollars, it is worth the blood of millions. The West forgot that, because its not really all that valuable to us, but, we tried to take it anyway; and it functioned as price discovery. What we learned is that we do not have the capability of applying a price that exceeds even a fraction of the value of the Crimea.

Sometimes you learn that the $50 trinket you think is cute is worth $100k to the guy across the aisle.

Putin will be, too. For one thing russians are xenophobic, they dont want to be awash in Chinese, chinese owning these new pipelines, china buying their farmland, it never ends.


I don't think you quite realize what its like to have a population density as low as Russia. There isn't a lack of farmland in Russia. There's a lack of warm bodies that want to do anything with it; and an even greater lack of warm bodies that want to pay someone else to do something with it. You know what the Chinese are? They are warm bodies that want to pay someone else to do something useful with that farmland/oil/minerals.

The idea of a flood of Han surging into Siberia.... Its beyond crazy.

If they dont have the West as a hedge then they wont be able to saynno to china sometimes, as Australia is able to


We did not try to exclude Australia from a port and assets critical to its survival. We did do such a thing to Russia, and almost succeeded. I'd say our trustworthiness from their point of view is slightly less than you might have for a sociopathic kleptomaniac.

if putin makes big deals with china, you'll suddenly see him making nice with the west.)


You write that as if I'm suggesting he wouldn't. Of course he will. Putin is NOT about pride or nationalism. Putin is about economics; and he's already taken what he required for Russia, he's moved the ball so we're now obsessed with a couple run down regions in Ukraine; and so now Putin can play all peacemaker/diplomat and the clock of integration of the Crimea keeps right on ticking.

Its a friggin shell game, and you and those like you in the Western media have bought in totally; even though the ball is in a pocket under the table.
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Re: Russia-China Gas Deal, May 2014

Unread postby AgentR11 » Wed 28 May 2014, 08:17:23

Ulenspiegel wrote:Russia already is in danger of sliding into a recession without real actions by her opponents. Something went IMHO wrong.


Something went wrong quite a while back really; when the state divested, it was careless and allowed to much financial power to flow into the hands of too few people; then the rule of law for the markets became more a rule of the boss. That makes the market in Russia quite risky, risky enough that a guy with a $50 mil portfolio probably wouldn't be willing to place any significant orders, eg, the retail investor simply has no place in Russia; and the bosses have already stabilized their wealth.

So.. for those in control of the market, growth is no longer particularly useful or interesting, and those to whom growth would be greatly desired are basically excluded by risk from that market.

I don't know that Putin can fix this, or even if he cares about it. Russia in recession is still a better fed, better drunk existence than it was during the USSR days, so for now, I'd expect the Russian people will generally play along because enough of them remember not being able to buy bread. Putin's already attained a set of successes that will place him alongside the great Czar's of history, so he could easily settle back to lock in these gains for the remainder of the age of technological civilization.
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Re: Russia-China Gas Deal, May 2014

Unread postby Ulenspiegel » Wed 28 May 2014, 09:22:19

radon1 wrote:s.

The basic point is, that Russia's options in a economic war are much more limited because a reduction of NG exports to central Europe are not easy and would be the economic equivalent of a HIC, in which European countries have some ugly options to strike back.


Don't think Russia (Putin+) are either going to wage an economic war, or are in position to do so. They are simply reacting. Just diversifying their trade.

And how are you going to wage an economic war on Russia? Ban imports of Mercedes? Or deny use of Windows 8?

Russia has already been in recession for quite a while (despite official numbers), talk of "sanctions" helps Putin+ as it provides a bit of excuse for them in the face of the general population.


Russia depends on foreign investment and capital, that get lost in an insecure invironment, here simply downgrading Russian banks etc. is sufficient. The transformation of the Russian industry, a cornerstone of a post oil economy still has to happen, here western imput is essential and can be blocked, most of this without any propaganda benefit for Putin. And you can add a higher brain drain due the insecure situation.

Russia faces already a stagnating oil production and all attemps to broaden the industrial base, i.e. reduction of of oil/NG exports, were a complete failure. Russia depends under Putin even more on oil exports than before. And kep in mind, the relative godd situation (compared to 2000) only happens because Russia benefits from three times higher crude prices compared to 2000. What is the chance to compensate for declining oil production and higher financial demand with higher prices in future?
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Re: Russia-China Gas Deal, May 2014

Unread postby radon1 » Wed 28 May 2014, 12:15:09

Ulenspiegel wrote:The transformation of the Russian industry, a cornerstone of a post oil economy still has to happen, here western imput is essential


This kind of transformation is never going to happen anyway. How do you imagine this, the Russian industry transforms and starts producing Mercedes and Windows 8? What will the German industry be doing then?

All the Russian banks can be downgraded to junk, but profitable projects will get all the finance and the investments that they need. Why? Because they are profitable.

In any event, interesting, how the 55bln USD Chinese deal is going to be implemented. Are they going to do without "the western input", or the western firms will be queuing to get in? May be this is one of the reasons why they are now running various PR campaigns.
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Re: Russia-China Gas Deal, May 2014

Unread postby dissident » Wed 28 May 2014, 19:13:09

The $55 billion in spending on the pipeline is yet more stimulus to the Russian economy. It's not merely some expense. NATO member states know this aspect of GDP dynamics very well and that is why they run up deficits and debts to keep spending.

As for Russian recession, people need to use the same metrics when talking about economics subjects. Some touch feely subjectivism doesn't cut it. Official Russian GDP growth numbers have been systematically lowballed for at least 16 years if not longer. For some reason GKS thinks that transition to capitalist market pricing in all parts of the economy from an initial state based on communist vouchers and edict allocations followed by a collapse to barter during the 1990s is all one big massive inflation surge. Of course, this is utter BS. You cannot have the money supply growing by 50% per year for 12 years in a row and have the CPI hover around 10-13%. If the inflation was real and not mostly structural adjustment to different price equilibrium as part of a different economy, then the inflation would be higher (and possibly very much higher) than 50% (due to multiplier effects from injection of excess liquidity, a la hyperinflation). So Russia's GDP is seriously underestimated in the official statistics because they have been using an overly high GDP deflator based on a misunderstanding of what constitutes inflation.

This is the opposite of the USA where the GDP deflator is finagled to be low via BS like hedonics adjustments. So that the GDP is higher than it actually is (see Shadowstats for more).
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Re: Russia-China Gas Deal, May 2014

Unread postby Sixstrings » Wed 28 May 2014, 22:43:28

radon1 wrote:This kind of transformation is never going to happen anyway. How do you imagine this, the Russian industry transforms and starts producing Mercedes and Windows 8? What will the German industry be doing then?


The Germans were smart and *protected* their manufacturing.

US offshored all of its manufacturing -- Mexico, China, Honduras, Nicaragua, everywhere. Ostensibly, these factories were replaced by things like "finance" and "hedge funds" and "real estate bubbles" and "student loan bubbles."

So Russia's got oil, and the US has agriculture and "finance." And -- the US *develops* products (think Apple) that are then made offshore. It's all well and good for a couple thousand engineers, but doesn't employ masses of people.

Manufacturing will go to where there's cheap labor, or bargain priced high skilled labor. I saw a show on the science channel about a big Russian truck factory. I don't know what the name of those trucks were, but, they seemed quality to me. Looked like a good operation there. Good workers.

If Russians would stop being xenophobic and fighting Europe, and just let Germany in and all the others, THEN Russia could be a big manufacturer and really diversify from just energy. Look at Poland -- they have a lot of manufacturing, shipping to the EU.

In any event, interesting, how the 55bln USD Chinese deal is going to be implemented. Are they going to do without "the western input", or the western firms will be queuing to get in? May be this is one of the reasons why they are now running various PR campaigns.


Well somebody's got to pay for it. How is it that everything in Russia just happens to cost fifty billion dollars? That's odd. Those Olympics -- fifty billion dollars. Ukraine bailout -- fifty billion dollars. Crimea -- that'll wind up being fifty billion. Now the pipelines to China -- fifty billion.

Anyhow, are the Chinese really going to invest fifty billion? My guess would be that Western financing is let in, makes sense all around, for the Chinese too. I don't think China has fifty billion laying around. They're busy with moon rovers and building ghost cities, air force bases on Filipino coral reefs, and for good measure they made a cool replica of Paris, France (big city, nobody lives there, it's one of the ghost cities).

Image
Image

(that's the Chinese Eiffel Tower there, rusting, behind that shack. Apparently the people living in the shack can't afford to live in Chinese Paris, and apparently nobody else can afford to live in Chinese Paris either, and so it's just another ghost city -- shoddily built, half-built, and falling apart.)
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Re: Russia-China Gas Deal, May 2014

Unread postby Sixstrings » Wed 28 May 2014, 23:32:00

AgentR11 wrote:You mean, more obedient to the stated desires of the West. Russia's always danced with Europe and pulled back when they got too close. The Siege of Leningrad taught them what Europeans are like. They have good reason to desire a strong defense against European encroachment.


You know what, I'm tired of hearing that line, about how *awful* those Westerners were that came in the 90s. And how horrible the Russian liberals were.

If there was a problem, it was with Russia. Because Poles sure figured it out, and got it right. And the rest of east Europe too, pretty much. They've all got equal or higher standards of living to Russia (except those places Russia has held back, like Ukraine, like Moldova, like Belarus).

Russians aren't Martians. They're European. Look at how good Radon's English is -- I challenge you to find a French or German that even knows what "frickin'" and "rat's ass" mean, much less when to use it, and use it correctly, and enthusiastically.

Russians don't want to admit it, but they're just like all the other East euros and they gravitate to things American. And then they pull away, as you say, but the bottom line Agent is exactly what that Moscow Times article said: they just need to get rule of law, get rid of the corruption, and move beyond Putin and one man rule. Rule of LAW, not a man, rule of a SYSTEM, no one man, or group of oligarchs / kelptocrats.

Russians are gut-level more like us than our Euro allies. So why do they resist it. Who benefits from this fictitious cultural divide, other than Putin and his cronies?

It's just my impression, but from my experience east europeans are a lot more like us than west europeans. Russia dropped the ball. They have all that energy -- oil, gas -- and natural resources. They could have had manufacturing too, and innovation, but just like the Moscow Times says -- that requires constitutional rule of law and FREEDOM. Innovation just doesn't happen under oppression. People have to feel free, free to think, free to try new things without government bringing the hammer down or government saying the Church doesn't approve.

Look how stifled the middle east is (mostly) -- it's because of all the religious oppression. And now Putin has been doing that in Russia, with Orthodox. It's not good. What would Russia rather be, a free thinking and innovative Silicon Valley, or clamped-down religious theocracy. They don't even have any liberals, Agent. That's a problem. Liberals innovate. They think big, they're dreamers. And Russia squashed them all.

Russia did some things wrong in the 90s, and it is Russia's fault, and when they have another go at real democracy again -- it's up to them to finally, just like Ukraine needs to do, GET THAT CORRUPTION out of there. And have freedom. WITH rule of law, and good law enforcement and clean up all the mafias and crime.

The West would have given them its manufacturing jobs, on a silver plate, if only they did this. And they'd have all that energy too. It's their mistake, it benefits Putin, but does Russia a great disservice. There's no future in hanging out with Syria and Iran and Belarus, and China.

Even the Chinese look West! Despite whatever else they may say, they want iPhones, they want Euro luxury goods, and they want to invest their money in the US. As do many Russians. So why not just bring back home to Russia, these things they like about the US. :?:

Its irrelevant to me.


It's relevant to me. People matter more than oil does. Progress of mankind matters more, too. There's no progress with dictatorships, communist parties, and religious theocracies and ayatollahs.

What they will not do, is ever relinquish the Crimea, it is worth trillions of dollars, it is worth the blood of millions. The West forgot that, because its not really all that valuable to us, but, we tried to take it anyway; and it functioned as price discovery. What we learned is that we do not have the capability of applying a price that exceeds even a fraction of the value of the Crimea.


See, you really don't understand. The truth is that Merkel and Obama wanted nothing to do with Ukraine, other than to trade, but the EU didn't really want them. They drag their feet on this now days, taking new east euros in, the boat is full as it is.

A neocon US pres could have been aggressive, and Putin would have backed down, and never annexed Crimea. But that isn't what Obama did, Obama did the opposite.

I don't think you quite realize what its like to have a population density as low as Russia. There isn't a lack of farmland in Russia. There's a lack of warm bodies that want to do anything with it; and an even greater lack of warm bodies that want to pay someone else to do something with it. You know what the Chinese are? They are warm bodies that want to pay someone else to do something useful with that farmland/oil/minerals.


I really wonder what Russians are thinking of this Chinese thing. I'm tellin' ya Agent, they are xenophobic (it's not a slur, Japanese are good people but seriously xenophobic too, about immigration).

Yes they have a population problem. THAT would be sovled with FREEDOM so people have OPPORTUNITY and start HAVING KIDS. Putin haranguing them to have more kids won't do it, people have kids when there is hope and jobs and they aren't depressed and feel like growing a family.

Anyhow, I bet a dozen donuts there is some trepidation in Russia, about getting close to the Chinese. They're doing it just for spite and hedge for Putin to start doing whatever he wants to in east europe, but otherwise, I bet you they are leary of this. They've got small population density. That means they'd be overwhelmed by Chinese. Look at what China does elsewhere -- they tell Australia what to do and boss them around, they even *try* to tell us what to do.

Russians are leary of this. That's the history there. They've always been cautious about China.

I'd say our trustworthiness from their point of view is slightly less than you might have for a sociopathic kleptomaniac.


You're getting deeper than what this actually is: Putin finally failed to keep Ukraine chained up, and they broke loose with this last revolution, and Putin saw Obama and Merkel are weak, and so he tested step by step and went ahead and did the most he thought he could get away with.

It's that simple. If Bush had let them take Georgia, they would have. Obama let him take Crimea. Obama isn't even interested -- US is focused on China, and Russia is a distraction. (I happen to disagree, we should have been paying attention all along)

Its a friggin shell game, and you and those like you in the Western media have bought in totally; even though the ball is in a pocket under the table.


Yes, geopolitics and political intrigue are a game. Machievelli wrote a book about it many centuries ago. BTW, what Ron Paul types don't understand is that this is realpolitik -- there is no option to just not play the game.

Obama isn't exactly the best we could have had out there quarterbacking.
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Re: Russia-China Gas Deal, May 2014

Unread postby ROCKMAN » Wed 28 May 2014, 23:39:32

"I don't think China has fifty billion laying around." Latest stats: Foreign Exchange Reserves in China increased to $3.95 TRILLION USD in March of 2014 from $3.82 TRILLION USD in December of 2013. Foreign Exchange Reserves in China reached an all time high in March, 2014. So they have $50 billion laying around. This is how the Chinese have been funding hundreds of $billions in refinery build outs and direct acquisition of reserves in the ground as they've done offshore Angola. The Chinese will probably have addition leverage in the pipeline deal by supplying (at a profit) materials and labor. Just as the Chinese have done with the oil field operations contract they won in Iraq. They move so much material and personnel around China built their own private airport in Iraq.

In addition to their huge trade surplus the US sends China about $2.20 billion/yr as interest on our debt. Their trade imbalance with the US increased from $7.7 billion last March to $18 billion in April. Globally China's trade surplus with the rest of the world is difficult to judge since the source is China itself but appears to be between $150 billion/yr to $300 billion/year. They might borrow money to finance deals because rates are so low. But they don't have to. They've got over $3 trillion laying around with a few hundred $billion more coming in every year.

I think they can afford the $50 billion pipeline.
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Re: Russia-China Gas Deal, May 2014

Unread postby Sixstrings » Thu 29 May 2014, 00:15:53

radon1 wrote:Russia's key priority is security.


PUTIN's priority is HIS security, at home and abroad.

He wants to do whatever he wants to do at home in Russia.
He wants to do whatever he wants to do in East Europe, and around the world.

If the economic arguments fail, then at some point we all (including Germany) may just find ourselves with tactical nukes next door to us. Whom is it going to benefit, except egos of a handful of fool-spectre-dominating grand-chessborders.


The West has some valid red line concerns here, Radon. Putin cannot be free to just do whatever the hell he wants to in the world, I'm sorry. Not even the US does that.

He cannot annex too many places.
He cannot just sell weapons to whoever just to make the buck, "with no strings attached."
He cannot be irresponsible about nuclear proliferation, with Iran.

You probably don't have experience of family members going off to fight in "global cop" wars, but that's why it matters to an American. US is leading a lot of allies -- neither Israel nor the Saudis are okay with a nuclear Iran.

Putin has the luxury to just game for Russia, but the US is looking out for a lot of people here. It falls on the US to be thinking about things like what happens if the whole middle east has nukes. Putin doesn't have to worry about any of that.

Putin is just making it very difficult to keep the world at peace. He's made a "no strings attached" arms deal to the military leader in Egypt. Do you know what that means, Radon? It means Russians don't give a sh*t if the Egyptian military just mows people down with those Russian-made weapons.

Putin doesn't seem to care about the nerve gas going off in Syria.

If we really do have a cold war, then the US is going to get hardcore too and start backing dictators, or whatever we have to do, to compete with Russia. So you're right, that helps nobody -- except Putin.
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Re: Russia-China Gas Deal, May 2014

Unread postby Sixstrings » Thu 29 May 2014, 00:21:47

ROCKMAN wrote:"I don't think China has fifty billion laying around." Latest stats: Foreign Exchange Reserves in China increased to $3.95 TRILLION USD in March of 2014 from $3.82 TRILLION USD in December of 2013.

...

They might borrow money to finance deals because rates are so low. But they don't have to. They've got over $3 trillion laying around with a few hundred $billion more coming in every year.


I would be genuinely surprised if China puts $50 billion into Russia. China likes to park its money in the US, or, when it invests elsewhere then it wants *control*. They're probably as leary of Russians as Russians are of them.

We'll see, I bet I turn out right, I bet China won't foot this whole bill and it'll be Western money. Ain't that a laugh. :lol:
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Re: Russia-China Gas Deal, May 2014

Unread postby Sixstrings » Thu 29 May 2014, 00:44:35

Merrill Lynch says, "time to find the $50 billion:"

Merrill Lynch Says Russia's Gas Deal With China Was A Political Win But A Business Loss

Time To Find $55 billion

What a team of analysts in Merrill Lynch’s Moscow office dislike is that with the celebrations out of the way it’s time to find the $55 billion needed to develop the gasfields and build the pipelines which will supply China.

Even with China providing a $25 billion prepayment to help meet the development cost of the Chayanda and Kovykta gasfields which will supply most Gazprom’s gas to China there will be a need to find another $30 billion from the company’s own sources, or from the Russian Government.

Stagnant Home Markets

“Aside from Ukraine jitters, demand for Gazprom’s gas is starting to stagnate in Europe and Russia,” Merrill Lynch said.

“European storage is full, while the price differential between spot and contractual gas is close to an all-time high.

“In the domestic and FSU (former Soviet Union) markets Gazprom’s sales are down 6% and 1.5% respectively, reflecting sluggish demand and pressure from independent producers.”

What the Merrill Lynch financial analysis answer is the question of which side needed the gas deal most, Russia or China, with the clear answer being that Russia was an eager seller and China a relaxed buyer which means it has almost certainly done best on price.
http://www.forbes.com/sites/timtreadgold/2014/05/28/merrill-lynch-says-russias-gas-deal-with-china-was-a-political-win-but-a-business-loss/


Okay there's the answer. China is putting up $25 billion. But Gazprom, or the Russian government, has to come up with $30 billion. Or more -- we all know about Russia's cost overruns to pay off the kleptocrats like with the olympics, so does that apply to these pipelines too? Does that $30 billion from the Russian side swell to $50 billion or more?

But anyhow, either Gazprom or the Russian government has to pay the rest, and China is fronting $25 billion in "prepayment." That's prepayment for gas. So Russia won't see any profit until how long, then? After China's used up a $25 billion prepaid gas card?

Can Russia afford to put all this money out? After the olympics, after crimea, and also its military buildup.

One thing Gazprom / Russia certainly cannot do is have more trade problems with Europe OR lose its high-paying top dollar German customers or lose anymore customers.

I think that calls an end to cold war, they can't lose any existing customers and find $30-$50 billion for expansion all at once. As Merrill Lynch has pointed out, this is not good business sense.

I wonder what the latest is about natgas imports from the US. :?: That's going to cost Gazprom business. Money that Gazprom needed to expand to China. And even if Putin backtracks now, the damage is already done, and Euros are rattled enough to where they really have no choice but to diversify their gas supply. It's a national security issue.

What an odd position Russia is in. It's really a business selling gas. But yet the Putin government is going all nationalist and expansionist, but that that's screwing with their business -- selling the darn gas, and making money, and they aren't communist you know so it actually matters what Gazprom's stock is at and whether hundreds of billions in capital are flying out of Russia because of geopolitical instability their own government has caused.
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Re: Russia-China Gas Deal, May 2014

Unread postby Sixstrings » Thu 29 May 2014, 01:56:35

Ulenspiegel wrote:The basic point is, that Russia's options in a economic war are much more limited because a reduction of NG exports to central Europe are not easy and would be the economic equivalent of a HIC, in which European countries have some ugly options to strike back. You have only to check how Russia exports most of its oil.


Welcome to the forum, I certainly agree with everything you say. I'm glad you get the obvious point there, that Gazprom actually needs its German customers more than Germans need Gazprom.

They actually *can't* ever shut off the taps. That's shutting off their national revenue.

But I'm curious what you think, what would happen if they did? Another German poster said Germany has 6 months of strategic reserve?

Is there any serious talk about importing gas? I don't care either way, I'm not in the gas business, but I really think Europe has to diversify its gas at this point because even just being threatened like that, it's a national security issue, so some gas needs to come in from somewhere else besides Russia -- whatever it costs.

From everything I've read, Germany's been more than fair with Russia. Merkel has been talking to Putin on the phone for years now, in Russian. Bush wanted to rush Ukraine into NATO after the Georgia thing. Merkel said no. What more could Russia want from Germany.

Although I think this is all going to settle down at this point, because Gazprom can't expand into China and lose Euro business too, that's just a business reality there. BUT if it heats up again.. and Germany is leading Europe.. then just my opinion, Germany needs to step up to a leadership role and safeguard the EU. Which Germany is not used to doing post WWII, being tough, but that's what may be required.

At the moment one get the impression that Putin is quite good in some secret service operations, but has surrounded himself only with KGB guys who simply ignored the basic economic problems which are biting Russia now: Russia already is in danger of sliding into a recession without real actions by her oponents.


Yep, you're 100% right.
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Re: Russia-China Gas Deal, May 2014

Unread postby Sixstrings » Thu 29 May 2014, 02:09:32

Ulenspiegel wrote:Russia depends on foreign investment and capital, that get lost in an insecure invironment


Yep. I don't know why other members of this forum don't get this, the "pro Russia" side, that it actually matters that they had over $200 billion in capital flight during this Ukraine mess.

Causing instability has harsh market consequences, in a globalized world. The Chinese understand this importance of stability and they never go too far, so I don't know what Putin and their nationalists have been thinking.

It means that a foreign business just packs up and leaves, and takes its money with it. And Russians put even more money into the West, for safety. It's capital flight, it's very serious, and they aren't communist so they can't just rock the boat so hard like that.

Foreign business is now rethinking / has canceled investment in Russia. None of this is good.

Russians may think they don't need any of it, but they are wrong, it really does matter what their stock market is doing and what the ruble is worth etc. etc. etc.
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Re: Russia-China Gas Deal, May 2014

Unread postby radon1 » Thu 29 May 2014, 03:20:48

dissident wrote: So Russia's GDP is seriously underestimated in the official statistics because they have been using an overly high GDP deflator based on a misunderstanding of what constitutes inflation.


It is. It is underestimated by some 25-30%.

The Ministry of Labour do not even know what 2-3 dozen million people of working age are doing. They are off the Ministry's books. Presumably, they are working, but their production is off the official numbers.

Sixstrings wrote:PUTIN's priority is HIS security, at home and abroad.
Absolutely. "Russia" here means Putin+. But on this occasion, Putin+ security mostly coincides with Russia's general population security; if in doubt - check Ukraine now or Russia in 90s.

He wants to do whatever he wants to do at home in Russia.
He cannot afford it. Which is a sign that Russia has strong features of a real democracy, at the moment.

My guess would be that Western financing is let in...
The specific point was more about machinery exports than about finance. If you are a sales person of a manufacturer, and have a $55 billion project in sight - and, according to Putin, this is the largest construction project in the world currently in place (even before the inevitable overruns) - what is your thought and action then. If you win a contract (or contracts) there, then for the same amount of effort you get way more gain to your realized sales, top line and bottom line than elsewhere. And on this scale, the CEOs are essentially sales persons. If you happen to be in Germany, then you'd presumably be interested in pleasing Putin+ and getting in, irrespective of whether Russia is significant or insignificant for Germany in terms of annual exports.

The same with finance. The Western finance will duly arrive. Why? Because there is no where else to invest. The world is awash with money but lacks projects and people willing to implement them. It is not clear however, whether the western finance will be needed at all. Perhaps, it will, but China has lots of reserves, and Russia has lots of reserves.
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