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Russia-China Gas Deal, May 2014

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Re: Russia-China Gas Deal, May 2014

Unread postby AgentR11 » Thu 29 May 2014, 07:53:44

Sixstrings wrote: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.


You keep asserting unsubstantiated things about this 'pro-Russia' side.

Of course it matters; it is the price for taking the Crimea. No one expected it to be free. Heck, just the infrastructure to link it up to the Russian mainland will cost billions. What the "anti" folks don't get, is you don't realize how cheap that price is compared with the value of what has been acquired.

If you pay $50 for something worth $10, you got ripped off, and should feel some degree of disappointment. If you pay $50 for something worth $1000; you're still out that $50, but the feeling of elation should be substantial.

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.


Thinking was obvious. Their continued access to Sevastapol was about to be subject to NATO/EU approval. That is a fatal wound. If it cost a trillion, and 100,000 lives to prevent, then that's what it costs. It'd be like if China up and told us, act now, or lose Hawaii to Guam. Its not a loss we could afford to accept, whatever the price to prevent, is a price we would pay without hesitation. Our failure was in not understanding the value of Crimea/Sevastopol to Russia.

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.


Yes it does matter. But the choice for them was between some injury (recession/capital flight) and economic & political death (loss of Crimea). We forced them to choose between two things they need. They chose to discard the one they can survive without, in order to keep the one they could not survive without. How is this hard to understand. A high school student should be able to look at the map and see the obvious.
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Re: Russia-China Gas Deal, May 2014

Unread postby Quinny » Thu 29 May 2014, 14:25:07

Agent you're analysis is pretty accurate. Six seems to think that anyone who doesn't agree with his interpretation of international affairs is pro-russian. You are obviously not, just pro thinking.
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Re: Russia-China Gas Deal, May 2014

Unread postby AgentR11 » Thu 29 May 2014, 15:18:39

Sixstrings wrote:(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.)


Here's an actual article. You play so fast and lose with the assertions, hoping no one will think to closely about any of them.

http://www.euronews.com/2013/08/12/chin ... -catch-on/

Read it carefully. "The residential complex dubbed Tianducheng" What looks like an artificially placed city to mimic Paris in the photo, is basically a modestly large residential complex.. A few thousand units. In Chinese real estate terms, its a ghost town because its just barely finished.

http://en.wikipedia.org/wiki/Tianducheng

Its not a stand alone city. "Tianducheng is a gated community near Hangzhou, the capitol of China’s Zhejiang province." (from wiki)

Now, maybe it'll fail; Residential complexes sometimes do fail. Its a little early though, to say success or fail on this one.

So six, stop with the sound bites, and start thinking.
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Re: Russia-China Gas Deal, May 2014

Unread postby Sixstrings » Thu 29 May 2014, 17:37:56

AgentR11 wrote:So six, stop with the sound bites, and start thinking.


My point remains: Russia is running to China to get away from the West, while the Chinese are building mcmansions to look like they are in San Diego.

And Parisian flats. And an Eiffel tower. And Chinese love european and american things, and they love kentucky fried chicken and mcdonalds (studies show that Chinese believe the food is safer, which it is, since Chinese vendors often put plastic and God knows what in the food).

I just find it interesting. Russia's just going overboard with the anti-West thing, and they're a lot more like us than the darn Chinese are so what's up with that. The latest is that their legislature wanted to BAN all visa and matercards from Russia. Their rightwingers are like our tea party, Agent, they don't think things through.

Like, you can't just take away 30 million Russian's credit cards. :roll:

I just don't understand them. Not even the Chinese are really anti-Western. Really, the Iranian people aren't either -- they're just ruled by the ayatollah. But you get down to the man on the street and Iranians are more Western than Saudis.

"Anti-Western" is really just synonomous with "anti-democratic" and an authoritarian regime wants to keep its grip on the people -- whether that is Assad's Syria, or Iran, or Putin's Russia. When Putin tells them they're different from the West, he just doesn't want them drifting over that way and having a maidan protest like the Ukrainians did.

Anyhow.. what do you think about the nuts and bolts of this gas deal. China's doing a $25 billion "prepayment" for gas. That means Russia must find $30+ billion on its own. And even after it's all built, presumably there's no profit until the Chinese have got $25 billion worth of gas delivered (at discount rates).
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Re: Russia-China Gas Deal, May 2014

Unread postby Sixstrings » Thu 29 May 2014, 18:19:17

radon1 wrote:Presumably, they are working, but their production is off the official numbers.


They may not be working. US has the same problem in recent years -- millions have fallen "off the books." Not counted in unemployment figures anymore. They're classified as "discouraged workers." There's a "peak jobs" problem over here, and in Europe, and perhaps Russia as well.

For that reason, you guys may want to be careful about China there.. you can't afford to lose what manufacturing you have, or be swamped with cheap Chinese imports. It happened in the US -- if I go to the store and look at labels, clothes say "Nicaragua" or "Honduras" or "Mexico," and hard goods are all "China" or maybe "Mexico."

If Russians want to be nationalist, then do something nationalist that makes sense and keep your manufacturing base intact. Be nationalist in a *smart* way, just self-interested like Germany is, but not actually throwing up trade walls and jingoist rhetoric and trashing your rocket engine deals with Boeing and Lockheed and the US Air Force. Russia should want to manufacture things, and for people to rely on them and buy them.

Putin wants to expand Russian manufacturing exports, yet he trashed a whole sector here -- you guys had the rocket engine contracts for the whole US Air Force, and for NASA. Putin rocked the boat, outright threatened, outright shut down that business, so how was that smart?

(which I'm pleased with as an American, we need to make our darn crap again, especially *rockets* for crying out loud)

There are a lot of similarities between Russia and the US -- rule by billionaires and the top 1%, stagnant population (but we are open to immigrants and grow that way), and Russia is dependent on one sector -- energy -- while the US is now financial.

John McCain has called Russia "a gas station masquarading as a country."
But really, the US is just a big hedge fund. The masses of people in both places, Russia and US, don't get much of the pie from these ruling industries -- energy in Russia, and big finance in the US.

Absolutely. "Russia" here means Putin+.


Things aren't too bad in Russia, since you are at least free enough to be able to voice that opinion.

The concern about dictatorship is just how bad it can get -- which you know from Russia's communist history -- it really can get so bad that neighbors are spying on each other, to the point where nobody can feel safe to say anything bad about the Dear Leader.

Russia's a bit of a dictatorship, and hopefully for Russians it just never goes off further on that spectrum of oppression. Maybe there's a happy middle ground where you guys are pleased with it -- you give up some freedom and rights for security and strong effective leadership, maybe some minorities get slapped around and Pussy Riot gets whipped, but overall you're okay with it. That makes sense to me, I get that.

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.


From what I've read, China has only agreed to $25 billion gas prepayment, but Gazprom / Russia must come up with the rest.

It's a smart investment and should be done.

I'll admit about Putin -- he is able to implement big projects. China is a bit like that as well, though they have a more delegated system on down through the bureaucracy (that's how the ghost cities happened, regional governors have these growth targets they're expected to meet no matter what, and so they've done a lot of building that doesn't make sense).

China has talked about a bullet train across Alaska, down to California. That actually makes a lot of sense if someone -- like a Putin -- could actually get a big project like that done.

We're really bad about that in the US. Government over here can't get anything done, like that. Where we excel though is with private industry and SpaceX is a great example of that.

I'm drifting off topic -- but if we had to have a dictator, I'd vote for Elon Musk. There's a can-do guy.
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Re: Russia-China Gas Deal, May 2014

Unread postby AgentR11 » Thu 29 May 2014, 19:16:40

Sixstrings wrote:Russia's just going overboard with the anti-West thing, and they're a lot more like us than the darn Chinese are so what's up with that. The latest is that their legislature wanted to BAN all visa and matercards from Russia.


Well, I understand their motivation, their is a substantial effort in play right now for an internal payment card processing system; but its not finished. Takes a lot of time. Legislatures can be like that sometimes, wanting to jump all over something they desire, even though its not ready for prime time. In general 'anti-western' is just rhetoric; the sanctions in place right now are modest, and there's no push from the West to increase sanctions with regard to Crimea, and Russia has no real interest in Eastern Ukraine other than as a distraction to keep the Crimea; so, expect the rhetoric to stay hot and heavy, and the action to remain fairly trivial.

Anyhow.. what do you think about the nuts and bolts of this gas deal. China's doing a $25 billion "prepayment" for gas. That means Russia must find $30+ billion on its own. And even after it's all built, presumably there's no profit until the Chinese have got $25 billion worth of gas delivered (at discount rates).


Pretty good for all parties. China probably got a better deal on price than they otherwise would have; the infrastructure though, its pure win for all involved. So in the future, if the Europeans don't want to pay in a currency the Russians can spend, they can still get by because other markets will purchase their product in a currency they can spend. I'd say the ability to settle in ruble/renminbi is every bit as valuable as any price discount the Chinese may be receiving.

Its always better to have more customers. Capitalism 101.
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Re: Russia-China Gas Deal, May 2014

Unread postby ROCKMAN » Thu 29 May 2014, 19:17:42

China is spending their $3.5 TRILLION foreign currency stash. From Bloomberg Nov 2013: "First of all, China is on track for a big shift. Very soon, Chinese companies will be investing more money overseas than foreign companies bring to the mainland. In the first 10 months of the year, China pulled in $97 billion from overseas investors, up 5.8 percent. Meanwhile, outbound investment reached $69.5 billion, growing at a much more rapid 20 percent. “The trend for Chinese companies going abroad has just started,” said Zhang Yuliang, chairman of Greenland, in a recent interview with Bloomberg News."

And more recently from the American Enterprise Institute China invested in $85 billion in 2013 up from $10 billion in 2005. And much of those investments in third world countries with the obvious inherent risks. And the investment in the Russian pipeline will be over several years. And as I speculated a good but of that $50 billion will be sent back to China for steel and labor expenses.

If the deal falls apart (a definite possibility IMHO) I suspect it will happen for political and not finance problems.
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Re: Russia-China Gas Deal, May 2014

Unread postby dissident » Thu 29 May 2014, 21:30:16

radon1 wrote:
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.


No, this is not the issue. You are talking about the shadow economy. I am talking about the non-shadow economy which is systematically underestimated based on a false definition of inflation in Russia. To properly model inflation growth, they would need to create a model of pricing for every economic transaction after 1991 and use this is as a reference point. What used to cost 1 kopek in 1990 and costs 10,000 kopecks today does not imply an inflation of 1 million percent. The 1 kopek price in 1990 has to be replaced by 2000-5000 kopecks to reflect its meaningful price and not Gosplan voucher allocations. The structural adjustment transient is still there even after 23 years and will likely take another 20 years to disappear.

As for the current state of the economy. Growth is being stifled by a high interest rate policy of the Central Bank based on the false evaluation of true inflation and the fact that the monetarist lunatics are still running the asylum (regardless of Kudrin's departure, in fact that Kudrin was there until a couple of years ago says a lot). If only Putin was all powerful as he is being made out to be. He has to accommodate the Yeltsin legacy to this day.
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Re: Russia-China Gas Deal, May 2014

Unread postby dissident » Thu 29 May 2014, 21:32:31

Quinny wrote:Agent you're analysis is pretty accurate. Six seems to think that anyone who doesn't agree with his interpretation of international affairs is pro-russian. You are obviously not, just pro thinking.


Six$ has Russian derangement syndrome. A type of schizophrenia.
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Re: Russia-China Gas Deal, May 2014

Unread postby radon1 » Thu 29 May 2014, 23:33:19

Sixstrings wrote:The latest is that their legislature wanted to BAN all visa and matercards from Russia.


Again everything upside down.

No one banned anything. Visa and Mastercard suddenly themselves stopped operating their cards issued with a selection of Russian banks, specified in the Washington administration's order. This could have been a gross violation of terms and conditions, by the way. And an appalling situation for the individual card holders affected.

The Duma (Russia parliament) then introduced legislation prescribing for the card processing companies to register subsidiaries in Russia and set up local processing centers, to avoid situations exactly like this. Has nothing to do with a ban. Visa and Mastercard are now going to register their subsidiaries in Russia and continue operating unhindered. They just won't be able to stop their services locally on political orders from other countries.

Foreign banks, by the way, have always had to register a subsidiary in order to operate in Russia, despite their heavy lobbying in favor of operating via branches. Even in the darkest liberoid times their lobbying failed. Branches are difficult to be subjected to capital controls, and repatriation of funds from branches takes one computer mouse click. In such situation the entire Russia would be like one big Cyprus, leaving the depositors at the mercy of the banks' management and western politicians.

They may not be working.
Most of them do work, but do not register. This is indeed a shadow economy, as noted above in the thread.

Russia's a bit of a dictatorship
Russia runs centuries' old Mongolian type administration, which is dictatorial/autocratic/bureaucratic in nature, but Putin, personally, cannot afford to be an autocrat or dictator. In fact, the last Russian autocrat was Stalin and since then no one has been able to be the one.

ROCKMAN wrote:If the deal falls apart (a definite possibility IMHO) I suspect it will happen for political and not finance problems.


Putin has actually noted that eventually they were going to connect the Eastern pipeline system (Chinese directed) with the Western (European directed). So presumably he keeps in mind an opportunity to play Europe against China if need arise, in the same way that he is now trying to play China against Europe.
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Re: Russia-China Gas Deal, May 2014

Unread postby EdwinSm » Fri 30 May 2014, 06:38:09

Not related to the pipe line, but to the financial fall-out to the current political situation which is affecting Finland. It is sort-of PO related as it has to do with new cars:-

The crisis involving Ukraine and Russia has weakened the ruble and dampened the Russian appetite for imported cars. As a result the Kotka-Hamina port has seen a pile-up of new cars with no buyers in the formerly vehicle-hungry eastern neighbor.

The trade in new cars to Russia has decelerated considerably in the wake of the Ukraine-Russia political crisis and the resulting weakening of the ruble, says Kimmo Naski, harbor master of the Kotka-Hamina port in southeast Finland.

The slowdown in the cross-border vehicle trade has caused a backlog of new vehicles crowding the harbor parking area. The brake in demand has coincided with a constant influx of new cars into Finland from locations such as Germany and the Far East, the port chief said.

Usually some 100,000 vehicles bound for Russia pass through the Kotka-Hamina port annually – that figure has remained constant for 5 – 6 years, port authorities added.

The last time the parking area was as full of cars was before the financial downturn in 2008, they add. And just a few years ago, the area was almost empty as imported cars rapidly transited through Finland to new owners in Russia.

http://yle.fi/uutiset/political_crisis_stalls_car_sales_to_russia_pile-up_at_finnish_port/7269980
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Re: Russia-China Gas Deal, May 2014

Unread postby ROCKMAN » Fri 30 May 2014, 07:22:33

Edwin - Great update...thanks. I wonder how many other unintended side effects of the sanctions are being ignored by the big news media outlets?
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Re: Russia-China Gas Deal, May 2014

Unread postby Graeme » Thu 05 Jun 2014, 19:51:25

The US and Russia may be headed for a gas war in Asia

Asia seems bound for a natural gas shakeup pitting the US against Russia—which could benefit consumers, but also deal a potential hard blow to current and future producers, such as Australia and east Africa.
+

The trigger for the shakeup is a critical mass of US and Russian gas exports destined for Asia over the coming decade and beyond, much of it likely to be priced at a substantial discount to the liquefied natural gas (LNG) currently on sale in the region.
+

LNG sold in Japan last month for about $15 per 1,000 cubic feet, and in February, it went for more than $20. But in May, Russia committed to sell 38 billion cubic meters (bcm) of gas per year to China at half that February price—an estimated $10 per 1,000 cubic feet. When US LNG produced from the shale gas boom begins to reach Asia next year, Citi estimates that it will sell for about the same price–$10 to $12 per 1,000 cubic feet.
+

The US and Russian gas will compete with existing and planned LNG projects around the world toward the end of the decade. According to numbers compiled by Citi, Russia could supply 30 bcm of gas to China by 2020 and as much as 95 bcm to Asia as a whole by 2025. The US is in approximately the same posture—seven export projects in various stages of approval could export 93 bcm of LNG in a similar time frame. The combined potential US and Russian volume is equivalent to more than 3 million barrels of oil a day.


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Re: Russia-China Gas Deal, May 2014

Unread postby Graeme » Sun 12 Oct 2014, 18:00:25

Russia's Gazprom says US$400b Chinese gas deal not final

Russia's top natural gas producer Gazprom said an intergovernmental agreement with Beijing to seal a US$400 billion deal to supply gas to China through an eastern route had yet to be signed, clouding the plan's prospects.

Gazprom said, however, the final document to be signed by the Russian and China governments was almost ready, and could be signed "in the nearest future".

Gazprom and Russia and China National Petroleum Corp signed the deal to supply gas through a pipeline in May after a decade of painstaking talks. Russian President Vladimir Putin lauded the agreement as the biggest contract in the "history of the gas sector of the former USSR".

The deal now needs the signature of both governments.

According to a Russian government document, the agreement between the Chinese and Russian governments is a condition under which the deal, signed in May, can come into force.

Some analysts and insiders have already expressed their doubts over the validity of the deal, saying that a final agreement on price had not been reached.

Russia has announced gas deals with China several times, only for them to prove elusive. In 1997, for example, a US$7 billion deal was clinched to supply 25 billion cubic metres of gas a year to China but the project never materialised.

The latest absence of an agreement brings uncertainty to Moscow's plans to diversify its energy exports to the east from the west. Russia has been stepping up the plans due to the crisis in Ukraine, which has caused the deepest rift with Europe and US since the end of the cold war.


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Re: Russia-China Gas Deal, May 2014

Unread postby AgentR11 » Sun 12 Oct 2014, 18:42:00

There's plenty of certainty of it happening, the real question is how sweet of a deal can China get. Can China get a price from Russia that is as cheap as US commercial elec generators get from US domestic NG producers; now THAT would be an exceptional deal for China.
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Re: Russia-China Gas Deal, May 2014

Unread postby sparky » Sun 12 Oct 2014, 23:49:25

.
I would tend to agree with Agent "was almost ready, and could be signed "in the nearest future"."
is the usual corporate speak for ,
" the engineering has been worked out but the financials are being fought over "
the delays and false starts would indicate that Gasprom doesn't want to roll over either ,
they have some cards to play ,the main one being that they have the gas and China wants it
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Re: Russia-China Gas Deal, May 2014

Unread postby dissident » Mon 13 Oct 2014, 00:08:44

sparky wrote:.
I would tend to agree with Agent "was almost ready, and could be signed "in the nearest future"."
is the usual corporate speak for ,
" the engineering has been worked out but the financials are being fought over "
the delays and false starts would indicate that Gasprom doesn't want to roll over either ,
they have some cards to play ,the main one being that they have the gas and China wants it


Gazprom knows that the EU will not be using American LNG. Or any other LNG supply if it wants not to pay a hefty premium just to throw a tantrum at Russia. The recent French decision to shoot itself in the head by reducing its nuclear capacity has only consolidated future demand for Russian gas. The EU demand for gas will keep on increasing as well.

Perhaps someone can fill us in on the details of Germany's current consumption of the coal and French electricity it had to buy after its 2011 decision to shutdown its nuclear plants. I have seen no evidence that it has reduced by much.
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Re: Russia-China Gas Deal, May 2014

Unread postby sparky » Mon 13 Oct 2014, 07:47:08

.
I'm not a fan of the telegraph but for what it's worth
http://www.telegraph.co.uk/news/worldne ... tters.html

the net result of stopping the nuclear plant in Germany ( for fear of a Japanese tidal wave or what ? ) is that the coal consumption has increased ,so presumably has the import of French nuclear produced electricity
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Re: Russia-China Gas Deal, May 2014

Unread postby dissident » Mon 13 Oct 2014, 08:29:56

sparky wrote:.
I'm not a fan of the telegraph but for what it's worth
http://www.telegraph.co.uk/news/worldne ... tters.html

the net result of stopping the nuclear plant in Germany ( for fear of a Japanese tidal wave or what ? ) is that the coal consumption has increased ,so presumably has the import of French nuclear produced electricity


Thanks for the link. So all the alternatives failed to fill the gap. This should be a lesson to all the starry eyed idealists about how windmills and photovoltaic panels are going to replace conventional energy sources "real soon now".
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Re: Russia-China Gas Deal, May 2014

Unread postby ROCKMAN » Tue 04 Nov 2014, 13:02:49

Just a small side bar: Here's bit of NG that won't be heading to the EU just as that Russian NG won't:

Kinder Morgan announced that the fully subscribed Sierrita Pipeline has begun service. The 36-inch diameter pipeline provides approximately 200 million cubic feet per day (73 bcf/yr) of capacity and extends the existing lines to the Mexican border. The pipeline interconnects via a new international border crossing with a new natural gas pipeline in Mexico. It will help Mexico meet its environmental goals of converting existing fuel-oil-fired power generation plants to efficient, clean burning natural gas and provide natural gas for future power plants. The project was built with monies from the Mexican gov't as well as a few US companies.

If EU countries want LNG from the US they might consider in investing in our LNG infrastructure. As they say: Money talks and bullsh*t walks.
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