Bye Bye Petro-dollar: $400 B China-Russia Gas Deal is Official!

Gazprom dealLed by Vladimir Putin negotiating in Shanghai himself, the Russia-China “Holy Grail”  Gas Deal of the Century- $400 billion over 30 years, is official. 
Bye-bye Petro-dollar!



Originally posted at RT.com:

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.

The total value of the contract is $400 billion, Gazprom CEO Aleksey Miller said. However, the price of gas stipulated in the document remains a “commercial secret.”

Assuming the overall price of the contract includes only the cost of supplies of Russian gas, then the $400 billion price tag means China will pay about $350 per 1,000 cubic meters. Delivery price for the contract will be tied to market oil prices, Putin said from Shanghai on Tuesday.

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 for pipelines on their respective territories.

This is Gazprom’s biggest contract to date.

Russia will supply China 38 billion cubic meters of gas per year via the eastern ‘Power of Siberia’ pipeline, which crosses Siberia and reaches China’s populous northeast regions. 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.

According to Miller, the deal was set to go through at 4:00pm Shanghai time when he understood “all fundamental issues were resolved.”

RT producers were informed of the landmark energy deal prior to its signing after a conversation with Miller.

The deal comes as a part of Russia’s larger-scale pivot to Asia and especially China as Western economies threaten sanctions over turmoil in Ukraine. Sanctions by the US and the EU have been mostly limited to visa bans and asset freezes on some of Russia’s top officials, while so far only threatening a so-called third round of real economic sanctions against Russian hydrocarbon businesses.

Just ahead of Putin’s visit to Shanghai, Russian Prime Minister Dmitry Medvedev gave reassurance that the agreed price would be fair.

“One side always wants to sell for a higher price, while the other wants to buy for a lower price,” Medvedev said. “I believe that in the long run, the price will be fair and totally comparable to the price of European supplies.”

A major breakthrough in negotiations came on Sunday as Gazprom chief Aleksey Miller sat down with his CNPC counterpart, Zhou Jiping, in Beijing to discuss final details, including price formulas.

Although Europe is still Russia’s largest energy market – buying more than 160 billion cubic meters of Russian natural gas in 2013 – Moscow will use every opportunity to diversify gas deliveries and boost its presence in Asian markets.

“I wouldn’t look for politics behind this, but I have no doubt that supplying energy to the Asia Pacific Region holds out a great promise in the future,” Medvedev said.

In October 2009, Gazprom and CNPC inked a framework agreement for the Altai project which envisions building a pipeline to supply natural gas from fields in Siberia via the western part of the Russia-China border.

In March 2013, Gazprom and CNPC signed a memorandum of understanding on Russian gas supplies to China along the so-called eastern ‘Power of Siberia’ route. When both pipelines are activated, Russia can supply Asia with 68 billion cubic meters of gas annually.

Last year, China consumed about 170 billion cubic meters of natural gas and is expected to consume 420 billion cubic meters per year by 2020.

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Comments

  1. Aaaaand … of course … the banknote goes which way? No, UP, you silly logical goose.

  2. uh - where in the article does it say that china is going to pay with something other than petrodollars ?

  3. This is an interesting deal    10 years in the making.  Putin’s leverage was lessened with the discovery of a major gas field in China.  That timing was interesting.  Jinping had an ace up his sleeve and the final price for $350 per 1,000 cu Mt.  Will that have the standard inflation clauses?   Still, this is a gbig deal for Putin and Russia since they want to move away from the Euro  market reliance.  China’s comsumption of nat gas rising to 420 Bil Cu Mt is 150% increase by 2020.  That’s huge and will reduce their reliance on US Coal.   I wonder how Buffett’s railroads will fare?
    With Chinese nat gas use like this, the air will be so clear in Shanghai you’ll be able to see the Petro dollar—as it collapses.

  4. All I can see is gold and silver collapsing.  USD is doing just fine, so is the stock market.
     
    Time for an urgent guru circlejerk!

  5. This news is supposedly dollar negative but you wouldn’t know it looking at the price action in gold and silver today. I found it interesting yesterday that while the DOW was tanking gold didn’t catch a bid at all. They are doing a great job defending $1300. I am sticking with my prediction that gold and silver stay flat to lower over for the balance of this year. Gives me plenty of time to reach my target allocation. 

  6. as far as I can see, no matter what happens on the national and international front, the precious metals prices must be suppressed to keep the dollar alive and viable. Pretty much anything can happen in that realm.  And nothing would surprise me either.
    waitingforsilver what I read in that RT post reminds of a petro lubed FIAT circle jerk. 30 smiling bankers all around and gold sitting as a bystander to the antics.

  7. Its all good. I read something somewhere that the Fed is simply running out of bullets, but at the moment it is keep putting them bullets in its automatic rifle and shooting them off. Great analogy, Yellen there, shooting her big old gun at the markets. So what! let the fed shoot its bullets at the markets, gold is bullet proof.
    Its painful to watch but its a bit like watching a crocodile being killed by a boa constrictor. The Croc being the Fed, the Snake, being Gold. I think gold is winning in the long view, but taking a few Croc bites along the way, never mind, the bites will heel, just a couple of more squeezes should do the trick.

    • It is actually the ESF that is the control mechanism that rigs and manipulates the gold market and USD. UST is involved too with the bullion banks who are given the ability to front run everything ahead of price moves. I’m pretty sure Bill Dudley is front and center on this at the NYFED as well.

      “A change in the law, in 1970, allows the Secretary of the Treasury, with the approval of the President, to use money in the ESF to “deal in gold, foreign exchange, and other instruments of credit and securities.”
       
      http://en.wikipedia.org/wiki/Exchange_Stabilization_Fund

    • Really? Wheres the records of gold being purchased from the BIS? Nah this is the Fed shorting the paper market through its cohorts.  Much simpler to do in this day and age, and much more secretive. You involve the BIS or the IMF and the whole world would know whats going on. If they bought paper gold, and shorted directly, then they would be involved directly in manipulating the markets by issuing fake sell signals, as a customer of one of the big three. Nah this is directed by the Fed, under the radar. We are living in an age that Nixon would dream of.

    • @WaitingForSilver
       
      Yes, that’s what I meant. Paper gold. Fed/ESF/UST all work together. They deal in all the markets, mostly via HFT platforms and use of derivatives.

    • @Bay of Pigs
       
      Yep.  This is known as the “we don’t like what the market is doing right now, so we’ll manipulate it to do something that is more to our liking.  Silly think is, these guys seem immune to the lessons of history, so you know what that means for them.  The USSR was very fond of central planning and ordering their economy to do this or that too.  Unfortunately, their 70 year experiment choked and died on this nonsense and the US economy will too.  Gee, what a surprise… as in NOT.

  8. The monarchy’s/elite are simply converting ink and paper into gold and silver, and relocating  their money changing tables east to where the new market is, same old same old   

  9. Interesting article. LMAO Hell I’m Still Stacking.
    http://goldsilverworlds.com/price/silver-in-the-dead-zone-of-disinterest/ 

    • Nice article, Charlie. I don’t see too much downside in silver from here on, and although I believe gold may still take a bit of a hit I still like to buy it on the dips. One never knows…..

    • “One never knows…..”
       
      No, we don’t.  No one knows.  Best we can do is make some educated guesses as to what is happening and what will therefore result from that.  This is not at all easy and the results tend to be less than stellar.  But this is the path we have chosen and there is no going back now.
       

    • I saw that article yesterday Charlie, I was the first commenter and said:
       
      This is exactly why it’s time to take advantage of the disinterest and low pricing. Blood in the streets spells buying opportunity. This period in the silver market is a gift to those who want to acquire precious metal. Stock and paper can go to zero but metals will always be highly valued. What’s going on now is a great example of manipulation of prices and sentiment delivered by the media per the script, it won’t last with things being as they truly are.

  10. Good point Bay of Pigs   When you’re watching the hogs wallow in the slop, it’s hard to remember all their names.
    Sorry about the reference to the oinkers.  it insults swine world wide
    Marchas45 silver is sitting in the eye of a hurricane. everyone but us thinks things are hunky dory.

    • ESF, IMF, BIS…..most Americans (I’m guessing 80-90%+) couldn’t tell you what those initials stand for much less what they do. I also believe that gold and silver holders make up maybe 2-3% of the American population.
       
      Gold, and especially silver, are the most undervalued assets going today. Reminds me of the days of 1999, 2001, 2008 and 2011. Everyone forgets the ride from $252 to $1900 and $4 to $49, and assumes it wont ever happen again. It sure as hell will. And with so much going wrong in the world right now, you wonder how sentiment could be this low for PM’s? It’s fascinating.

    • The low sentiment isn’t too surprising looking at the effectiveness of Wall Street and the MSM in concert with the Fed, through ESF et al… you realize it’s a very coordinated effort.  But then, the whole theatrical production has been brought to you by the same folks that are trying to bring the whole world under a NWO One-World-Government — so clearly, they have had their hands firmly agrip the levels of manipulation and illusion.  The paper market pricing of the metals with the talking down handles the masses and the sentiment while  keeping the effects of the physical market conditions (BIS, LBMA, Shanghai) off people’s radarscopes.
       
      You have to hand it to these folks. Lots of levers and lots of balls juggling in the air.   I think we all can only tip our hats to the ingenuity and creativity the banker elites have used to preserve their status and power… who could have ever imagined they would be able to keep up the worldwide illusion that recovery is coming as a foregone conclusion for now 5+ years?
       
      Of course, one day, something will break with a loud SNAP that will be heard ‘Round the World.  The next snaps you will hear will be the elite necks as they hit the end of the ropes.  When one realizes that these are the stakes for these folks, it’s not surprising they are putting on one hell of a Grand Finale in the fireworks show….

    • @Bay of Pigs
       
      “Everyone forgets the ride from $252 to $1900 and $4 to $49, and assumes it wont ever happen again. It sure as hell will.”
       
      Agreed.  Whenever something happens, it is because the conditions necessary for it to happen have occurred and anything that happens once CAN happen again.  At least we know that it is possible.  It isn’t guaranteed in this life but then little is.  A Carrington Event is similar in that it is very rare but it is possible.  It has already occurred at least once that we know of and perhaps other times as well.  It certainly can happen again. If it does, it will change our world instantly and not for the better.
       
      “And with so much going wrong in the world right now, you wonder how sentiment could be this low for PM’s? It’s fascinating.”
       
      Yes, it is.  The show is well orchestrated, intricate, and precise.  From that point of view, it is fascinating.  In fact, in light of what we know, it seems impossible that so many people could be so ignorant of all the facts that are known and well documented concerning the Fed, money, gold, IMF, ESF, et al.  But what the hell?  If for nefarious reasons of their own, TPTB want to put the precious on sale, then we here would be fools not to buy it… and most of us are doing just that.

  11. LOL I am laughing at Putin. With all that new Chinese fiat there is only one place to spend them. Russia has fallen into the same Chinese trap the US has during the last 20 years. Russia will begin importing massive amounts of cheaply made Chinese goods and what few factories the Russian did have (besides defense) will be closed making them just another pawn with a new master.

    • @Cyberspace_Void , actually – Russia is already flooded with ‘made-in-china’ crap.
      You made the good point that china is just using Russia to accomplish its own goals, though.
       
      The US blew it.  It would be much better to have an amicable relationship with Russia, than to have forced them into a closer relationship with china – who is clearly NOT America’s friend.

    • When I was in Moscow all I saw were high-end European luxury goods, a McDonalds and several rather dismal grocery stores including a big box AwaH (Auchan, a French walmarty type store). If the Chinese crapola was there my guess this would have been the place to find it, but I was so mesmerized by the walls of liquor and the less than appealing foodstuffs that I failed to look.

      And as someone once said:” Politics makes for strange bedfellows”

    • @Cyberspace
      “…With all that new Chinese fiat there is only one place to spend them…”
      I wouldn’t be too quick to presume Russia to be locked into Chinese fiat on this deal and to have gotten the short end of the stick…  Without question, the US is working hard behind the scenes to pit Russia and China against each other… this was Brzezinski’s plan all along… but a funny thing happened on the way to the opera… the US galvanized a determination to break away from the Dollar as a WRC (World Reserve Currency)  Four years is an eternity in these GeoPolitics and it remains to be seen what will happen when these two countries ending up holding a vast financial power in the void left by the dollar… I really suspect that neither of them will be much constrained in who they are able to trade with…

  12. There are some week hands out there today, I have seen an oz of gold selling below and at spot, yikes  but not silver. I also just bought another Canadian Jubilee Queen 1/2oz gold proof for are you ready? $600  Lol Keep Stacking

    • Wow …. You must have no competition at all in your area for PMs. Great purchase! It’s impossible to get them for less than spot here unless you are one of those “We Buy Gold” places.

    • Actually my friend I’m buying it on other forums. I may have 5 more coming by the end of the week. Lol Keep stacking

  13. Sonofabitch!  I just started learning a little Chinese Mandarin, now I have to get hot on Russian, too!  WTF?  This is getting a little out of hand don’t you think?  http://www.shtfplan.com/headline-news/who-is-the-new-secret-buyer-of-u-s-debt_05212014

    • @silverrrrr , once you get past learning the Cyrillic alphabet, it is not too difficult to learn the language.  Oh, and every single verb has around 20 different forms, though…
       
      The Russians are a lot like us in many ways; for example, they hate America’s government.

    • @Mammoth
       
      T-shirt idea:
       
      “I don’t hate the government.
       
                 I hate stupid!”
       
      Unfortunately, they are very often one and the same.  :-/

  14. another bubble is burst silverrrrr   Euroclear = JPM = Dimon bragging about how JPM handles trillions of dollars of transactions a day.  This statement was made a couple of years ago when Dimon was being questioned in the House.  He flashed his presidential cufflinks and silence ensued.  This rotation of USD must be dizzying

    • Belgium is the linchpin/circle jerk of UST buying now? LOL, seriously? The whole rotten disgusting affair is so brazenly being thrown in out faces yet people still don’t get it? It is so disheartening and sickening.
       
      Might be time to fly back to Maui and stick my head in the ocean AGX?  :)

    • @Bay of Pigs Yea that sand in Nevada is kind of hard to get your head under. Lol

    • @Marchas45
       
      “Yea that sand in Nevada is kind of hard to get your head under. Lol”
       
      Not if you cheat the casino boys and they catch you doing it.  ;-)
       

  15. micro managing the expectations for the bullion market is like trying to influence gravity by jumping. We all know that our knowledge in the fundamentals is correct and that manipulation was is and will be until it is no longer possible to do so. I wish I could figure out when that is, I’d be a pretty popular guy but I think the manipulators couldn’t even tell you when that time will come. So in the mean time we will stack whilst we can and eat drink and be merry at the very least for our own sanity. Peace

  16. And our rigged stock market rises!! Up 159

  17. When we look back we’ll see that this agreement between Russia and China was one of those inflection points in history.  The ballgame has changed.  

  18. Absolute nonsense! The U.S. Dollar is the reserve currency of the WORLD!! Do people actually think that China and Russia’s currecncys are ready for the ,main stage??? not even close. It will happen over a very slow time frame but expect the dollar to stage a strong rally.

    • Whether the US Dollar rallies or not, one thing that is certain is that the entire world is having great difficulties achieving growth.  And without growth, the debt-based fiat money system will go extinct.  At that point, a new monetary system must come into being, and a great re-pricing of all things will occur.  Those caught with savings derived from the value of debt-based fiat currencies, whether the US Dollar or another fiat currency, will stand to lose the most.

    • The camel’s back isn’t breaking yet. This is more symbolic than anything else. 400 bil over 30 years is a small trade deal. Symbolic of what? BRIC may be inclined to do more in the future. 
       
       
       
       

  19. Plebian … “Those caught with savings derived from the value of debt-based fiat currencies … will stand to lose the most.”
     
    That scenario is predicated on the viewpoint of paper-currency ‘value’ which always has been the crux of the illusion presented.

    The more realistic viewpoint is to see the currencies in Purchase Power ‘value’, related to a physical expression. From that approach, if all currency is accordingly converted, then all savings is preserved in real terms. Also, wage rates, prices and systems comprising the financial super-structure remain completely unchanged … effectively ‘erasing’ the past century’s paper-credit folly from monetary reality.

    No one would be any ‘richer’ or ‘poorer’ in the aftermath, yet rationality between money and goods will be returned to the environment where they constantly seek equilibration ‘matrix-wide’ (aka: Invisible Hand). Energy may well go much higher, but food and clothing will likely go much lower. All sorts of re-calibrations will evolve, but their impetus will derive from relative supply-demand drives, rather than ‘central planning’ of oligarchic buffoons.

    • I dunno, Pat.  Having something of that magnitude for the entire world go smoothly really pushes the odds, IMO.  Possible?  Certainly.  Likely?  Nope.
       

    • Ed_B … “Possible?  Certainly.  Likely?  Nope.”
       
      ‘Had ye but the faith of a mustard seed.’

      However one might view the task as ‘daunting’, to rescue the savings of most people of the world is an aspiration worthy of all effort nevertheless.

      In the past men have faced down beast, spear, sword, gun and worse. Is it now frightful to face naked life? That life itself is so much a thing to shake our resolve, might we soberly ask … what has become of us?
       

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