Well, now. Do we have a deal? I believe we do, given all the announcements, pronouncements, etc. Our Chinese 'friends', including the stoic, Xi JinPing, have announced a 'deal' with our other 'friends', the Russyans, headed up by the ever-stoic, Mad Vlad Putin. It's about energy: Russya has it; China needs it: now.
We also know that European nations were large consumers of Russyan oil and natural gas, which has flowed continuously to the European market for decades. But, then Mad Vlad became adventurous-in Crimea, then Ukraine, and now Syria(not to mention Georgia, Chechnya, Afghanistan). The West, lead by Obama, sanctioned the Little Fellow and his oligarch /KGB cronies, cutting off access to world capital markets, restricting trade, and otherwise stomping on the toes of expansionist Kremlin apparatchiks. With a worldwide recession expanding, Russya's own recession getting worse, and the value of the rouble in the loo, seems Russya needed a little boost in economic activity. Where to Go? Where to Go?
Where else but down south, to their Asia neighbor and former Communist brethren: China. "Let's make a deal", says the Kremlinistas. We have gas; you need gas. Shall we talk? Maybe we should use English, everybody else does. And who can decipher all those Chinese Mandarin characters? And you guys never had any interest in Cyrillic characters anyway. Deal?
So: lend us $2 billion. Got it. Bank of China to Gazprom(State-owned energy company which provides 10% of sovereign income). This is the largest loan secured by Gazprom ever. It points to Russya's ever-increasing need to go beyond its borders for capital, and underscores the effects of sanctions from the West.
This deal comes after China took a larger stake in a LNG project in the Arctic. This, too, has been highlighted by the decision by Washington on Wednesday to extend these sanctions against Russyan business(state business, really). Natalia Orlova, economist at Alfa Bank in Moskova, says the move proves that Russya can still gain access to capital despite the sanctions.
Yes, but Natalia, the deal is with the Chinese! It's dancing with the devil and you will lose this dance.
Last week, another Russyan company, OAO Novatek, announced a deal that includes financing for an LNG plant. Known as Yamal LNG, the plant will supply gas to Asia as soon as next year. The price of the gas has yet to be determined and Yamal is now in the position of one who will not have the leverage of the cross table party- Xi & Co. This according to Mikhail Krutikhin, a partner at RusEnergy consulting. Yamal is a partnership, and China already owns a 20% stake and France's ToTal owns 20%. The end result of this deal will not be pretty for the Russyan Bear. The Chinese Dragon, laughing smoke and flames from the toothy mouth, will take the Kremlin to the modern version of the Chinese laundry: the Silk Road Fund.
Perhaps the introduction of American LNG has had a positive effect on the price of energy. A recent shipment of American LNG to European ports has created some competition where there had been little if any.
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