Putin Is Taking A Big Risk With China Gas Deals

Oilprice.com ^ | 11-02-2015 | pu

[bananaman22]

As the above quote from 2014 indicates, some Russians have identified Russia’s future with Mr. Putin. In turn, Mr. Putin in the past has identified Russia’s future with its mineral resources, in particular its crude and natural gas resources, writing that they will drive Russia’s economic future, its ability to catch-up with developed economies, and its ability to modernize the Russian military and military industry.

Consistent with securing Russia’s future (and presumably, therefore, his), Mr. Putin in May 2014 signed an agreement with PRC President Xi Jinping to supply 38 billion cubic meters (bcm) of natural gas annually to China from the Chayandinskoye and Kovyktinskoye fields in Eastern Siberia via a new 4000 km pipeline, Power of Siberia—at a total investment cost to Russia of $55 billion. While Russian commentators portrayed the deal as proof Russia can pivot successfully toward Asia and away from dependence on Europe and the United States, its real import is as a critical step in Mr. Putin’s ambition to dominate Eurasia’s natural gas markets. Power of Siberia, with 60 bcm capacity, and the two additional Asia-oriented pipelines that are planned (the Altai pipeline, 30 bcm, to supply China from Western Siberia, and the Sakhalin-Khaborovsk-Vladivostok pipeline, 30 bcm, with ~10 bcm potentially available for China), are expected to complement the extensive pipeline network already supplying Europe.

[Navy Patriot]

The "risk" to Russia's petroleum and natural gas sales strategy is if the US is able to dramatically raise the price of both to the US citizen/resident and subsidize the export of both to Europe and China on the cheap. The European consumers will not be getting the gas cheap though, thanks to EU monopoly middlemen.

Replacing Russian gas requires LNG shipping and facilities that are not currently operational or existent, or the completion of the Saudi-Qatari backed pipelines through Syria.

Neither is likely to happen efficiently or quickly, if ever.

Russia probably won't make a killing by shifting sales to China and India, but it will grow the economies that the US and EU want so desperately to stunt.

Interestingly, Europe will probably freeze and be gouged by their own, except the Muslims who will have plenty of the legacy Europeans' furniture to burn for heat and cooking goats.