Changing Equations: Russia and China Sign Natural Gas Deal
Changing Equations: Russia and China Sign Natural Gas Deal
Russia's Gazprom and China National Petroleum Corporation have signed a natural gas deal worth $400 billion. The deal between the 2 companies has been 10 years in the making. Russia has been looking for an alternative energy market for its gas. This comes in the wake of possible EU sanctions over the crisis in Ukraine. The price is satisfactory for both the sides though sources say it is somewhere around $400 billion.
The price is tied in all of Russia's international contracts with Western partners specifically those in Western Europe. This is a calibrated, general formula for pricing. Amidst changing equations across the world following the Ukraine crisis, Russia is looking to make progress when it comes to getting new customers for its natural gas. Gazprom shares rose by 2% following this news.
Through this agreement signed at a summit in Shanghai, some 38 billion cubic metres of natural gas per annum will be delivered eastward to China commencing in the year 2018.The main discussion has been regarding the price and it is said that there were continuous negotiations between Russia and China.
Over the past 10 years, China has been looking for new gas suppliers. Its largest foreign gas supplier currently is Turkmenistan and it has started importing piped natural gas from Myanmar as well.
The natural gas deal between Russia and China was signed at 04:00 China time. This indicates that the deal was signed after urgent discussions. While the price has not been disclosed on account of being a commercial secret, China needs the natural gas to cut its coal fired smog levels. A WHO report released earlier during this year had found that Beijing was the city with the highest levels of smog among 192 countries in the world.
China was also looking to diversify supply and has had negotiations with Russia over the natural gas deal. However, given that the pipeline (so named by Gazprom) will not start pumping gas into Chinese factories till the year 2018 at the earliest. Its economic effect on the EU crisis may therefore not be significant.
A more crucial consideration is the solid investment being made by China in Russia's power and energy sector. Putin has opened the door to economic ties that could revive Russia's fortunes. Russia has been facing sanctions leading to negative outcomes for its economy following the Ukraine crisis. Experts are also discussing the symbolic vale of the deal. The 2 countries are finally preparing to work with each other following 10 years of negotiations in the natural gas sector. It can also be quite a significant indication that Russia and the western nations are also divided over other wars such as Syria as well apart from the Ukraine crisis that is brewing between the two camps. In economic as well as geopolitical terms, Russia is now looking to move eastward in a search for new allies in this situation.
Currently, there is one complete pipeline running across Russia's Far East to the Chinese border. This is known as the Power of Siberia and its operations commenced in 2007. this is 3 years after the initial agreement was signed between Gazprom and CNPC in the year 2004. While the economic benefits of the deal are undeniable, this agreement is more than just about the money. With changing equations becoming the new trend, it needs a powerful leader to unite warring nations with conflicting interests and aspirations. War has a price that is too hard to bear, and this includes its economic repercussions as well as what it means in terms of international relations and the welfare of humanity in an increasingly polarised world.
