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Russia and China sign major gas agreement

May 22, 2014

On May 21, 2014 one of the most important agreements of the century was signed, where Russia will supply China with 38 billion cubic meters of gas per year for the next 30 years. The pipeline will be the largest construction project in the world for the next four years. It is comparable to the Alaska pipeline that was built a few decades ago.

http://www.huffingtonpost.com/2014/05/21/china-russia-gas-deal-gazprom_n_5364004.html

The agreement enables Russia to expand the market for its gas, which now goes mostly to Europe.

It "opened the door for Russia to enter into Asia's gas market," said Keun-Wook Paik, senior research fellow at the Oxford Institute for Energy Studies….

US government officials tried to put on a happy face, although Jack Lew had just gone to China to try to convince China not to sign the agreement. The US government has been trying desperately to make sanctions hurt Russia.

U.S. Secretary of State John Kerry noted that Russia and China have been trying to work out an energy agreement for 10 years and said the deal "isn't a sudden response to what's been going on" in Ukraine.

"And if the world benefits as a result of that, that's fine," he said.

Similarly, State Department spokeswoman Jen Psaki said of the prospect of closer Russia-China relations: "It is not a surprise to us that countries that are neighbors communicating about how to work together, whether that's through an economic partnership or otherwise…."

U.S. Treasury Secretary Jacob Lew had appealed to China during a visit last week to avoid taking steps that might offset the West's sanctions against Russia over its lightning annexation of Crimea in March. However, American officials have acknowledged China's pressing need for energy….

China and Russia have been negotiating the deal for more than a decade but had been hung up over the price.

Russia and China had virtually completed negotiations, except for the price. It is plain that the recent US sanctions made this agreement more urgent and speeded up Russia’s turn to the East. Twenty years ago Russia was made to believe that the West welcomed them, and they began creating ties to Europe and America. They were told that NATO would not set foot in any of the Eastern European nations on or near Russia’s border. Those agreements were broken. The US government continued to treat Russia as an enemy instead of a friend.

Russia began fighting back a few years ago in South Ossetia and now in Ukraine. They do not want US missiles pointing at them from so close. The US took the same steps in 1960 during the Cuban missile crisis.

Economically speaking, this gas agreement will exclude the US dollar, as the gas will be paid for in Chinese currency. This deal alone could end the USD’s reign as the world currency for international trade.

Politically speaking, it will further isolate the West from Asian markets. This deal alone serves to make Russia an Asian nation, rather than a European one, thanks largely to the US sanctions over Ukraine.

The sanctions are backfiring.


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Dr. Stephen Jones


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