Streetwise Professor

July 22, 2015

Vlad’s Pivot to Oblivion

Filed under: China,Commodities,Economics,Energy,Politics,Russia — The Professor @ 7:09 pm

This story is a Sino-Russian twofer:

The contract between Russia and China for gas supplied via the western route known as Power of Siberia-2 is being delayed indefinitely, Vedomosti cited Russian officials. They say China is reviewing its energy needs due to the economic slowdown.

The demand growth for gas in China is slowing, at the same time access to liquefied natural gas (LNG) is becoming more available in the country, for example from Australia, due to the fall in oil prices, Sberbank CIB analyst Valery Nesterov told Vedomosti on Wednesday.

Repeat after me: Gazprom finalizes about one out of a hundred of the vapor deals it announces. This is especially true where China is involved.

There are three basic problems. First, the pipeline is expensive, primarily because the Russians insist on building it. After all, how else could they tunnel out money? And if they can’t tunnel out money, what the hell is Gazprom good for?

“Gazprom offers CNPC a high price, explaining this by the high cost of the Power of Siberia – 2 construction. China is ready to build the pipeline at a cheaper cost and at public tender, so its companies could participate and for the construction price to be transparent,” the president of the Russia-China analytical center Sergei Sanakoyev said.

Second, the pipeline would go to the western part of China, which is convenient for Gazprom, but it isn’t where China needs the gas.

Third, China doesn’t need as much gas period, because (a) new (LNG) supply is coming on line in Australia, and (b) despite the happy talk of official statistics, every indication is that the Chinese economy is slowing:

The demand growth for gas in China is slowing, at the same time access to liquefied natural gas (LNG) is becoming more available in the country, for example from Australia, due to the fall in oil prices, Sberbank CIB analyst Valery Nesterov told Vedomosti on Wednesday.

So how’s that pivot to Asia working out, Vladimir? Timing is everything in life, and Putin is┬ácounting on China precisely when China has its own issues to deal with. If China was continuing to power forward, Putin’s pivot would have turned him into China’s pilot fish. Now even being a pilot fish looks out of reach.

To all those who hyperventilated at the announcements of huge Sino-Russian gas deals: when will you people learn to discount virtually anything Gazprom says down to just above zero? That’s especially true when there was a huge political reason for Putin to hype such a deal. I guess suckers never learn.

The second part of the twofer here is the further evidence it provides of China’s economic troubles. Look at the commodity carnage going around: oil, copper, iron ore, gold, platinum, you name it are in the dumper. China put them there. This is just another pixel in the image.

 

 

Print Friendly

3 Comments »

  1. I think you were quite prescient about this.

    Comment by John Hall — July 22, 2015 @ 10:58 pm

  2. Only the most prolific fool would lack precience in this very matter.
    Same shit in pipe-line dealings with Turkey and Greece.
    Every (pipe-)line a Provokatsjia….dumb, dumber, dumbest.

    PS: was that Sino-project not 2 decennia in the making already?

    See also various struggles between national & local RU-government, dealing with (agricultural) land-lease to China.
    Or: why buy oil if you are going to get the territory by demographic means anyway.
    (illegal Chinese workforce in Russia grows by 1 million(!) annually(!))

    Comment by Wilhelmus Janus — July 25, 2015 @ 6:29 am

  3. Putin’s Pivot (VVPP) took another spin today, by the yuan….:))

    http://www.bloomberg.com/news/articles/2015-08-11/ruble-drop-resumes-as-yuan-devaluation-dents-oil-clouds-exports

    Comment by Wilhelmus Janus — August 12, 2015 @ 3:00 pm

RSS feed for comments on this post. TrackBack URI

Leave a comment

Powered by WordPress