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‘West forgot to lock back door, pushed Russia into gas deal with China’

Published time: May 20, 2014 10:48

China's President Xi Jinping (R) and Russia's President Vladimir Putin attend a welcoming ceremony at the Xijiao State Guest house ahead of the fourth Conference on Interaction and Confidence Building Measures in Asia (CICA) summit in Shanghai on May 20, 2014.(AFP Photo / Alexey Druzhinin )

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While the West imposes sanctions on Russia, Russia is making a deal with China as each has something to offer the other, David Kuo, CEO of the Motley Fool Singapore financial website, told RT.

RT: We have not seen the papers signed just yet. We could be witnessing a possible delay. What issues you think could be behind this?

David Kuo: Ultimately, price hinges on the asking price between the two sides. This deal has been 10 years in the making and ultimately what it really comes down to at the very end is how much China is willing to pay for the gas. We are looking at somewhere between $350 or maybe slightly less for 1,000 cubic meters of gas. We are looking at the deal that is worth around $400 billion over a 30-year period of time. We are looking at something that could generate for Russia approximately $13 billion a year.

RT: This has been called an historic agreement. Why are we seeing China and Russia become so much closer on many levels?

DK: I think it really boils down to these sanctions that the West has imposed on Russia. There is a saying, "If you lock the front door make sure that the back door is locked as well." In this case the West has forgotten to lock the back door. So whilst they actually impose sanctions on Russia, Russia is saying to the rest of the world, “You locked the front door, but I have a back door as well.” And the back door in this case in China.

The West has actually pushed Russia into doing a deal with China. So on the one hand, this is an economic deal. But on the other hand, it is also a political deal in which Russia is saying to the rest of the world, “If you don’t want to buy my stuff, there is somebody else out there who is willing to buy my stuff as well.” And we have to look at this deal in the context of these two countries. Russia has something that China wants - gas. China has something that Russia wants – clean energy. When you put these two things together, we are talking about the win-win situation between the two countries.

RT: India, Japan, North Korea are reportedly queuing up to be the next ones to sign economic deals with Russia. Talk to us about the shift in the global economic balance?

DK: It is quite noticeable. What we are seeing is major powers here in the East saying they want to do deals with the rest of the world. If you look at India, India also wants what Russia has to offer [and Russia wants something that India can offer]. So you are looking at the sort of the major countries here in the East, particularly China which is the second-largest economy, but also India. India needs growth very badly. One time India and China were running neck and neck in terms of economic and expansion but that has slowed in the case of India, not in the case of China. In the case of India the economic growth has slowed to 4.6-4.7 percent, that isn’t sufficient to sustain the Indian economy. Therefore India is saying “I need someone to help me spur this economic growth,” and it is looking to Russia in this case and Russia can help.

RT: What sort of reaction do you expect from the US and Europe to the talks?

DK: That is a very interesting point. The West will slowly begin to realize that sanctions do not work, so therefore they will have to rethink their strategy and see if there is a better way in which they can get what they want in terms of a solution on Ukraine. Because ultimately this really hinges on Ukraine, and what they are saying is whether they can find a way in which they can find a better solution for that country. Because sanctions are not going to work.

RT: Why, in your opinion, did China choose Russia as a partner for such a huge agreement? There had been other contenders before.

DK: The thing is that China needs clean energy today. When you have a look at proximity of Russia and China - they are quite close geographically - and also in order to build a pipeline from Russia to China it is much easier to do so, than to build big storage facilities. We know that in the case of Australia there will be new gas supplies coming on stream. I think in some cases we are talking about the urgency of the situation. Russia wants to sign a deal very quickly, and it is willing to move on price. As far as China is concerned if it can get the price down to a level that it considers to be sustainable over long-term, then we will have this deal inked between the two countries. Exciting time for investors.

The statements, views and opinions expressed in this column are solely those of the author and do not necessarily represent those of RT.

Comments (53)

 

Muhammad Abbass 23.05.2014 13:09

I see the cheerleaders for the DyingCorpseEmpire… are still trying to find a negative in every action taken by Russia. Claims they are desperate or being forced into corners. Wishful assertions that Russia is broke (actually the West is) or that they are being isolated. You clowns just can't admit defeat. You keep on trying to find the "failure outlook" of everything Russia does, and given everything Russia is doing is a logical and perfectly legal response to the immoral, deceitful and illegal actions being against them and their interests by the DyingCorpseEmpire; that's just bad losers. Russia holds all the cards.

 

Muhammad Abbass 23.05.2014 12:46

I live in Western Australia, and it is namely us who will be the biggest losers. Thanks to being a lackey (of the USA) country we deserve it as well. How you like them apples Mr Abbot? You want to follow that fraud in the White House and dump on Russia and act like the world's greatest hypocrites over something the USA created in Ukraine in the first place then you shall have no pie. Russia won't lose by it, they can sell their gas to China and as for us, I suppose we can sell ours to Europe? Not so easy. Nice one uncle Sam. Just being your ally hurts.

 

Frank Wolstencroft 23.05.2014 04:40

Steven Barrel 21.05.2014 00:10

Well, now China has the upper hand in its negotiations with Russia's gas price. Since they couldn't agree on the price for over a decade now, China knows that it is Russia that is desparate. China is not stupid.
What Russia should address is their medieval behavior in dealing with its neighbours.

  


In the international commodities trade, fixed prices never work out well on long term contracts. There is more than likely flexible pricing built into the the Russia-China gas deal, based on world market prices on bid/ask or Platt's Oilgram quotes.

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