Putin Prepares To Announce "Holy Grail" Gas Deal With China

[EE_]

Petrodollar Alert: Putin Prepares To Announce "Holy Grail" Gas Deal With China
Submitted by Tyler Durden on 03/21/2014 09:41 -0400


If it was the intent of the West to bring Russia and China together - one a natural resource (if "somewhat" corrupt) uperpower and the other a fixed capital / labor output (if "somewhat" capital misallocating and credit bubbleicious) powerhouse - in the process marginalizing the dollar and encouraging Ruble and Renminbi bilateral trade, then things are surely "going according to plan."

For now there have been no major developments as a result of the shift in the geopolitical axis that has seen global US influence, away from the Group of 7 (most insolvent nations) of course, decline precipitously in the aftermath of the bungled Syrian intervention attempt and the bloodless Russian annexation of Crimea, but that will soon change. Because while the west is focused on day to day developments in Ukraine, and how to halt Russian expansion through appeasement (hardly a winning tactic as events in the 1930s demonstrated), Russia is once again thinking 3 steps ahead... and quite a few steps east.

While Europe is furiously scrambling to find alternative sources of energy should Gazprom pull the plug on natgas exports to Germany and Europe (the imminent surge in Ukraine gas prices by 40% is probably the best indication of what the outcome would be), Russia is preparing the announcement of the "Holy Grail" energy deal with none other than China, a move which would send geopolitical shockwaves around the world and bind the two nations in a commodity-backed axis. One which, as some especially on these pages, have suggested would lay the groundwork for a new joint, commodity-backed reserve currency that bypasses the dollar, something which Russia implied moments ago when its finance minister Siluanov said that Russia may refrain from foreign borrowing this year. Translated: bypass western purchases of Russian debt, funded by Chinese purchases of US Treasurys, and go straight to the source.

Here is what will likely happen next, as explained by Reuters:

Igor Sechin gathered media in Tokyo the next day to warn Western governments that more sanctions over Moscow's seizure of the Black Sea peninsula from Ukraine would be counter-productive.

The underlying message from the head of Russia's biggest oil company, Rosneft, was clear: If Europe and the United States isolate Russia, Moscow will look East for new business, energy deals, military contracts and political alliances.

The Holy Grail for Moscow is a natural gas supply deal with China that is apparently now close after years of negotiations. If it can be signed when Putin visits China in May, he will be able to hold it up to show that global power has shifted eastwards and he does not need the West.

More details on the revelation of said "Holy Grail":

State-owned Russian gas firm Gazprom hopes to pump 38 billion cubic meters (bcm) of natural gas per year to China from 2018 via the first pipeline between the world's largest producer of conventional gas to the largest consumer.

"May is in our plans," a Gazprom spokesman said, when asked about the timing of an agreement. A company source said: "It would be logical to expect the deal during Putin's visit to China."

Summarizing what should be and is painfully obvious to all, but apparently to the White House, which keeps prodding at Russia, is the following:

"The worse Russia's relations are with the West, the closer Russia will want to be to China. If China supports you, no one can say you're isolated," said Vasily Kashin, a China expert at the Analysis of Strategies and Technologies (CAST) think thank.

Bingo. And now add bilateral trade denominated in either Rubles or Renminbi (or gold), add Iran, Iraq, India, and soon the Saudis (China's largest foreign source of crude, whose crown prince also happened to meet president Xi Jinping last week to expand trade further) and wave goodbye to the petrodollar.

As reported previoisly, China has already implicitly backed Putin without risking it relations with the West. "Last Saturday China abstained in a U.N. Security Council vote on a draft resolution declaring invalid the referendum in which Crimea went on to back union with Russia. Although China is nervous about referendums in restive regions of other countries which might serve as a precedent for Tibet and Taiwan, it has refused to criticize Moscow. The support of Beijing is vital for Putin. Not only is China a fellow permanent member of the U.N. Security Council with whom Russia thinks alike, it is also the world's second biggest economy and it opposes the spread of Western-style democracy."

This culminated yesterday, when as we reported last night, Putin thanked China for its "understanding over Ukraine." China hasn't exactly kept its feelings about closer relations with Russia under wraps either:

Chinese President Xi Jinping showed how much he values ties with Moscow, and Putin in particular, by making Russia his first foreign visit as China's leader last year and attending the opening of the Winter Olympics in Sochi last month.

Many Western leaders did not go to the Games after criticism of Russia's record on human rights. By contrast, when Putin and Xi discussed Ukraine by telephone on March 4, the Kremlin said their positions were "close".

The punchline: "A strong alliance would suit both countries as a counterbalance to the United States." An alliance that would merely be an extension of current trends in close bilateral relations, including not only infrastructure investment but also military supplies:

However, China overtook Germany as Russia's biggest buyer of crude oil this year thanks to Rosneft securing deals to boost eastward oil supplies via the East Siberia-Pacific Ocean pipeline and another crossing Kazakhstan.

If Russia is isolated by a new round of Western sanctions - those so far affect only a few officials' assets abroad and have not been aimed at companies - Russia and China could also step up cooperation in areas apart from energy. CAST's Kashin said the prospects of Russia delivering Sukhoi SU-35 fighter jets to China, which has been under discussion since 2010, would grow.

China is very interested in investing in infrastructure, energy and commodities in Russia, and a decline in business with the West could force Moscow to drop some of its reservations about Chinese investment in strategic industries. "With Western sanctions, the atmosphere could change quickly in favor of China," said Brian Zimbler Managing Partner of Morgan Lewis international law firm's Moscow office.

Russia-China trade turnover grew by 8.2 percent in 2013 to $8.1 billion but Russia was still only China's seventh largest export partner in 2013, and was not in the top 10 countries for imported goods. The EU is Russia's biggest trade partner, accounting for almost half of all its trade turnover.

And as if pushing Russia into the warm embrace of the world's most populous nation was not enough, there is also the second most populated country in the world, India.

Putin did take time, however, to thank one other country apart from China for its understanding over Ukraine and Crimea - saying India had shown "restraint and objectivity".

He also called Indian Prime Minister Manmohan Singh to discuss the crisis on Tuesday, suggesting there is room for Russia's ties with traditionally non-aligned India to flourish.

Although India has become the largest export market for U.S. arms, Russia remains a key defense supplier and relations are friendly, even if lacking a strong business and trade dimension, due to a strategic partnership dating to the Soviet era.

Putin's moves to assert Russian control over Crimea were seen very favorably in the Indian establishment, N. Ram, publisher of The Hindu newspaper, told Reuters. "Russia has legitimate interests," he added.

To summarize: while the biggest geopolitical tectonic shift since the cold war accelerates with the inevitable firming of the "Asian axis", the west monetizes its debt, revels in the paper wealth created from an all time high manipulated stock market while at the same time trying to explain why 6.5% unemployment is really indicative of a weak economy, blames the weather for every disappointing economic data point, and every single person is transfixed with finding a missing airplane.

http://www.zerohedge.com/news/2014-03-21/petrodollar-alert-isolated-west-putin-prepares-announce-holy-grail-gas-deal-china

[Hatha Sunahara]

While Europe is furiously scrambling to find alternative sources of energy should Gazprom pull the plug on natgas exports to Germany and Europe (the imminent surge in Ukraine gas prices by 40% is probably the best indication of what the outcome would be), Russia is preparing the announcement of the "Holy Grail" energy deal with none other than China, a move which would send geopolitical shockwaves around the world and bind the two nations in a commodity-backed axis. One which, as some especially on these pages, have suggested would lay the groundwork for a new joint, commodity-backed reserve currency that bypasses the dollar, something which Russia implied moments ago when its finance minister Siluanov said that Russia may refrain from foreign borrowing this year. Translated: bypass western purchases of Russian debt, funded by Chinese purchases of US Treasurys, and go straight to the source.

What he's saying here is that the US borrows money from China (by selling them Treasury bonds) and then lends that money to Russia (presumably by banks, possibly the IMF). Russia says they won't borrow any money from western banks, but instead get the money they need by selling natural gas to the Chinese.

I would presume that the Chinese would pay the Russians in dollars they get from selling stuff to the US. I think the Chinese understand that the Yuan would be more universally acceptable if it were backed by gold. Then, the Russians and presumably everyone else would accept the Yuan when the Chinese buy something from them. And if everyone accepts the Yuan, they will likely stop accepting dollars because dollars are just fiat money--backed by nothing.

One of the major sources of power an empire has is that large numbers of people use money issued by the empire. If people find better money than that of the empire, the empire loses power. That is what is staring the Fed in the face. People will no longer borrow dollars into existence to use those dollars in trade. And since those dollars are all created by people borrowing them (with an agreement to pay interest) the interest income (transfer of wealth) to the Fed and American banks will decline dramatically. Most people don't understand that it is the job of the military, the CIA, the national security apparatus, the State Department, and a whole host of other government agencies to make sure that people use the empire's money--the dollar. Saddam Hussein agreed to accept Euros for Iraq's oil, so he had to go. Gaddhafi pushed an African gold currency, so he had to go. Iran enters into barter agreements with other countries for their oil. US foreign policy is hostile to these arrangements. People either use the dollar, or face the consequences. TPTB are now giving Putin notice that he better not stray from using dollars. Putin is challenging the empire. China wants to help him. They want to make the empire join the dustbin of history. If you understand that the main source of power of an empire is that its money is universally used, then US foreign policy is no mystery. What you read in the mainstream media is deliberately designed to prevent people from understanding this. Being the source of money is the power of an empire. The Rothschilds understood this--and they controlled the British empire with the British Pound. Today they control the American empire with the dollar. And the Protocols of Zion is all about dominating the entire world with a global currency. They have gotten very close with the dollar. When the dollar collapses, so will their empire.


Hatha

[Serpo]

So its really the United States of the Dollar.............USD

Russia wont need Europe and sanctions will be ineffective......

[EE_]

What he's saying here is that the US borrows money from China (by selling them Treasury bonds) and then lends that money to Russia (presumably by banks, possibly the IMF). Russia says they won't borrow any money from western banks, but instead get the money they need by selling natural gas to the Chinese.

I would presume that the Chinese would pay the Russians in dollars they get from selling stuff to the US. I think the Chinese understand that the Yuan would be more universally acceptable if it were backed by gold. Then, the Russians and presumably everyone else would accept the Yuan when the Chinese buy something from them. And if everyone accepts the Yuan, they will likely stop accepting dollars because dollars are just fiat money--backed by nothing.

One of the major sources of power an empire has is that large numbers of people use money issued by the empire. If people find better money than that of the empire, the empire loses power. That is what is staring the Fed in the face. People will no longer borrow dollars into existence to use those dollars in trade. And since those dollars are all created by people borrowing them (with an agreement to pay interest) the interest income (transfer of wealth) to the Fed and American banks will decline dramatically. Most people don't understand that it is the job of the military, the CIA, the national security apparatus, the State Department, and a whole host of other government agencies to make sure that people use the empire's money--the dollar. Saddam Hussein agreed to accept Euros for Iraq's oil, so he had to go. Gaddhafi pushed an African gold currency, so he had to go. Iran enters into barter agreements with other countries for their oil. US foreign policy is hostile to these arrangements. People either use the dollar, or face the consequences. TPTB are now giving Putin notice that he better not stray from using dollars. Putin is challenging the empire. China wants to help him. They want to make the empire join the dustbin of history. If you understand that the main source of power of an empire is that its money is universally used, then US foreign policy is no mystery. What you read in the mainstream media is deliberately designed to prevent people from understanding this. Being the source of money is the power of an empire. The Rothschilds understood this--and they controlled the British empire with the British Pound. Today they control the American empire with the dollar. And the Protocols of Zion is all about dominating the entire world with a global currency. They have gotten very close with the dollar. When the dollar collapses, so will their empire.


Hatha

http://3.bp.blogspot.com/-jeB4LvY2Ey8/TdvxNBXVR0I/AAAAAAAAAUw/j3NLG5br2Qk/s1600/report_card2.jpg

[vacuum]

What he's saying here is that the US borrows money from China (by selling them Treasury bonds) and then lends that money to Russia (presumably by banks, possibly the IMF). Russia says they won't borrow any money from western banks, but instead get the money they need by selling natural gas to the Chinese.

I would presume that the Chinese would pay the Russians in dollars they get from selling stuff to the US. I think the Chinese understand that the Yuan would be more universally acceptable if it were backed by gold. Then, the Russians and presumably everyone else would accept the Yuan when the Chinese buy something from them. And if everyone accepts the Yuan, they will likely stop accepting dollars because dollars are just fiat money--backed by nothing.

One of the major sources of power an empire has is that large numbers of people use money issued by the empire. If people find better money than that of the empire, the empire loses power. That is what is staring the Fed in the face. People will no longer borrow dollars into existence to use those dollars in trade. And since those dollars are all created by people borrowing them (with an agreement to pay interest) the interest income (transfer of wealth) to the Fed and American banks will decline dramatically. Most people don't understand that it is the job of the military, the CIA, the national security apparatus, the State Department, and a whole host of other government agencies to make sure that people use the empire's money--the dollar. Saddam Hussein agreed to accept Euros for Iraq's oil, so he had to go. Gaddhafi pushed an African gold currency, so he had to go. Iran enters into barter agreements with other countries for their oil. US foreign policy is hostile to these arrangements. People either use the dollar, or face the consequences. TPTB are now giving Putin notice that he better not stray from using dollars. Putin is challenging the empire. China wants to help him. They want to make the empire join the dustbin of history. If you understand that the main source of power of an empire is that its money is universally used, then US foreign policy is no mystery. What you read in the mainstream media is deliberately designed to prevent people from understanding this. Being the source of money is the power of an empire. The Rothschilds understood this--and they controlled the British empire with the British Pound. Today they control the American empire with the dollar. And the Protocols of Zion is all about dominating the entire world with a global currency. They have gotten very close with the dollar. When the dollar collapses, so will their empire.


Hatha

Great summary of what this is all about. They want complete global control, and to do that they need a global currency. The dollar collapse is inevitable, but the plan is to use that as the springboard for the global currency. They can't allow a diversified currency system before then, because then the dollar collapse won't completely reboot everything. Hence, the multiple invasions as you point out. But they also can't allow a viable alternative to already be waiting in the wings to replace the dollar, which is the problem they face now with Russia and China. But a good war could solve two problems at once: collapse the dollar and destroy the viable alternatives.

[Hatha Sunahara]

It's not just Putin who is going to stop using the dollar. The Saudis are cozying up to China as well. China, not the US is their biggest customer for oil. As soon as they stop using the dollar, they will start experiencing some USA sponsored (Arabian Spring) destabilization of their current government.

There is a good article explaining the petrodollar, and some tricks of empires on how to use money in conjunction with military power to dominate people here:

http://dailyreckoning.com/the-power-play-to-eliminate-the-petrodollar/

The article cites a book by David Graeber called Debt, The First 5000 Years. I'm going to find that book and read it. I find it enjoyable to learn the kinds of tricks people use to get power over other people.

The demise of the petrodollar is shaping up--and it will happen soon. Jim Willie talked about it in an interview here:

https://www.youtube.com/watch?v=vOjsAMVdbW0




Hatha