28.09.2014 Author: F. William Engdahl

China and Russia in New Strategic Energy Deals

546464Only weeks after Russia’s Putin and China’s President Xi signed what was called the “energy deal of the century,” a $400 billion eastern gas and pipeline project over 30 years from Russia to China, the two countries have followed with a dazzling array of major new energy agreements from gas to oil to coal. Taken as a totality it amounts to a major strategic and geopolitical shift in relations between the two giant nations of Eurasia that will have implications for the future of Europe as well as the United States.

On September 17, Russia’s Gazprom CEO Alexei Miller briefed Vladimir Putin on negotiations with the Chinese to supply China with 30 billion cubic meters of natural gas via western route over thirty years, according to the Russian Interfax news and Chinese Xinhua news agencies. Like the recent “eastern” gas pipeline deal, it too will run for 30 years. It will reportedly be signed between Gazprom and China National Petroleum Corporation (CNPC) in November. The two have also discussed the possibility of more than doubling or even trebling the gas volume later, up to between 60 billion to 100 billion cubic meters. The new deal on Russian western gas will partly utilize existing Russian gas pipelines.

The new western pipeline gas deal is in addition to the major deal signed in May, 2014, between China and Russia after more than a decade of negotiating. That eastern or East Route Gas Project, calls for construction of a gas pipeline to provide China with 38 billion cubic meters of natural gas annually, from 2018. The East Route project, officially, the “Power of Siberia,” has just begun construction this month of a pipeline from the eastern Siberian city of Yakutsk, known as the coldest city in the world, and will cost an estimated $55 billion to be completed by 2018.

Yamal LNG

The two Russia-China gas pipeline projects are far from all being agreed between the two Eurasian countries at the moment. The deputy head of China’s National Energy Administration, Zhang Yuqing, announced on September 19, just two days after the news of the western Siberia-China talks, that China will “amplify cooperation” with Russian companies on Russia’s huge Yamal Liquified Natural Gas (LNG) project. The Chinese, who have been developing their own technology for creating LNG, will use their technology in the project in Yamal for gas deliveries to China.

Russia’s Yamal Peninsula in northwestern Siberia, known as the Yamal Megaproject, contains some of the world’s largest known undeveloped reserves of gas. Significantly, China and Russia are discussing at the present time significant Chinese increased participation in developing LNG from Yamal. The current Chinese-Russian Yamal LNG project calls for China National Petroleum Company to drill 200 wells, create a pipeline system, gas treatment facilities and a liquefaction plant at the South-Tambeyskoye Field in Russia’s Yamal Peninsula. Russian gas company, Novatek, has 60 percent equity stake in the project. China’s CNPC and France’s Total hold 20 percent each.

In 2008 Russia signed a joint venture with the US ExxonMobil to develop an adjacent Yamal gas field. Recent US and EU sanctions could, if increased, freeze the ExxonMobil deal. The Chinese decision is clearly being made by Moscow with an eye to possibly losing the participation of western companies because of future US sanctions.

Coal Too…

At the same time, in early September, the Russian state company, Russian Technologies, or Rostec, signed a $10 billion deal with China’s state-owned Shenhua Group Corp Ltd, the largest producer of coal in the world. It calls for the two to develop coal deposits in Russia’s Siberia and the Far East. The two

companies will explore and develop the Ogodzhinskoye coal deposit in Russia’s Amur Region, with estimated coal reserves of 1.6 billion metric tons. Rostec expects coal production to start in 2019, with annual production reaching 30 million tons to be exported mainly to China.

The Rostec-Shenhua cooperation will go far beyond the exploitation of Russia’s Amur coal. Rostec and Shenhua will also build a marine coal terminal at Port Vera in the Primorsky Territory, with annual capacity of 20 million tons. Construction will begin in 2015 and become operational in 2018 – 2019. That will enable Russia to vastly increase its coal exports to the Asia-pacific markets. In addition, the project involves building a power plant and high-voltage transmission lines to China, as well as social and transport infrastructure. That will help deal with the issue of power shortages in Russia’s Amur Region and China’s northern regions, and meet the electricity demand of those territories. It will also expected to create an estimated 10,000 new jobs and up to 30,000 jobs in related and associated industries.

Huge Geopolitical implications

Commenting on September 20, Russian Prime Minister Dmitry Medvedev told Russian TV that, “Our collaboration with China is of strategic importance. We have great, brilliant political contacts, we have excellent economic relations. China is our strategic partner, and we are interested in expanding the volume of cooperation.”

Taken as a totality, along with other measures by Russia’s Putin to deepen political, economic and military ties with China and the other nations of Eurasia, the latest energy agreements have the potential to transform the global geopolitical map, something Washington’s war faction will not greet willingly.

The world, as I’ve noted before, is in the midst of one of a fundamental transformation, such as occurs only every few centuries. An epoch is ending. The once-unchallenged global hegemony of the Atlantic alliance countries of the USA and EU is crumbling rapidly.

Washington and the powerful very rich families behind the power of Washington are clearly becoming frantic as to how to stop or reverse the deterioration of their global power. Even EU states, most especially German elite circles, are becoming fed up with the US neo-conservatives’ wars, fake disease scares around such things as Ebola, the Ukraine destruction that harms the EU but leaves Washington and Wall Street untouched. The coming months will be fateful beyond what most of us can imagine, with once-powerful institutions crumbling in power and other new institutions rising to replace their abusive power. The array of recent economic agreements between China and Russia is shaping this epochal shift.

F. William Engdahl is strategic risk consultant and lecturer, he holds a degree in politics from Princeton University and is a best-selling author on oil and geopolitics, exclusively for the online magazine “New Eastern Outlook”

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