In 1865 at the end of the US Civil War New York journalist Horace Greeley popularized the expression, “”Go West, young man, and grow up with the country.” Today, some 150 years later, as the colossal economy of the United States of America sinks into obsolescence, outsourcing, income depression, and staggering real unemployment, with many countries of the European Union close to the same, the slogan should properly be changed. “Go East, young man,” and grow up with the booming economies of Eurasia, especially Russia and China. While NATO planes and warships increasingly saber rattle both Russian and Chinese territories, the two giants of Eurasia are forging relations closer than ever in their history. Energy alliances are at the heart of the process.
Since May, 2014, China and Russia have agreed to staggeringly large energy deals that make China less vulnerable to any NATO or Mideast supply blackmail, and Russia to any Ukraine or EU energy blackmail.
In May, 2014 Russian President Vladimir Putin and China’s President Xi Jinping signed the so-called Russian East Route pipeline deal, a $400 billion agreement over 30 years that will begin sending 38 billion cubic meters of gas annually from Russia to China beginning 2018. It was followed in November 2014 by an agreement for the so-called West Route gas pipeline that will connect gas fields in western Siberia with northwest China through the Altai area of Xinjiang Autonomous Region. They also agreed on provisions for possible second and third sections to be added later that would bring capacity to an impressive 100 billion cubic meters a year. West Route is designated a priority and to be finished in six years.
When both East and West Route pipelines are operational, Russia will supply some 59% of the current Chinese annual natural gas consumption, replacing the EU as Russia’s largest gas export market. Today China consumes 169 billion cubic meters annually. At the same Beijing meeting, the presidents of state oil companies Rosneft and CNPC signed a deal whereby CNPC buys a 10% stake in Rosneft subsidiary Vankorneft which operates the huge Russian Vankor oil field. China will receive some $7 billion worth of Russian oil from Vankor in the deal.
Then on April 19 this year Russian First Deputy Energy Minister Alexei Teksler told RIA Novosti that certain Chinese state oil companies are discussing buying the planned 19.5% state share of Rosneft that is to be sold privately by end of 2016. The likely candidate would be China’s CNPC oil company.
Yamal LNG Project Gets China Money
Now on May 3, the Director General of the Yamal LNG Export Terminal project in northwest Siberia made an announcement that clearly did not please the Washington sanctions warriors. The Russian LNG project consortium signed a loan agreement with China Exim Bank and the China Development Bank who will extend a 15-year loan to the project of 9.3 billion euros, some 75% of the estimated total funds that Yamal needs to get into production.
Following Washington sanctions that blocked key Russian energy companies from raising capital in western markets, Yamal looked highly unlikely. As the company’s website notes, “Launched at end 2013, Yamal is not only one of the most complex liquefied natural gas projects ever undertaken; it is also one of the most competitive…because it benefits from the vast natural gas reserves situated across the Yamal peninsula. Complex because it is located above the Arctic Circle.” Its partners include Russia’s Novatek, China’s CNPC, French Total (20%) and, significantly, China’s Silk Road Fund.
OAO Novatek is Russia’s largest independent natural gas producer, concentrated in the Yamal-Nenets Autonomous Region (YNAO) in Western Siberia, the most significant gas producing region in Russia, accounting for approximately 80% of Russia’s natural gas production and approximately 16% of global gas production. Now the Chinese are taking the major financing burden to make the mammoth Yamal project work.
Also significant in terms of the process of de-dollarization taking place in Russia, China, Iran and other Eurasian countries, the Chinese loans will be denominated in Euros and not in US dollars.
It appears clearly that Washington’s enraged neoconservatives around Victoria Nuland in the State Department and Defense Secretary Ash Carter have made the best contribution to bringing China and Russia together in an unprecedented manner. They managed this impressive feat by imposing financial and economic sanctions on Russia and threatening China’s sea lanes, fostering terrorism in Xinjiang and advancing the military “Asia Pivot” as well as the TPP that deliberately excludes China. The result is that both Russia and China are forging deep long-term economic ties across Eurasia that ultimately will become the focal point for world economic growth as the China New Silk Road—the One Belt, One Road project– links Russia, China, Iran and the vast regions across Eurasia with a new network of high-speed rail and port links, energy links, pipelines, electricity infrastructure. Russia has clearly decided to “Go East, young man.”
It would be an entirely new paradigm if the nations of Europe were to also go East to open vast new markets for their stagnating economies rather than open US Missile defense bases, hosting advanced nuclear weapons and station US troops on the borders of Russia.
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”