Essay Writing Help on A New Gas Deal with China

A New Gas Deal with China

            So, in striking an enormous new arrangement to supply the gas to China, has Putin outflanked the United States furthermore its European companions once more? Much as Russia’s leader would like everyone to think along these lines, not by any means. Putin called today’s agreement an “epochal occasion.” The administrations’ joint articulation contained not so subtle feedback of United States furthermore European Union activities over Ukraine, welcoming the world to view an arrangement in the connection of that question. The timing is unquestionably no mishap, and a closer relationship in the middle of Russia and China is scarcely a matter of aloofness to whatever is left of the world. In the meantime, this consent to supply China with natural gas has been in labors for a long time, and an arrangement had been broadly expected in the not so distant future. The two nations had been wrangling for the most part over cost. The terms advertised this week do not make a genuine cost of the gas (counting how much each one will use on the vital pipeline foundation) unequivocal, however it creates the impression that Chinese government will pay a bit short of what Europe pays for the Russian gas. If provided that this is true, both parties have moved from their prior positions in settling the negotiations[1].

            On the off chance that there is a victor, its China. It utilized Russia’s yearning to send the United States also Europe a message as an issue to show signs of improvement value and its favored pipeline course for the gas. As far as it matters for him, Putin has a huge new client for Russian trades, and can tell the United States what is more Europe that Russia is feeling fine without the European business sector, much obliged. China broadens its vitality supply – in addition to everything else, its quick to depend less on coal – and it does so on ideal terms. Representations of solidarity about the downsides of equitable a free market system and the benefits of other quality frameworks are a reward for both sides.

            What an arrangement doesn’t mean – not yet, at any rate – is a worldwide realignment that puts the United States also Europe at a grave impediment. The convoluted history of the Russia-China relations demonstrates that their long haul diversions are not correlative. Putin won’t need Russia to rely on upon Chinese government any more than he needs it to rely on upon Europe. At any rate, the gas sends out in the new agreement, once on-stream in 2018, will be around the quarter of what Russia offers to Europe. Regardless of the fact that the arrangement is amplified later, the thought that Russia is possible now to get along the fine without the European business is jabber.

            Russia will have each motivation to repair the relations with Europe once an emergency in Ukraine has passed. Meanwhile, Europe ought to utilize the influence it has. The new arrangement does not change the Europe’s computation, as far as Ukraine is disquieted. For the more extended term, Europe knows it needs to expand its vitality supplies. The new understanding just underlines the point. It is generally reason for concern when two domineering governments, managing such enormous and capable nations, develop their ties and find better approaches for collaborating. For this situation, in any case, the new union is unrealistic to change the hidden rationale of a longstanding contention. Also, the length of this organization keeps going, it is important that there is even the worldwide profit: It’s to everyone’s greatest advantage that China, whose offer of overall nursery gas outflows is climbing quick, utilize more gas and less coal. Much obliged for that, to President Putin[2].

            After negotiations that lasted 15 years, Russia and China finally signed a contract for the supply of natural gas, implying the construction of a pipeline between the two countries. Under the terms of the pact, signed on 30 years, China will receive natural gas needed for its economy (which will also help clean the air in the country), while Russia will be able to diversify exports and reduce dependence on the difficult relations with Europe. Most likely, Russia will never have to worry about possible sanctions from China.

            Since the late 90’s the stumbling block in the negotiations was the price that China is willing to pay for Russian gas. Beijing has always sought to invest immediately in exchange for a price reduction in the future. Russia has always gladly took the money but did not want to give China too big discounts to other customers did not expect such prices. Now it seems that China will spend about $25 billion of advance payments to help Russia build the pipeline and develop gas fields in Siberia. What about the price? Announcing the deal, the Russian “gas king” Alexei Miller, the head of state of “Gazprom”, declined to name the price of gas to China as part of the agreement, saying only that this is a “trade secret.” Yet, talking about the details of the contract, he made a few hints about the gas prices. According to him, “Gazprom” will sell China 38 billion cubic meters of natural gas a year for 30 years. The total value of the contract – $400 billion[3].

            Moreover, according to Russian President Vladimir Putin, the price that China will pay for gas, linked to the oil price. That is, if the price of Brent crude oil will grow by 2%, the same thing will happen with the price of gas to China, but how can you determine the total cost of the transaction for 30 years, if we do not know what will be the price of oil in a month? According to Derek Scissors, a specialist in Asian economies in the American Enterprise Institute, articulated figures is the fiction. “I do not believe a word” – says Scissors, who suggests that an agreement on a price has not yet been reached. Similarly, it is impossible to know, however Scissors believes that Russia and China have agreed on the amount of gas sent, but decided not to discuss its price, so that it was the possibility to proceed with the construction of the pipeline.

            In this case, $400 billion is just a PR ploy. Having said that, as Scissors says, “Gazprom” can show the world that it held its position on the issue of gas prices and “will not go on too much reduction” of the prices for China, thus not allowing the chance for others to their customers to claim discounts (that they are not able to do in any case). It is important for Russia to demonstrate that it firmly holds the position on prices. All this, of course, only speculation, but it is worth paying attention to the time of the conclusion of the contract. Just hours before the official declaration of the deal was reported that Russia and China could not agree on the price, and then we saw how Putin and Chinese President Xi Jinping shake hands on stage in Shanghai, while the heads of state energy companies signed the agreement.

            If Putin went from Shanghai, and has not signed the treaty, it would weaken his position in a meeting with President Obama and German Chancellor Angela Merkel, and now he has appeared evidence that Russia may reduce dependence on Western clients, to protect themselves from the sanctions in the long run. Against the background of the criminal charges brought recently by America against the Chinese military for alleged espionage against US companies, China might want to answer to the United States with the help of Russia. As the saying goes, the enemy of my enemy is my friend, at least for now[4].

            The day after the announcement of the European Union’s about the readiness of a new package of sanctions against Moscow, a State Department spokesman said that the US is completing preparing to expand sanctions against the defense, energy and financial sector in Russia. So, the European capitals and Washington say that the imposition of sanctions depends on the Kremlin’s actions in Ukraine. As American experts say, that it is possible that this argument can to act this time, since Moscow already has to undertake extraordinary measures to neutralize the effects of Western sanctions. It is possible that the sanctions have hit the Russian economy is much more serious than are willing to admit the Russian government and the Kremlin is trying to get out of a very dangerous situation by selling a part of state-owned oil companies to China. American economist at the Hoover Institution Mikhail Bernshtam argued that under normal circumstances, a significant part of the profit of the company for a song actually a billion dollars will not be passed into the possession of the national state-owned company in another country. In early September, Russian President Putin announced that the Russian state company “Rosneft” sold to China for a billion dollars ten per cent of its largest field “Vankorneft” in the north of the Krasnoyarsk Territory. This is the largest field, the development of which began in 1988, now it is running at full capacity and produces an oil for about fifteen billion dollars a year. China will not make any significant investments in this field, because it is running a large deposit. We are talking only about a form of debt refinancing of the “Rosneft”[5].

            Vladimir Putin’s property snatch in Ukraine has prompted Russia’s most noticeably bad emergency with the West since the end of the Cold War; however it may have one ideal outcome for individuals far from Crimea. With Russia’s lucrative fares of characteristic gas to Europe now debilitated, Putin needs to discover new clients to the East so, this could mean an exhaust cloud stifled residents of Beijing and another Chinese urban area may have the capacity to inhale somewhat more effectively. For the Chinese, the Russian pipeline would help decrease the dependence on coal-blazing force plants that have fouled the demeanor of the world’s most crowded nation. How awful is Beijing’s air? We realize that the brown haze is obvious from space. Nowadays, the city’s natural security agency advertised the measure of contamination more modest than 2.5 microns in width surpasses national models by 156 percent[6]. In order to battle contamination, the legislature is attempting to decrease China’s dependence on coal. Considering that, China will boycott imports of coal with high-cinder and high-sulfur content, the Chinese official said at the meeting. Talking in Shanghai, Ren Leixin, leader of the coal sector at National Energy Administration, said that China would rather attempt to empower imports of the higher-quality coal.

            The Chinese likewise need to import more gas as an issue option to coal. So, they moved closer to the natural gas achievement with Russia after a gathering between  Zhang Gaoli, the Chinese Vice Premier and his Russian partner Arkady Dvorkovich, the Deputy Prime Minister. The two co-executives of a Sino-Russian vitality participation council talked hopefully about boosting endeavors to cooperate on a mixture of tasks. The authority China newspaper reported a proposed gas pipeline from Russia direction to China is “coming soon.” Dvorkovich was considerably more energetic, anticipating an agreement would be essentially before the years over. Corporate authorities are talking, as well. Venturing out to China with Putin’s agent was the Chairman of Gazprom Alexey Miller, who met with administrator and the president of the China National Petroleum Zhou Jiping. There is currently “dynamic” advance in exchanges about importing natural gas from Siberia. Fortunately for China, they now have the preference in its discussions with Russia, which all of a sudden has a much more prominent motivator to develop the Chinese market. The approvals to rebuff Putin’s snatch for Crimea are debilitating to lessen request in Europe in the meantime the American fast blast has made the United States a much stronger contender. As an issue, Russia truly may close the China natural gas supply arrangement, considering that it will be more adaptable on the value. Putin undoubtedly would love to have the capacity to adhere it to the West by proclaiming an arrangement himself, and he may find the opportunity soon. The Russian pioneer is planned to visit the Chinese President Xi Jinping soon, and if all will be good, they may declare a deal then.

            To date, China’s industry is represented by 360 branches. Along with the traditionally developed sectors (textile, coal, iron and steel) it has emerged new industries such as oil and gas, oil refining, chemical, aerospace, and electronic. Energy in China is released in the world by a large scale of development, like the production of primary energy, and the country has one of the leading places in the world. China is a major producer of oil and is the 6th largest in the world. It is developed more than 125 fields there. The extracted oil varied in quality – from light sweet to heavy and waxy. The gas industry is represented by production of natural and associated gas, by achieving the artificial industrial (coke, oil shale) and artisanal (biomethane) gases. The oil industry accounts for 21% of the production of energy resources. Oil provides about 16% of foreign exchange earnings from exports. In general, there are more than 32 companies producing oil, and in parts of China, the total oil reserves have 64 billion tons. The largest mining and processing enterprises of oil are located in the provinces of Heilongjiang, Shandong, Qinghai, and also in underdeveloped areas are often far from the centers of oil consumption. The greater parts of the 580 refineries are concentrated in the Northeast China. Southern China, and especially its eastern zone are rich in natural gas reserves, which estimated at 4 thousands billion of tons, and to date, it has been explored only 3.5%[7].

            China is diversifying its sources of energy, particularly it seeks to reduce the use of coal, and does like this way on the favorable terms. Moreover, both countries agree in their assessment of the shortcomings of democratic capitalism and advantages of other systems of values that can be called a bonus for two sides. What this deal does not mean, in any case, so far, so this is a global restructuring of the world, which would put the United States and Europe in a difficult disadvantage. Complex history of Russian-Chinese relations, says that its long-term interests do not coincide. Putin does not want Russia to be dependent on China more than he wants to depend on Europe. However, according to the new agreement, the amount of gas to be exported in 2018, will be like a quarter of the amount that Russia sells to Europe, but even if this figure will increase later, saying that Russia will now be able to do without European market is ridiculous.

            The deal on gas between China and Russia is more important for Russia than for China. This opinion was expressed by the Chinese analysts. In their view, the geopolitical importance of the contract with Gazprom for China is much less than for Russia, despite China’s desire to diversify its oil and gas supplies. Moreover, this deal is more evidence of how important the support of China to Moscow. Cooperation with the West is important for China because this country is still seeking to establish strong ties with the US. At the same time, Russia has no choice especially in terms of gas supplies. Putin said: “If you do not want to deal with me, I will pay attention to the East,” but he cannot do this. All pipes have a westerly direction. In order to expand eastward, it requires the significant investment, and the land which adjacent to China, is not so rich in natural resources “- indicates one of the top managers of the gas industry[8].

            The development of China’s natural gas industry cannot be considered outside the context of the problems of development of all its energy. The growth of the Chinese economy in the medium term, to a large extent linked to the increase in the share of consumption of efficient energy resources, as the natural gas, oil, hydro and nuclear power, although now their share in the structure of energy production is relatively small. However, the bringing in effective energy fraught with difficulties. Today the high rate of rise of the Chinese economy are not provided by the corresponding development of its energy sector. The country is increasingly moving into the category of net importers of energy, increasing energy shortages, and providing them to the needs of the national economy is becoming a factor in the foreign policy strategy of the state. A key part of China’s energy diplomacy is a steady and guaranteed supply of needs of the country in high-energy resources, which include oil and natural gas. In the context of China’s greater involvement in the processes of globalization, considerable attention must be paid to such external factors of the global energy market, as a change in the geopolitical situation and the associated increase in political risk and instability in the production of hydrocarbons, the increase in world prices for oil and gas, and increasing of the state’s participation in international trade energy[9].

            In addition, China’s energy policy should take into account a number of national characteristics of oil and gas sector of the country, namely:

– A significant proportion of the state’s presence in the development of oil and gas resources;

– Opening new promising oil and gas fields in Remote Mountain and desert regions;

– Lack of development of gas transportation infrastructure.

            Another important factor is the need to optimize energy consumption. Currently, the country’s leadership attaches great importance to excessive energy consumption. At the first session of the National People’s Congress of the 11th convocation, held in March 2008, for this issue was paid a special attention. Back in 2006, in order to save energy was planned reduction in their use per unit of GDP (20% in five years). However, in the same year there were not energy savings, and in the 2007 it was 3.7% instead of the planned 5%. Moreover, a significant part of foreign direct investment goes to the energy-intensive industries sector, which only exacerbates the high energy needs. In connection with such negative trends, the government took drastic measures, in particular the significant number of closed small and inefficient power plants, small coal mines, outdated energy-intensive production in the steel, cement and so on.

            Lately, because of rising oil shortage public authorities “deployed” in the direction of the gas industry. It becomes the determining factor in the further rise of the Chinese economy, to accelerate progress is drawn all the attention of the country. However, the high capital intensity of development in this area leads to the need to develop a clear and sound strategy. The interest in the gas industry is due to the increase in gas consumption in the electric power industry, improving an environmental protection and industry transition to more advanced technologies. Additional impetus to the wide application of the gas gives the realization of software systems to improve the quality of life, which to a certain extent due to the transition from heating coal to gas heating, etc. Thus, in the medium term, it is planning the rapid growth of consumption of these raw materials. At first glance, China will be able to satisfy the increased demand for natural gas, since, according to some data, it has significant reserves: according to Chinese experts, they make up 46.2 trillion cubic meters. It is reported that the country celebrated the active growth of proved reserves in gas production areas of the state[10].

            The Chinese Government has decided on a gradual increase in domestic gas prices to world levels, in connection with what is supposed to improve the methodology of pricing, as well as the scheme of preferences for increasing the interest of oil companies in the development of domestic resources. In parallel, it should be taken measures to drastically reduce the energy intensity of the economy and the environmental load of enterprises. The projected medium-term is difficult to determine the pace and level of development of the gas industry of China. This is due to the lack of clear government decisions to allocate funds for the replacement of coal with gas in the national economy, as well as to reduce the environmental load of cities, etc. In many ways, a defining moment in the gas structure of China becomes a decision on construction of the main pipeline from Russia. Thus, from the two directions of the proposed, the gas pipeline Altai becomes irrelevant, due to its length and environmental requirements. Highway of Eastern Siberia is real, but the sale of the East Siberian natural gas at a reduced price, which insists China, is only possible if China will provide the direct access to its gas distribution assets of corporations for the Russian companies.


1. Beijing Review. Sino-Russo Pipe. Article (2014), p. 7.

2. China Today. Green Drive Fuels NG Demand. Article (2014), p. 13.

3. Einhorn, Bruce. How the Ukraine Crisis Could Help Clear Beijing’s Smog. Global Economics   (2014).

4. Kramer, Andrew. Gazprom Makes a Gas Deal With China, Giving Russia New Leverage.

             New   York Times (2014), p. 6.

5. Krauss, Clifford & Bradsher, Keith. China’s Global Search for Energy. New York Times         (2014), p. 1-8.

6. McFarquhar, Neil & Higgins, Andrew. Ukraine Crisis Pushing Putin Toward China. New

            York    Times (2014), p. 1-7.

7. Mock, Vanessa & Spegele, Brian. China and Russia Sign Natural Gas Deal. Wall Street            Journal (2014).

8. Shipley, David. In the Russia-China Gas Deal, Did Putin Win? Business Week (2014).

9. Weitz, Richard. The Russia-China Gas Deal. World Affairs (2014), p. 80-86.

10. Yep, Eric. New Russia-China Deal Could Further Hit Natural-Gas Prices. Wall Street

            Journal (2014), p. 1.

[1]              Shipley, David. In the Russia-China Gas Deal, Did Putin Win? Business Week (2014).

[2]              Weitz, Richard. The Russia-China Gas Deal. World Affairs ( 2014), p. 80-86.

[3]              Beijing Review. Sino-Russo Pipe. Article (2014), p. 7.

[4]              Yep, Eric. New Russia-China Deal Could Further Hit Natural-Gas Prices. Wall Street Journal (2014), p. 1.

[5]              Einhorn, Bruce. How the Ukraine Crisis Could Help Clear Beijing’s Smog. Global Economics (2014).

[6]              McFarquhar, Neil & Higgins, Andrew. Ukraine Crisis Pushing Putin Toward China. New York Times (2014), p. 1-7.

[7]              China Today. Green Drive Fuels NG Demand. Article (2014), p. 13.

[8]              Kramer, Andrew. Gazprom Makes a Gas Deal With China, Giving Russia New Leverage. New York Times (2014), p. 6.

[9]              Mock, Vanessa & Spegele, Brian. China and Russia Sign Natural Gas Deal. Wall Street Journal (2014).

[10]             Krauss, Clifford & Bradsher, Keith. China’s Global Search for Energy. New York Times (2014), p. 1-8.