Desperate Times, Desperate Measures
Celebrating A Union of Malcontents
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| Not quite ready to build a pipeline to China. Photographer: Alexey Druzhinin/AFP/Getty Images |
"Russia has abandoned the troubled South Stream project and will now be building its replacement with Turkey. This monumental decision signals that Ankara has made its choice to reject Euro-Atlanticism and embrace Eurasion integration."
"In what may possibly be the biggest move toward multipolarity thus far ... Turkey has done away with its former Euro-Atlantic ambitions. A year ago, none of this would have been foreseeable, but the absolute failure of the US/ Mideast policy and the EU's energy one made this stunning reversal possible in under a year. Turkey is still anticipated to have some privileged relations with the West, but the entire nature of the relationship has forever changed as the country officially engages in pragmatic multipolarity."
"Turkey's leadership made a major move by sealing such a colossal deal with Russia in such a sensitive political environment, and the old friendship can never be restored ... The reverberations are truly global."
Andrew Korybko, 'Cold Turkey: Ankara Buckles Against Western Pressure, Turns to Russia', Sputnik News
"We were negotiating concerning an advance and the advance was an element of the price negotiations. But as we have reached a final agreement on the price, we are not considering the possibility of receiving an advance as a financial instrument to further lower the price [offered to China]." WOT?!!
Alexei Miller, head, Gazprom
The 'advance', unfortunately did not materialize. China was offered a better gas price on the basis of investing substantially into the 30-year deal to supply 38 billion cubic metres of natural gas yearly to China in a $400-billion contract to supply China with gas through a new pipeline, Power of Siberia. That much-celebrated deal, meant to thumb-nose the European Union by teaching both it and Ukraine another lesson in pipeline diversion, simply failed to materialize.
The generosity of a presumed Chinese advance to begin the building of the gas infrastructure would have aided Moscow enormously. On the basis of a projected $55-billion pricetag, no doubt heads were spinning at the prospect of China ponying up at least a tenth of that total to help matters along and spur the initial construction. The offer originally was that an advance would translate into a lower gas price for China. But the advance was withheld and the gas price ... what about that price?
With the plummeting returns on gas and oil is it even remotely possible that clever Beijing energy authorities bargaining with Moscow would not foresee a fluctuating market and await near-delivery before settling on a price? Headaches there are many. For Moscow, in any event. The Power of Siberia infrastructure to funnel that gas to China may have been under-priced. New costing speaks more like $70-billion.
Given that Russia is teetering on the brink of recession where will the wherewithal to build the pipeline arise from when the East European Gas Analysis consultancy cites an even costlier estimate of $100-billion required by Gazprom to build the pipeline. Funding can no longer be raised through financial markets in the West. And Russia's state National Welfare Fund has a lineup for funding from the $80-billion kitty.
And then there's the deal with Turkey, the replacement of the South Stream pipeline blocked by the EU with new plans to lay pipe across the Black Sea. It will prove more costly to deliver gas to Turkey bypassing the Ukraine route to "reduce Ukraine's role as a gas-transit country to zero". The European Union countries dependent on Russian gas (30% of imports) bought a significant 160-billion cubic metres of natural gas from Gazprom last year.
Turkey doesn't seem convinced that the pricing offered by Russia will really benefit the country. Turkish Energy Minister Taner Yildiz holds that no firm deal, despite the triumphant trumpeting of Moscow for at-home public consumption, to soften the bad-news blow of recession, had actually taken place. President Putin and Prime Minister Erdogan simply agreed to keep discussing diverting the Black Sea pipeline to Turkey.
Turkey isn't much enamoured of the Russian offer of a 6% discount, and a counter-offer was proffered. Moscow is now anticipating unhappily the prospect of supplying Turkey with gas at a lower price than it would have received from its European consumers out of South Stream. And there goes its argument to the West and the U.S. in particular to stop interfering in Russia's Ukraine adventure.
The sanctions by Moscow-averse adventurism by the West has left Mr. Putin with a sincere wish to upstage his tormentors by demonstrating ably how many options he has to diversify the country's export base, and nothing would please him more than to leave his old EU customers with whom he has had such uneasy, bullying relations in the past, out in the dark and the cold.
Pity indeed that the realities of the marketplace and a meagre cash cupboard leaves Russia in actual fact, with so few options but to return to its traditional client base meekly in need of a boost to its faltering finances.
Labels: China, Energy, European Union, Natural Resources, Russia, Turkey
posted by Pieface @ Wednesday, December 10, 2014
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