Russia-China $400 Billion Energy Deal Highlights Continued Cold War

By:  Christian Gomez
05/27/2014
       
Russia-China $400 Billion Energy Deal Highlights Continued Cold War

On May 21, 2014, Russia and China signed a 30-year $400 billion deal for Gazprom, Russia and the world’s largest natural gas producer, to deliver 38 billion cubic meters (1,342 billion cubic feet) of Russian natural gas to Communist China each year, highlighting the emergence of a new increasingly anti-Western Sino-Soviet bloc.

The agreement was signed between the Chinese Communist Party-controlled CNPC (China National Petroleum Corporation) and the “ex”-KGB run Gazprom at the culmination of Vladimir Putin’s two-day visit to the Chinese capital.

The agreement between the two giant state-owned energy companies was signed by Gazprom vice-chairman and CEO Alexei Miller and CNPC chairman Zhou Jiping. According to various Mandarin (Chinese language) websites, Zhou Jiping is listed as a member of the Communist Party of China. According to a 2009 article from the Global Post, “Nearly a dozen of top Gazprom managers served in the KGB or its main successor agency, the FSB, including its deputy chairman, Valery Golubyov.” Alternately spelled Valery Golubev, his official biography on Gazprom’s website lists 1979 to 1991 as his “Service in the USSR KGB.” 

Vladimir Lenin, the architect and founder of the USSR, referred to the KGB (then called Cheka) as the “sword of the shield of the revolution.” The revolution Lenin was referring to was the October or Bolshevik Revolution of 1917 that transformed Russia into a communist state.

Speaking to representatives from various global enterprises at the 18th International Economic Forum, held in St. Petersburg, Russia, Russian President Vladimir Putin, also a former KGB officer, said of the Gazprom-China deal:

This deal is for 30 years, while I think there’s enough supply for 50 years. They are underestimated. Extractable reserves at the two deposits that we would introduce –Kovykta and Chayanda – are 1.5 trillion cubic metres of natural gas reserves each. Which means in total there’s 3 trillion. In reality, I repeat, there’s more.

Putin had been pushing for this agreement for over a decade but had been stalled over the price. With its signing last week, the agreement is “the largest in the gas sphere during the era of the USSR and Russia,” Putin said.

The $400-billion price tag of the Gazprom-China deal is greater than the gross domestic product of South Africa. Putin told reporters in Shanghai that Russia will invest $55 billion to construct the necessary pipelines in order to deliver the gas to China. In the meantime, China has agreed to invest at least $20 billion toward the project.

The delivery of this gas to China will be a much-needed boost for China’s rapidly growing economy and industry. “In 2013, China consumed about 170 billion cubic meters of natural gas and is expected to consume 420 billion cubic meters per year by 2020,” reported RT.

“Assuming that the 38bn cubic metres of gas are delivered each year, the price of the gas is about $350 (£207) per thousand cubic metres, according to analysts,” the U.K. Guardian newspaper reported.

Aled Jones, the director of the Global Sustainability Institute at Anglia Ruskin University, told The Guardian, “Russia’s new pipeline to China will increase competition for natural gas from 2018 and will most likely increase the cost we pay for natural gas here in the EU. It will certainly increase the pressure on European countries to find alternative gas supplies.”

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Photo of Russia's President Vladimir Putin, background left, and China's President Xi Jinping: AP Images

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