Thank you to Martin Armstrong @ Armstrong Economics.
Sanctions strengthened Putin and caused “unfriendly nations” to form a
closer alliance against the West. As the West suffers from an energy crisis
with no solution in sight, Russia is benefitting from this in more ways than
one. You may have heard of the China–Russia East-Route Natural Gas pipeline or
the Yakutia–Khabarovsk–Vladivostok pipeline. Construction was approved in 2007,
and in 2012, Putin ordered Gazprom to begin construction and renamed the
project “Power of Siberia.” China
and Russia signed a 30-year deal for $400 billion in 2014, and by December
2019, the pipeline was functional.
The mainstream media focuses on the failure of the Nord Stream 2
Pipeline at the hands of German politicians but forgets that Russia has
alternative options for exporting fuel. Deliveries through the Power of Siberia
have only reached $3.81 billion since December 2019, but China and Russia have
plans to ramp up distribution. China received 16.5 billion cubic meters of gas
from the pipeline in 2021. The deal has become so lucrative that Beijing and
Moscow created a second pipeline – the Power of Siberia 2.
This could double exports from Russia to China with a pipeline that would pass
through Mongolia as well.
In the first six months of 2022, Gazprom exported 7.5 billion cubic
meters of gas to China, marking a 63.4% uptick in volume. Prior to the invasion
of Ukraine in early February, China and Russia agreed to ramp up distribution
by 10 billion cubic meters. Reuters believes
this could increase sales by $37.5 billion in the next 25 years, but this could
increase given the high demand and low availability.
The West, namely Europe, needed Russian energy; Russia did not need
Europe. President Biden admitted long ago that sanctions do not work, but in
this instance, they completely backfired and have left the West with no
leverage over Russian energy.
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