Top line News on Major Gas Deal Status ( Almost a done deal )
Moscow Says Massive "Holy Grail" Gas Deal With China Is 98% Ready
Submitted by Tyler Durden on 05/16/2014 08:19 -0400
We have previously profiled the "holy grail" gas deal between Russia and China on several occasions, and with its announcement scheduled for next week (barring some unmitigated disaster) during Putin's first visit to China since Xi's appointment as president last March, it is time to do a status update on where it stands even if according to SCMP, at this point finding the "holy grail" is merely a formality.
The Hong Kong publication reports that China and Russia hope to sign a massive deal for natural gas supply when their leaders meet in a regional summit in Shanghai next week, a senior diplomat has said. Under the deal, Russia will supply 38 billion cubic metres of natural gas annually to China for 30 years. Deputy Foreign Minister Cheng Guoping told reporters yesterday that President Xi Jinping would discuss the deal and other points of co-operation with his Russian counterpart, Vladimir Putin, who will visit Shanghai on Tuesday.
Russian Deputy Energy Minister Anatoly Yanovsky said on Monday that the deal was "98 per cent ready". Supply would begin no later than the end of 2018.
Indicating just how important China now is to Russia, Bloomberg adds that traveling with Putin will be the who-is-who of Russian politics and business:
- Gazprom CEO Alexey Miller also in delegation as Russian President Vladimir Putin visits China on May 20-21, Yuri Ushakov, Kremlin foreign policy aide, tells reporters in Moscow.
- Ushakov also says that Russia-China trade may reach $100b as early as this year.
- Gazprom working on China gas deal, Rosneft working on Sinopec deal, Novatek working on deal
- China-Russia talks demand compromises on both sides
- Worsening relations with U.S. and allies "clearly to some degree influence" China talks
- Billionaire Oleg Deripaska also traveling to China
As reported previously, the deal is between Russia's Gazprom and China National Petroleum Corporation (CNPC), but the two sides have yet to agree on pricing despite more than a decade of negotiations. Xi will meet Putin on the sidelines of the Conference on Interaction and Confidence Building Measures in Asia, to be attended by 46 nations and agencies.
"The companies of the two nations are exchanging views on the pricing issue," Cheng said. "We will strive to get the companies to sign the natural gas co-operation deal and [have it] witnessed by both state leaders while Putin is in China."
Cheng said Xi and Putin reached a consensus over natural gas co-operation when Xi attended the Sochi Winter Olympics in February. Companies of both nations have reached agreement on many aspects of the deal.
Russian business daily Vedomosti reported last month that the companies were negotiating a price in the range of US$360 to US$400 per 1,000 cubic metres.Gazprom chief executive officer Alexey Miller said last year that the supply could be boosted to 60 billion cubic metres a year over the period of the contract. The gas would be supplied via two pipelines entering northeast and northwest China.Russia has been trying to diversify its energy export base beyond the European market, where Gazprom generates about 80 per cent of its revenue.China relied on imports for nearly a third of its natural gas needs, Xinhua said.It imported 53 billion cubic metres of natural gas last year, according to the China National Petroleum Corporation.Putin's visit will be his first to China since Xi was named president in March last year.
Quid pro quo: "Observers expect both leaders to take a united stand on major international issues, and Putin may seek China's support on Russia's dealings with Ukraine."
And also on the dollar as we reported in "Russia Holds "De-Dollarization Meeting": China, Iran Willing To Drop USD From Bilateral Trade." In which case expect random Chinese space rockets to mysteriously explode during take off too.
Philippines Releases Photos Of China's Construction In Disputed South China Sea
Submitted by Tyler Durden on 05/15/2014 22:43 -0400
Submitted by Zachary Keck via The Diplomat,
On Thursday the Philippines released photos to validate its claim that China is building structures and a possible airstrip on the disputed Johnson Reef.
As Shannon reported yesterday, on Wednesday the Philippines accused China of building structures on the disputed Johnson Reef in the South China Sea, which Manila said was in violation of the non-binding 2002 Declaration on the Conduct of Parties in the South China Sea agreement signed between China and the 10 member states of the Association of Southeast Asian Nations (ASEAN).
On Thursday the Philippines Department of Foreign Affairs (DFA) released four overhead shots of the Reef that date from between March 2012 and March of this year. The photos appear to show in stages China’s reclamation of the Johnson Reef, which the Philippines refers to as Mabini Reef. A DFA spokesperson said that the photos had been obtained by Philippine intelligence sources.
“These actions are considered destabilizing and in violation of the Declaration on the Conduct of Parties in the South China Sea (DOC) and international law,” the DFA said in a statement, the local news outlet GMA Online reported.
The Philippines has speculated that China is preparing to build an airstrip on the disputed reef in order to enhance its power projection capabilities in the South China Sea. Building structures on the reef could also bolster China’s claims of sovereignty over surrounding waters and isles.
The Philippines considers the Johnson Reef to be part of the Kalayaan Island Group (KIG), which it controls. Along with the Philippines and China, Vietnam and Taiwan also claim the Johnson Reef.
DFA spokesperson Charles Jose also expressed concerns on Thursday that China’s moves on the Johnson Reef are designed to undermine the Philippines ongoing international arbitration efforts. The Philippines has appealed to an international tribunal to determine the outstanding sovereignty issues it has with China in South China Sea. Beijing has refused to participate in the proceedings, which it characterizes as illegitimate.
According to Jose, China is trying to re-define the Johnson Reef as an island in order to bolster its claims of sovereignty over surrounding waters. Under the terms of the UN Convention of the Law of the Seas (UNCLOS), a feature that is defined as an island contains a 200 nautical mile exclusive economic zone (EEZ). Thus, a state possessing sovereignty over an island can claims the EEZ it generates. By contrast, smaller features like reefs or rocks do not have EEZs, according to UNCLOS.
“In our protest to China, we said this reclamation could undermine the arbitral tribunal’s review of our case because of the reclamation,” Jose said at a press briefing on Thursday, GMA Online reported. He added: “The nature of (Mabini Reef’s) land feature is being altered so the status quo is being changed.”
US Officially "Takes No Position" On China's Provocative Actions In Disputed Waters
Submitted by Tyler Durden on 05/15/2014 20:35 -0400
In a somewhat stunningly hypocritical step for a nation that seems so hell-bent on proclaiming Russia's provocative actions as tantamount to World War over Ukraine, the White House has issued a statement "taking no position" on China's "disputes" in the China Seas...
- *BIDEN MEETS CHINESE ARMY CHIEF OF STAFF FANG AT WHITE HOUSE
- *BIDEN SAYS U.S. TAKES NO POSITION ON TERRITORY CLAIMS AT ISSUE
- *BIDEN SAYS NATIONS SHOULD AVOID PROVOCATIVE STEPS IN DISPUTES
So - the Chinese undertook "provocative actions" into the "disputed territory" of another sovereign (allied) nation... and the US retaliates with no sanctions, no damnation, no hellfire? Good to know who your friends are...
As Bloomberg reports,
Biden, in meeting with China Army Chief of General Staff Fang Fenghui, says “no nation should take provocative steps to advance claims over disputed areas in a manner that undermines peace and stability in the region,”according to White House statement.Underscores U.S.’s “serious concern about China’s unilateral actions” near Paracel IslandsBiden, Fang met at White House
This comes after earlier new from China...
A top Chinese general on Thursday defended the deployment of an oil rig that has inflamed tensions in the disputed South China Sea and triggered deadly protests in Vietnam, blaming Hanoi and saying China cannot afford to "lose an inch" of territory.General Fang Fenghui also pointed blame at U.S. President Barack Obama's strategic "pivot" to Asia as Vietnam and China grapple with one of the worst breakdowns in relations since the neighbors fought a brief border war in 1979....A U.S. official said Vice President Joe Biden told the visiting Chinese army chief that Beijing's actions in the maritime disputes were "dangerous and provocative.Standing at the Pentagon alongside the top U.S. military officer, General Martin Dempsey, Fang said Vietnam was at fault for stirring up trouble by dispatching ships in an attempt to "disrupt" Chinese drilling activity."I think it's quite clear ... who is conducting normal activity and who is disrupting it," Fang said, speaking through an interpreter....Speaking about regional tensions, Fang said Beijing did not create trouble, but was also unafraid of it and suggested China was ready to defend its territorial integrity."Territory which has passed down by our ancestors into the hands of our generation - we cannot afford to lose an inch," he said.
Which appears to be Chinese for "from my cold dead hands"
China Slams US "Hypocrisy", Tells Obama To Stop "Inspiring Militancy"
Submitted by Tyler Durden on 05/15/2014 13:58 -0400
Tensions between China and the U.S. continue to grow. On Wednesday, Beijing called U.S. Secretary remark about "provocative behavior" of China in the South China Sea "inspiring militancy," and insisted that the U.S. "stop encouraging the provocation" of the Philippines and Vietnam. As China Daily reports, China has expressed the view that the U.S. must abandon the "hypocrisy" and stop publicly support Vietnam and the Philippines in territorial disputes with China.
As RIA reports, Tensions between China and the U.S. continues to grow, experts say. On Wednesday, Beijing called U.S. Secretary remark about "provocative behavior" of China in the South China Sea "inspiring militancy," writes China Daily .
Chinese Foreign Minister Wang Yi said in a telephone conversation with John Kerry that China insists that the U.S. "stop encourage provocation" of the Philippines and Vietnam.According to analysts, so China has expressed the view that the U.S. must abandon the "hypocrisy" and stop publicly support Vietnam and the Philippines in territorial disputes with China.Earlier it was reported that the Philippine government to seize the Chinese fishing boat and 11 crew members on charges of catching endangered sea turtles in the territory disputed waters of the South China Sea. Shortly before that, Vietnam demanded that China stop drilling for oil in the South China Sea.Tensions between China, Vietnam and the Philippinesbegan to increase after last week, President Barack Obama signed a new military agreement with the Philippines, which aims to persuade Asian allies of American support in case of conflict with Beijing.According to experts, thereason why the conflict risks becoming much more serious than just a territorial dispute is because Philippines quickly became embroiled in the geopolitical rivalry between the U.S. and China, while the two powers are fighting for strategic dominance in the western Pacific Ocean, says Al Jazeera article "Strategic Dilemma of the Philippines, between the eagle and the dragon."Professor at the Chinese Institute of International Relations Dan Dzhankun believes that the U.S. is fully engaged in the problems encountered in the Asia-Pacific region because of its relationship with China. However, Washington's aggressive behavior in the territory of South-East Asia is unlikely to stabilize the situation. "The Obama administration is moving away from a century of U.S. diplomatic tradition in maintaining the balance between the other two countries," - said the expert, noting that "sabotage relations between the south-eastern countries may have important implications for the situation in the region and even the world. And fatal mistakes in strategy, which adheres Obama can not be ignored."
Seems like the potential for "costs" are growing...
Russia Dumps 20% Of Its Treasury Holdings As Mystery "Belgium" Buyer Adds Another Whopping $40 Billion
Submitted by Tyler Durden on 05/15/2014 13:23 -0400
Back in mid-March, there was a brief scare after the start of the Ukraine conflict, whenFed custody holdings plunged by a record $104.5 billion (if promptly bouncing back the following week), leading many to believe that Russia may have dumped its Treasurys, or at least change its bond custodian. We noted that we wouldn't have a definitive answer until the May TIC number came out to know for sure how much Russia had sold, or if indeed, anything. Moments ago the May TIC numbers did come out, and as expected,Russia indeed dumped a record $26 billion, or some 20% of all of its holdings, bringing its post-March total to just over $100 billion - the lowest since the Lehman crisis.
But as shocking as this largely pre-telegraphed dump was, it pales in comparison with what Zero Hedge first observed, is the country that has quietly and quite rapidly become the third largest holder of US paper: Belgium. Or rather, "Belgium" because it is quite clear that it is not the country of Begium who is engaging in this unprecedented buying spree of US paper, but some account acting through Belgian custody.
This is how we explained it last month:
... to clarify for our trigger-happy Belgian (non) readers: it is quite clear that Belgium itself is not the buyer. What is not clear is who the mysterious buyer using Belgium as a front is. Because that same "buyer", who to further explain is not China, just bought another whopping $31 billion in Treasurys in February, bringing the "Belgian" total to a record $341.2 billion, cementing "it", or rather whoever the mysterious name behind the Euroclear buying rampage is, as the third largest holder of US Treasurys, well above the hedge fund buying community, also known as Caribbean Banking Centers, which held $300 billion in March.In summary: someone, unclear who, operating through Belgium and most likely the Euroclear service (possible but unconfirmed),has added a record $141 billion in Treasurys since December, or the month in which Bernanke announced the start of the Taper, bringing the host's total to an unprecedented $341 billion!
Make that an unprecedented $381 billion because as we just learned "Belgium" bought another $40 billion in March!
Curiously, this happened as Japan sold $10 billion in TSYs, and as China remained unchanged. Further, foreign official accounts actually declined from $4.069 trillion to $4.054 trillion, which means this is what the US Treasury would classify as a "Private" buyer.
So to summarize, of the total $60 billion increase in foreign Treasury holdings, which rose from $5.89 trillion to $5.95 trillion, "Belgium" accounted for two thirds, most likely doing the purchases under the guise of a "private", unofficial account!
And once again, it is Belgium in "", because whoever is buying through the tiny European country, whose GDP is just double its reported total TSY holdings, is neither its government nor its people.
The question remains: who? Who has bought a whopping $200 billion in Treasurys using Belgium as a proxy since October?
Russia Will Hold Massive Air Drill Along Ukraine Border On Ukraine Presidential Election Day
Submitted by Tyler Durden on 05/15/2014 10:36 -0400
Just in case the message was unclear when Russia held its "massive nuclear attack" drill last week, Putin - unlike Obama who has had a problem with clarifying over the past three months just what "costs" means - intends to hammer the point ten days from today when Ukraine is set to hold its presidential elections, when the Russian military has scheduled to hold yet another military drill, "Aviadarts 2014", this time involving fighter jets (including as Su-27, Su-24, Su -25, Su-34 and MiG-29 jets and Mi-8 , Mi-24 , Mi-28, Ka-52 helicopters) and will see the participation of 71 crews of military aircraft and helicopters rehearsing the "countering of enemy air defenses, destruction of ground targets and carpet bombing enemy territory." Somehow we think Ukraine (and NATO) will get this particular message loud and clear.
More from Russian paper RBC Daily, google translated:
After last year's success the Ministry has decided to introduce new types of military exercises in sports-adversarial format. On such demonstration competitions military not just work out procedures during the " battle" , but also demonstrate commanders , journalists, and the audience that they can do it better than others. The first and second phases of the exercise "Aviadarts - 2014" took place in the beginning of the year. According to RBC's central apparatus of the Defense Ministry officer , the third stage of the exercise " Aviadarts 2014 " in Voronezh site " Pogonovo " will be held from 21 to 26 May. 71 fighter jet crews will participate,more than the number of planes and helicopters took part in the May 9 parade in Sevastopol. Based aircraft at the time of the competition will be in Ryazan, Lipetsk and Voronezh region.The press service of the Air Force (Air Force) Russia, RBC said that the drill will involve operational- tactical aircraft (Su- 27, Su- 24, Su - 25, Su -34 and MiG- 29), Army ( Mi -8 , Mi-24 , Mi- 28, Ka -52) , the distal ( Tu-22M3 ) and military transport aircraft ( IL-76 ) . From the Western Military District ( WEST ) Challenge flight training will be attended by bomber crews Su and MiG fighters from air bases located in eight regions , said the press service of the WEST .During the exercises, formation flying pilots will work as part of couples and units piloting technique , problems of air navigation, combat use of the missile , bomb and gun arms against ground targets, as well as overcoming the simulated enemy air defense systems, said a source in the Defense Ministry .Will be prepared for the competition The target unique situation , said RBC chief of the press service WEST Oleg Kochetkov first ground targets will be presented not only a wooden model , but a real aircraft and automotive armor . Military even transported by air to the transport helicopter Mi-26T two handicaps MiG- 25RB ( cargo weight - 15 tons ) ."The active phase of the exercise, when the pilots will perform tasks directly in the air, including the use of military weapons , 24-25 May," - said RBC group chief information security Air Force Colonel Igor Klimov. 21st , he said, will be opening on May 22-23 - the theoretical exams and delivery standards for physical training, and the 26th - closing with the award winners .
Deputy director of the Institute of Political and Military Analysis, Alexander Hramchihin did not rule out that the choice of date of the air drill was not random , but deliberately. " It is possible that the Ministry of Defense were guided with the current military and political situation in Ukraine ," - said the expert. " May 9 we have demonstrated excellent West capabilities of our aircraft, which flew to the Crimea and back , apparently, decided to build on the success ", adds the director of the Center for Military Forecasting Anatoly Tsiganok.In June and July will be held the final , fourth stage " Aviadartsa " said RBC's group chief information security Air Force , Colonel Igor Klimov . It will take part foreign crews have already confirmed their participation , Belarus and Kazakhstan . Also was invited to the French side , but so far no response . In addition, in the final stage for the first time will participate aviadartsa and helicopter crews of Emergency Situations, Ministry of Internal Affairs and the Federal Security Service of Russia.
As for the yet unplanned fifth stage of the Avia-Darts, it may involve the landing of Mig-29s on the airport in Kiev.
And just in case Russian military engagements were not enough, RIA also reportedthat a Russian Pacific Fleet squadron, led by the guided-missile cruiser Varyag, sailed from Vladivostok on Wednesday to participate in the Russia-China exercises Naval Interaction-2014, a military spokesman told RIA Novosti.The squadron, which also includes the large anti-submarine ship Admiral Panteleyev, the large amphibious ship Admiral Nevelskoy, the destroyer Bystry, the tanker Ilim and the sea-going tugboat Kalar, is heading to Shanghai, said Capt. 1st Rank Roman Martov.“Upon arrival, sailors will take part in the joint Russia-China exercises in the South China Sea,” he said.Six Chinese ships and vessels will be involved in the drills, according to Martov.The drills come as Russian President Vladimir Putin is due to arrive in Shanghai on an official visit May 20 to cement economic ties with China, including on energy, the Kremlin said.This will be the two countries' third such joint training exercise this year, aimed at strengthening the cooperation of their fleets and the ability to withstand various threats in open water.Last year, the drills of the kind took place in July in the Sea of Japan and involved about 20 ships and vessels from both sides.
And now, once Kevin Henry returns from his Starbucks coffee break, it will be time to BTFD and/or BTFATH - after all the Fed is firmly in control of surreality, even if its excel models tend to #ref! out now and then.
Russia and China planning and strategizing - setting the Agenda.....