Welcome to the age of diminishing returns

Saturday, June 14, 2014

Russia's Smart Move to Asia


In this post, professor Tatiana Yugay, of the Moscow State University of economics, reports  from Saint Petersburg about the recent Russia-China deal. See also a previous post on the subject.




By Tatiana Yugay

In my previous post at Ugo Bardi's blog, I suggested that “Russia but not the U.S. has been pivoting to Asia just now”. Since then several landmark events happened in the Asian arena, such as, Vladimir Putin's successful visit to China and the conclusion of a $400 billion gas mega-deal between Russia's Gazprom and China's CNPC along with other important 50 agreements, the Russian-Chinese navy drills in the East-China Sea and Obama's visit to East Asia in order to alert his Asian allies. Last but not least, signing the Treaty on the Foundation of the Eurasian Economic Union took place in Astana at the end of May.

On May 23-24, I had a chance to participate in the Forum of Russia's and China's Leading Economists which was hosted by the St. Petersburg State University of Economics. By a happy coincidence, the Forum took place right after the conclusion of the millennium gas deal between the two countries and, moreover, contemporaneously with the St. Petersburg International Economic Forum. Though our event was a much more modest one, all the participants felt their involvement with mainstream geopolitical developments. The atmosphere was very vibrant, friendly and a sort of triumphant. In fact, we felt ourselves as if we were participating in the St. Petersburg International Economic Forum since the agenda of both forums were somehow overlapping, including a key topic of the Russian-Chinese strategic economic partnership. 
 
It is needless to say that the gas deal was on everyone's lips. I was pleasantly surprised that the attitude of the Chinese speakers was very similar to my own vision. It is clear that the scientific communities of both countries are more free to express their views than the political leadership. Recently, Russian policymakers do not hesitate to express their opinions in strong and sarcastic terms and the general public enjoy this fact. On the other hand, the Chinese leadership is rather careful in its wording and expresses its position rather indirectly. On the contrary, the Chinese speakers at our Forum were even more tough while expressing their attitudes towards the U.S. policy than their Russian counterparts. They accused the U.S. of the “new regionalism” aimed at excluding China and Russia from shaping new international trade rules in the framework of Trans-Pacific Partnership Agreement (TPP) and Transatlantic Trade and Investment Partnership (TTIP). Both Russian and Chinese participants agreed that the US domination destabilizes the world and exerts direct threats to national security of our countries. 
 
In my presentation, I presumed that Russia and China should give asymmetric geoeconomic responses to the latest geopolitical threats, avoiding direct confrontation. Since the U.S. is still stronger economically, politically and militarily than China and Russia and, mainly, because all three countries are the members of the nuke club and the world is already dangerously balancing on the brink of the world war. 
 
In my opinion, soft asymmetric responses should not be directed straightforward at a potential adversary but represent elaborate strategies aimed at creating international configurations or alternative ways out of a crisis situation. In these latter days, Russia has been masterminding such kind of long-term solutions. Instead of involving itself in a fruitless tit for tat sanctions game, Russia has been forging its Asian-Pacific pivot. 
 
Ahead of striking the mega-gas deal and in the aftermath, there was no shortage of speculations about its geopolitical significance. A repeating key-note was that China had an upper hand because of Western sanctions against Russia. The commentators presumed that Putin was going to China as a suppliant and would be forced to submit to Chinese tough conditions. Frankly speaking, I was seriously concerned when at the end of the first day of his visit the contract wasn't yet signed and I saw Putin's sober face. The tension continued on the next day and only in the afternoon it was announced that the deal was struck. However, there was still remaining a sort of ambiguity about the price of the gas that could serve as the main indicator of whose hand was the upper one. Gazprom regards the price as a commercial secret and didnn't reveal it. So the analytical community both in the West and in Russia made a lot of guesswork. A simple math supposes that if the total price ($400 billion) and the quantity (38 billion cubic meters) are known then the average price can be $350 per 1,000 cubic meters. 

The Western commentators hurried up to admit that Given the costs announced so far, this project will yield a subpar return for Gazprom under today’s assumptions—maybe high single digits or low double digits. This will not be Gazprom’s most profitable endeavor”. However, the head of the Gazprom export arm Alexander Medvedev said the gas price would be well above $350 per 1,000 cubic meters. At that, Gazprom and China have preliminary agreed on a $25 billion advance payment for gas supplies. Konstantin Simonov, director general of the National Energy Security Foundation, thinks that the widely reported sticker price of $350 per 1,000 cubic meters is a simple oversimplification. He explained that under the contract, supplies of Russian gas via the Eastern route will reach the full capacity of 38 bcm a year only after the fifth year of supplies. During the first five years deliveries will be only 16 bcm annually. This means that the total gas supply will exceed a trillion cubic meters and the price will come closer to $390.  

Important for Russia, the agreement includes a base price formula with reference to oil prices. Russia was determined to protect this price formula notwithstanding China's tough resistance. The pricing of Russia's gas sales to Europe is based on an oil price reference formula. Given the high oil prices, the oil-based price formula for natural gas allows Russia to sell its gas at a higher price than if it were based on spot-market natural gas prices. On the other hand, RBC Capital Markets analysts said implied terms will give China a steady supply of piped-in Russian gas at a price about 25-40 percent lower than the current cost of importing liquefied natural gas from overseas. So the deal is beneficial for both parties.

Gazprom expects that the contract with China will affect gas prices in the European market, Aleksey Miller, head of Gazprom said at the St. Petersburg International Economic Forum. "Firstly we assume that the signing of this contract will impact European gas prices. Secondly, the competition for Russian gas resources has begun yesterday,” Miller said. “The Asia-Pacific is not only the largest and dominant market, but it is the Asia-Pacific market that is influencing the European and North American markets”.

A greater geopolitical vision of the gas deal is expressed by Ulson Gunnar, “Finally, Russia and China’s constructive energy partnership, concluded without territorial, economic, or legal integration, will lend further credibility toward a future multipolar global order, while simultaneously exposing the shortcomings, even follies, of the West’s unipolar system of pursuing hegemony through costly and ultimately unsustainable global integration».

Immediately after striking the deal which was long in advance nicknamed by the Western media as Putin's Holy Graal, it was labeled as Russia's Asian pivot. As Patrick L Young puts it, “Placed in perspective, while a massive deal it is only expected to be around 10 percent of Chinese demand by 2020 (according to Nomura). That means there is much more scope for Russia to increase its supply in due course. Russia’s pivot to the growing markets of the east is in full swing”.

Properly speaking, inking a gas deal wasn't the beginning but a spectacular display of a very careful and thoroughly adjusted process of Russia's return to the Pacific. The deal was just an ultimate piece of smalt which made the whole mosaic visible to the general public. In fact, the Western analytical community has been alerting their governments about potential Russia's shift to the East long ahead of the Ukrainian crisis and even before Putin's re-election.

Gazprom and CNPC had been negotiating the gas deal during a whole decade, and when it was finally finalized Russia has succeeded in concluding a bulk of trade agreements with other north-eastern states. As well. Another landmark project is to double connect North and South Koreas by means of pipelines and railways. On June 5, Russia’s Minister for Far East Development Aleksander Galushka announced the plan to extend the Trans-Siberian Railroad in order to provide a link between the Korean peninsula and Europe. The link will extend the world’s longest railroad and make Russia a major transit route between Europe and Asia. Shipping by rail is nearly 3 times faster than via the Suez Canal, Russian Railways CEO Vladimir Bakunin said.

Cooperation between the two Koreas on the railway could lead to compromise on a long-delayed plan to build gas pipelines and connect both Koreas with Russian gas. Russia's Gazprom and the DPRK's Ministry of Energy have reached an understanding to build a natural gas pipeline that would enter the DPRK at the Khasan crossing of the Tumen River on the Russia-DPRK border. The pipeline would then extend through the DPRK to the Republic of Korea (Korean Gas Co). South Korea is the 10th largest consumer of energy worldwide and the second largest importer of LNG. Russia first agreed to export LNG to South Korea in 2005, and agreements this year include South Korean support for modernizing the LNG fleet and investing in Russian Far East development. Seoul is especially interested in partnering with Russia as an alternative to nearby China and Japan. Russia is ideally positioned to export to South Korea because of the proximity of the two.

In order to boost the deals, Vladimir Putin recently signed into law an agreement that will write off much of DPRK Soviet-era loans. Russia will forgive 90 percent of North Korea’s debt from the Soviet era, leaving $1 billion to be repaid interest free in the next 20-40 years. At that, North Korea will grant Russian firms access to its natural resources in exchange for imports and investments. In January, a UK-based private equity firm SRE Minerals Limited said North Korea had the largest rare earth oxides deposits in the world, an amount of approximately 216 million tons. Rare earth elements (REE) can be used in many sophisticated technologies, from cell phones to guided missiles.

During his four-day visit to Vietnam and South Korea in November 2013, Putin signed a series of documents to enhance Russia's cooperation with Hanoi and Seoul in the economic, energy, military and humanitarian sectors. Thus, Russia will help Vietnam with hydrocarbon extraction, and possibly sell LNG to Vietnam, along with its ongoing support for the Vietnamese navy and nuclear power. Vietnam’s coast is accessible from ports in Russia’s Far East. For that reason, Russia sees Vietnam as an attractive energy partner not only in its own right but also as a gateway for Russian exports to other Southeast Asian nations. Using Vietnam as a corridor to Southeast Asia would allow Russia to diversify its energy trade and avoid excessive dependance on Chinese exports.

India is an ancient trade partner and loyal political ally which has openly supported Russia amidst the Ukraine crisis. The countries are involved in high-tech military cooperation and Russia is a top arms provider to India. Surprisingly enough, their energy cooperation has got a random character. One of the major barriers to greater energy partnership between India and Russia — particularly for crude oil — is the lack of infrastructure to transport the crude. Currently, Russia and India are negotiating the construction of a $30 billion oil pipeline—the most expensive ever—to connect Russia’s Altai mountain region to the Xinjiang province in northwest China and then to northern India. India also can be interested in buying LNG from Gazprom's Sakhalin-2 terminal. At the time being, the main beneficiary of Sakhalin-2 is Japan. A new LNG plant in Vladivostok aims to ship 10 million tons from 2018 and will be connected to the continental gas production centres such as Yakutia and Irkutsk oblast. Novatek, Russia’s largest non-state gas producer, initiated another LNG Project on Yamal peninsula. It will start producing LNG in 2016 and supply 16.5 million tons per year of the tanker-shipped fuel by 2018.
 
Naturally, Russia's beginning pivot to Asia was not at all welcome in the West. Gal Luft in a characteristic article “Can America Stop Russia's Energy "Pivot" To Asia?” gives the US leadership advises how to stop Russia. They are so outdated that I can't deprive myself of pleasure to cite them. 1) “as guarantor of South Korean security, Washington should publicly take a strong position against the Russia-Korea pipeline”. 2) “Washington should convince its Asian allies that it is committed to becoming a leading energy-exporting country and a major player in the global energy-trade system”. 3) the U.S. “should enhance cooperation with Asia on unconventional gas. China owns the world’s largest shale reserve. Japan is a global leader in the development of methane hydrates”. 4) the U.S. “should support measures aimed at reducing LNG prices in the Asia-Pacific to make LNG more competitive with Russian pipeline gas”. In fact, items 2-4 can be reduced to a single one or shale, shale and shale! 

The U.S. made all this mess in the Ukraine in order to promote its shale gas to the EU and, supposedly, to extract it in the eastern Ukraine. That is why the US military advisers are so relentless towards the rebellious eastern provinces. It's hard to believe that they offer to sell the futures of this same gas not only to Europe but to Asia as well. In Russia, we say “to sell the bear's skin before one has caught the bear”. In my previous post I cited Gail Tverberg's article “The Absurdity of US Natural Gas Exports” , were she explains why America's gas crusade to Europe is ill-intentioned not only against Russia but for Europe, as well. On June 5 after the G7 meeting in Brussels, European Commission President José Manuel Barroso made it clear that the EU cannot create “the illusion that gas from the US is going to solve our problems.” In fact, instead of containing Russia's pivot, the U.S. and the EU have been doing their best to push it forward. A ridiculous sanction's campaign is still in play. The latest EU suicide attempt was to cancel the construction of the South Stream pipeline bypassing Ukraine. 

During the last few years, Russia has been striving to strengthen the European energy security and to diminish dependency of Southern European markets from the vicissitudes of gas transit through the unstable Ukraine. According to its fuzzy logic, the European Commission told Bulgaria to suspend preparatory work on South Stream, as it could damage EU energy security. Ironically, all this fuss takes place right at the moment when the EU, Russia and Ukraine are trying hard to resolve a $3.5 bn debt crisis since Ukraine haven't paid for Russian gas for months. Putin has sent two letters to EU leaders warning them that in case of continuing non-payments, Gazprom would be forced to suspend deliveries to Ukraine. A recent history teaches us that in such a case the latter simply begin stealing gas from a transit pipe. After tough talks, Ukraine has paid a third of the debt. What makes me laugh - that same EU Energy Commissioner Guenther Oettinger who has been the main arbiter in the debt case, has announced about blocking the South Stream. After trilateral gas talks in Brussels, Gazprom Chairman Miller has stated, “The EC cannot stop the construction. No one can stop us building it. Our answer is very simple. In December 2015 the first gas along the marine section under the Black Sea will arrive in Bulgaria and the European Union”.



Credit: Pool photo by Alexey Druginyn

While the West understands that it cannot reverse Russia's shift to the East, it is deeply concerned by another Putin's “dream” which has been turning into reality these days. After the collapse of the USSR, Russia has been seeking to restore gradually the economic and political relations in the post-Soviet territory in the framework of the Eurasian Economic Union and the Customs Union. At the end of 2011, Vladimir Putin, then being the Russia's Prime Minister, published an article "A new integration project for Eurasia: The future in the making" ("Izvestia", 3 October 2011). He revealed his vision of further developing of the Eurasion cooperation. An angry reaction from the other side of the Atlantic was not long in coming. Former US Secretary of State Hillary Clinton referred to the project as a “move to re-Sovietise the region.” While acknowledging that the Eurasian Union will not be called “the Soviet Union,” she also stressed “let’s make no mistake about it. We know what the goal is and we are trying to figure out effective ways to slow down or prevent it”. Did her ominous threat ever come true? 
 
On May 29, Presidents of Russia, Belarus and Kazakhstan has signed the Treaty on the Creation of the Eurasian Economic Union in Astana, which comes into effect in January 2015. The goal is to create a common market between three countries with a total population of over 170 million, with free movement of capital, goods, services and labour. Kyrgyzstan and Armenia are ready to join the Treaty in the nearest future. Meanwhile, Vietnam and Turkey are negotiating about joining the Customs Union. After the signing ceremony, President of Kazakhstan Nursultan Nazarbayev who hosted the event, said “a new 21st century geopolitical reality is being born”. 

It isn't at all surprising that comments on establishing the Eurasian Economic Union, were rather aggressive. They labeled the EEC as a “New Russian Empire” or a “New Soviet Union.” They predicted its failure, mainly, because of Ukraine's absence. Neil MacFarquharmay wrote a post titled sarcastically Russia and 2 Neighbors Form Economic Union That Has a Ukraine-Size Hole». He writes, “Some analysts suggest that the loss of Ukraine as a potential member was the death knell for the Eurasian Economic Union. On a purely economic scale, losing Ukraine meant losing a market of more than 40 million people. Ukraine also provided economic diversity when paired with the two energy exporters».

Is Ukraine so crucial for the Eurasian project? In order to understand the rationale behind Western reaction on Ukrainian developments, let's turn to “The Grand Chessboard: American Primacy And Its Geostrategic Imperatives, a textbook for American presidents written by Zbigniew Brzezinski. Four key statements are, as follows, 1) “For America, the chief geopolitical prize is Eurasia”, 2) “A power that dominates Eurasia would control two of the world's three most advanced and economically productive regions”. 3) “the new world order under the hegemony of the United States is created against Russia and on the fragments of Russia. 4) “without Ukraine Russia ceases to be empire, while with Ukraine – bought off first and subdued afterwards, it automatically turns into empire”. Following these clear instructions, the U.S. leadership has started a campaign of tearing Ukraine away from Russia and incidentally selling the idea of shale gas.

In my opinion, Brzezinski and his adepts have been over-estimating Ukraine's significance for a success of the Eurasian integration. Though Ukraine is very emotionally important for Russians, from the political and economic points of view, it was clear long ago that it was drifting to the West. If we look at the chart, we can see that Ukraine didn't take part in the Customs Union and exited from the Common Economic Space on the early stage. Initially, Russia was not so strong economically in order to give the country considerable support or to compete with the US NGOs in bribing the local elite. When Russia began doing well and started investing in Ukraine, the latter corrupted and got accustomed to milk two cows. Meanwhile, a fatal West-East divide has been gradually corroding the country from within. While maintaining old cooperation relations with the east-Ukrainian industrial regions, Russia was developing little by little its own industries to substitute Ukrainian import. Finally, the construction of North and South Stream pipelines were aimed to decrease gas transit through Ukraine. However, Ukraine will always stay a source of political, security and humanitarian preoccupation for Russian leadership.

Source: http://epthinktank.eu



I can't respond better to those who talks about Putin's imperial ambitions, than Mark Adomanis, who says, «Without lapsing into cartoonish Kremlinology, I do think it’s noteworthy and important that Putin is so publicly and forcefully going on the record advancing a broad program of technocratic neoliberalism: harmonizing regulations, lowering barriers to trade, reducing tariffs, eliminating unnecessary border controls, driving efficiency, and generally fostering the free movement of people and goods. Even if not fully sincere, an embrace of these policies is healthy». 

Last but not least, an important by-product of the Asian pivot is further undermining dollar domination, since according to the gas megadeal and other Russian-Chinese deals roubles or yuans will be used in mutual payments. Trade turnover inside the EEC will be also carried out in roubles, as well as, North-Korean deals.



19 comments:

  1. Thank you Tatiana for yet another interesting and informative post with lots of information not readily available in the mainstream media. You present many ideas and so much information that it is not easy to select what to respond to.

    I recently wrote a post on an Italian blog that I named "The Four Horseman of the Apocalypse and the Four Wild Tigers they are desperately trying to ride". If you are interested in my broader thinking I can send it to you directly in its English version. It is too long to post here and I also don't want to clutter up the responses to your own post.

    But the third "Wild Tiger" in that post can be summed up as being "geopolitics". The other three are respectively i) the level of human population, ii) a broad range of environment-related problems (climate change, resources depletion and many others) and iii) the ever further globalizing neoliberal capitalist economic and financial system.

    But it is probably my third Wild Tiger -though they are all inter-related and interactive and indivisible- which I believe most closely relates to the content of your post. Here is what I said:

    "A third Wild Tiger causing havoc in many parts of the world are the many geographically widely-distributed legacy costs of various earlier and present imperialisms, colonialisms and neo-colonialisms and their related policies, and their present interactive “geopolitics” which also interact with some even earlier “identity” elements (e.g. religions and ethnicities) of various populations. More and more intractable conflicts are arising all the time throughout the vast so-called Middle East area (in fact over most of the Eurasian land mass) but also in Africa and elsewhere. Simultaneously the old post world war II "Bi-Polar" “world order” of the United States, the Soviet Union and the so called non-aligned movement -with many nations aligned towards either one or the other or both- has given way at first to a more "Unipolar" -and also more neoliberal and ever further globalizing- world order “managed” by the U.S. and its closest allies, but this is gradually adjusting to a more “Multi-polar” world, and / or "Networked" world.
    But before this “new multipolar or networked world” further emerges and is fully ushered in and settled into, this “adjustment” in relative economic, political and military (and ideological and cultural) power will undoubtedly continue to bring on further big problems. As various world powers also “pivot” in various directions in various ways and resist one another's attempts towards establishing the new balance."

    In my concluding paragraph I also tried to say something about "the Horsemen".

    "But who exactly might "these Horsemen" be anyway? In one sense we ALL are. In another it could be groupings of nation states and their respective societies and their main (and networked) stakeholders from their private, public and civil society sectors. So the four horsemen could be thought of as being the United States, the EU, the BRICs and the ROW (rest of the world) and their respective "stakeholder communities". One can only wish them all a very happy ride, and a successful “taming of the four tigers” , hopefully based on intelligence, vision, courage and some sort of real ethics.

    The future will show what they are able to do and how all of this will play out.

    But as you know at this moment I have some particular sympathy for Russia which I think is probably more on the right side of history than some of the other galloping horsemen. But I don't know it very well and the last time I visited it for about one month (the only way I think one can really begin to understand ANY place) was back in 1973 when it was the main republic of the old U.S.S.R. and I was still a young man with a backpack and hardly any money who wanted to try to see and understand the world and its various realities a bit better.

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  2. Thank you, Max, for being an early bird to make a generous comment! I really love your comments which in fact are big stories. Right you are, it's the time of the Apocalypse and the moment of truth for our old little planet. I'd love to receive the English version of your post (yugpole@gmail.com).
    Special thanks for your sympathy to Russia! You should come to Russia one day and see great changes since 1973.

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    1. Thank you very much Tatiana and I am very glad that you like my "big stories" comments. (I like yours too) I will send you the English language version of my post in a minute. And I certainly would like to be able to come to Russia again to see in person the big changes which I know have occurred since 1973. During that same trip in 1973 I also went to the Ukraine and Georgia and Armenia and finally into Iran and much further east. It wasn't very hard to do back then (if one really wanted to) and also quite safely. It would be next to impossible to do now . At least "safely". So at least in that respect the (in fact many) four horsemen" have not managed to ride and tame the four wild tigers all that well and have instead perhaps angered them even further. Maybe they will do a bit better in the future. All the best and regards....

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    2. Unhappily, the world has become less secure place since 1973. One of the horsemen is definitely doing his best to rock the boat. Do you happen to know that the Russian embassy in Kiev was under attack yesterday, just like in Lybia? And the Western UNSC members has blocked Russia’s draft resolution on the case?! http://on.rt.com/fohnn1

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    3. Yes of course I DID see it. And I often also have "fun" comparing and contrasting the stories and "narratives" (and even just the plain facts or their stark omission or addition) of various events and happenings as they are reported by RT News in English (though sometimes I watch the Spanish version instead) and by the BBC and Al Jazeera and CNN. (I also watch Fox News from time to time but mostly just for entertainment purposes) And what happened in Kiev is obviously all the fault of those "terrorists" women and children in Luhansk and Donetsk trying to make their way east, and of course it is "only right" (i.e. somewhere to the right of Benito and Adolf) that the good Western nations have blocked a draft U.N. resolution condemning the attacks on the Russian embassy in Kiev. Since it is also rather likely that Stalin and Blokhin himself were both inside plotting away against "the Ukrainian people".

      If people were not dying and so much were not at stake it really would be quite funny.

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  3. Yes, exactly, if not civil casualties and damages, all the Ukrainian developments could be regarded as a perfect theatre of absurd. Unfortunately, we in Russia are watching the performance from the first row of the orchestra and it's a little bit different...

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    1. ....Yes you are right and I think I understand that it must feel quite different from "the first row of the orchestra". From my own "vantage point" here in Thailand I try to follow many different events taking place in our happy world. But the only one I live and experience directly is the situation right here in Thailand. Which moreover I cannot and should not try to get involved with at all. From afar (and also having been a perpetual expatriate most of my life) all one can do is think, write and talk to a few people in one's closer circle. Political and other forms of "activism" are pretty difficult when one is not "embedded" in some context and has not been for a very long time. (or maybe these are just some excuses I make for myself, but at least I try to be more or less honest)

      And it is also very difficult for me to affect what is happening in either the U.S. or Italy. The situation I probably feel the worst about out of all the horrible ones I see all around the world is probably that of the Palestinians since they have been slowly and methodically dispossessed over a very long period of time and most people hardly know or care. (though there are also many other situations as bad and in some other ways, even worse). It is hard to imagine for instance what many Syrians must feel like. What is happening in the Ukraine is also quite bad but at least Russia (though less so the people of the eastern Ukraine) is strong enough to be able to take care of itself. As I said earlier you have my sympathy and I think it is also important for everyone to keep a very cool head at all times even if sitting in the first row. And I think Mr. Putin in particular has done so thus far, and I am sure will continue to do so. ATB

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    2. Vow, you are in Thailand! Almost have written "in paradise" but have remembered that now it's kind of lost paradise... I'm sure that Putin will manage the situation somehow and save the world at the supreme moment.

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  4. Hi Tatiana
    It is good to see that you are posting again on Ugo's resource blog.
    I am sure you are correct to point out the spurious nature of projected unconventional US natural gas exports to Europe.
    Of course, at the moment most of the hype about fracking is concerned with US tight oil production which has seen spectacular increases. The future trajectory of this expensive tight oil is the subject of much conjecture.
    For US NG, Gail (your link) has this to say:
    "The catch–and the reason for all of the [fuss about] natural gas exports–is that most shale gas producers cannot produce natural gas at recent price levels. They need much higher price levels in order to make money on natural gas."

    China has been producing very little NG during recent economic expansion as can be seen in charts at this link and it will take time to integrate Russian supplies into China's economy.
    http://euanmearns.com/china-the-coal-monster/

    It seems obvious that Western Europe and EU are absolutely reliant on continuing substantial NG supply from Russia, and your country has been a reliable supplier on long term contacts for decades. The highly developed EU retail distribution and market for NG should make EU a reliable customer! Even UK, which does not yet purchase Russian NG, is wholly dependent on the whole continent networked trading area having secure supplies of energy. We would all 'go down' tomorrow if these supplies were threatened. Although this does not appear to be the case, there is grave danger from possible civil war in Ukraine. Personally I believe the US / EU has played dangerous games in Ukraine and encouraged unrealistic expectations among nationalist elements in Western Ukraine to the detriment of all Ukrainian people.
    Ukraine as a whole seems to have about half the per capita GDP of Russia. Eastern Ukraine appears to have x2 the GDP per capita compared with Western Ukraine except for Kiev. That relatively higher income seems to derive from Soviet era industries located in the eastern zone that include some armaments, and on these industries having a remaining market in Russia. It seems unlikely that much of these older factories would survive if Ukraine were to integrate with EU. The need for stability in Ukraine has become very obvious recently. I think the situation is urgent and dangerous and there is the beginning of a major humanitarian crisis.
    best wishes
    Phil



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    1. Thank you, Phil! You look very well informed about the Ukrainian collapsing economy, especially, about the East-West divide. The fact is that the Ukraine has got huge deposits of shale gas right in the eastern part and Biden has other sons or relatives to engage with the country. So they don't need the eastern "rust belt" for industrial needs just for fracking.
      As for the America's oil and gas peak, it has overtaken Russia this year as a top gas producer but I think this is the last peak.

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    2. Hi Tatiana
      Yes, the US and Russia have been the two largest NG producers in the world for a long time and US supplied most of its own demand.
      In the last few years NG from US shale has more than kept up with the slight decline of US conventional gas, but last year the USA was still a net importer of NG. Of course the USA is still a large net-importer of oil. For both oil and gas, see http://mazamascience.com/OilExport/

      I will believe in shale NG in Europe when the first wells are producing for more than a year at an 'economic' price. I noticed that Poland did not proceed to producing shale gas. We are told of lots of shale NG under the UK but we are at least 2 years from seeing whether these will produce and give an economic return. (Of course we have a highly developed retail network for NG in the UK.)

      best
      Phil

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  5. We just recorded our Anniversary Show on the Collapse Cafe with guests Ugo Bardi and Gail Tverberg of Our Finite World.

    Currently up as the Feature Video on Doomstead Diner TV
    http://www.doomsteaddiner.net/blog/2012/02/20/diner-tv/

    RE

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  6. https://charter97.org/en/news/2014/4/28/96514/

    "Thus, there are no important enterprises in the town of Slavyansk, neither mines, nor military bases or scientific institutions. However, it stands in the very center of the territory of the “Yuzov project”, where the deposits are located of the energy source of the 21st century are located - of the tight sandstone natural gas also known as shale gas.

    The gigantic deposit spreads into a part of the territory of Donetsk and Kharkiv regions.

    The total area of the shale gas deposit is almost 8 thousand square kilometers. Experts point out that the gas deposits in this land can bring revolutionary changes not only to Ukraine’s energetics, but of the whole Europe.

    “According to the latest confirmed data, coming from Americans, there are 3.6 trillion cubic meters of gas that they clearly see how to extract. This is a significant amount, a large amount, because if Ukraine increases extraction by 15-20 billion cubic meters, it will become an exporter”, - the director general of the center for energy studies Oleksandr Kharchenko points out.

    The central authorities are very worried about this project and pick words very carefully on its prospects. Although, even with such a restraint large future benefits for Ukraine can be noticed.

    “The deposits are quite significant. Ones of the largest in the world, in Europe. By the estimations that we have, we can increase of own gas extraction by 30-40%.

    If there are 20 billion, you do the math, it is possible to increase it by up to 10 billion”, - the energetics minister Yuriy Prodan said.

    We would remind that on 24 January in Davos an agreement was signed with the participation of the former president Viktor Yanukovych between Shell and “Nadra Yuzovskaya” on the division of shale gas extraction products in the Yuzov area of Kharkiv and Donetsk regions."

    I follow the situation closely and am happy to hear of the closer ties Russia is making with asian countries. Greater trade by train over land and by pipeline is important as USA dominates sea lanes. Also USD is too powerful and promotes dominance by Washington in all areas, subsidizes profligate spending. Alternate currency , trading and military, cultural area should exist, not just Washington, Hollywood, IMF and Container ships with flows China -Washington-Western Europe.

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    1. I am not sure I quite follow the logic of the article at the link at the top even though I read it twice. Is it Russia which is "fighting for vast shale oil gas deposits: (assuming they indeed exist and that "you do the math" actually has been done reliably by somebody) as "the true goal of its special operation"....or is it the U.S.? (and its neocons in particular) When and how did "the particular special operation" begin, and who started it?

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    2. Thank you very much, Ed, for your very important info about Slavyansk and shale gas.
      I've read an article, you've cited. It's ridiculous how the author flips all upside down. NOT Russia, but the U.S. is actually pushing Ukrainian military to kill innocent people in Slavyansk in order to seize shale gas deposits!

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    3. Right you are, Max! The cited article is a typical example of Goebbels' style propoganda. However, it reveals a true cause of US-inspired Ukrainian aggression against its own citizens.

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    4. Yes, but with one difference. (and it is not my intention to in any way “glorify” Goebbels) But Goebbels was a genius and a true master and dedicated professional at what he did. The specific people behind some of the current specific propaganda related to the Ukraine are instead amateurs and idiots. But there certainly are also plenty of people at the level of Goebbels in the overall broader Western propaganda system.

      Here are three good articles I found about “Dr.” Goebbels.

      http://www.jewishmag.com/158mag/goebbels/goebbels.htm

      http://www.jewishmag.com/159mag/goebbels_nazi_culture/goebbels_nazi_culture.htm

      http://www.jewishmag.com/160mag/goebbels_propaganda/goebbels_propaganda.htm

      I particularly liked the second one from which Hollywood definitely could draw (and in fact already has drawn) lots of due inspiration.

      The ways and methods and propaganda "techniques" that can be used to lie, deceive, misrepresent and create false or misleading "narratives" and "interpretations" whether "narrow" or "broader" in nature, are in fact many.

      Here is a listing of some of them for anyone who may be interested:

      http://www.orange-papers.org/orange-propaganda.html

      They can be observed at work in both the mainstream media (both in the print media, the broadcast media and the digital media) as well as in mainstream academia and mainstream culture and their many productions.








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    5. Thank you very much Max for your essay-comment and for the links. You've definitely convinced me that the mass media of our days is far from Goebbels' genius. But the spirit is quite the same.

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Who

Ugo Bardi is a member of the Club of Rome and the author of "Extracted: how the quest for mineral resources is plundering the Planet" (Chelsea Green 2014)