Natural Gas: The $400 Billion Marriage Between China and Russia
For the last several months, the crisis in the Ukraine has dominated headlines around the world, a fact that is directly responsible for the worst relations between the United States and Russia since the Cold War. While repercussions thus far have been relatively light, taking the form of sanctions on different individuals close to Russian president, Vladimir Putin, the door still remains open for more substantial punishments that could have devastating effect on the Russian economy.
As such, the recent announcement of a deal struck between Russia and China for the supply of natural gas has resonated more sharply in the West than it may have in the past. This deal could have serious repercussions in more than one way, in terms of how things ultimately shape up in the Ukraine crisis. Let’s take a look at what they could be and how they may affect the US and its allies.
Strengthened Ties
Russia has recently seen a marked level of isolation, due to activities that range from the absorption of Crimea to the fomenting of unrest in the eastern region of the Ukraine. The deal struck with China shows that they still have powerful allies and are not as alone as recent activities have shown. This could, in turn, embolden them to take further steps, which could lead to a deepening of the current crisis.
Economy
One of the repercussions of the crisis in the Ukraine is that Europe, one of Russia’s biggest gas customers, is exploring different options to remove their reliance on Russia. If Russia had lost Europe as a customer, without any alternate sales venue in place, it would have been devastating to the Russian economy.
The recent deal between China and Russia will serve to alleviate that concern, at least to some extent. The deal ensures that Russia has a large and powerful customer for, at minimum, the next 30 years, who will purchase a minimum of $400 billion worth of natural gas.
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