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China, Russia Nearing Gas Deal

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My dislike of John McCain is well-documented. While there are many who will call him a war-hero, I’ve simply called him the former playboy and dreadful pilot that encourages the United States to go to war whenever its interests are at stake. This even extended to Crimea which is no small amount of madness from this curmudgeonly old man. Recently, however, (and only briefly) enjoyed his suggestion to David Letterman that Russia is “a gas station run by a mafia that is masquerading as a country.” I say briefly because that line was then repeated ad nauseam to additional media figures in the days that followed the original claim. Broken record or old man susceptible to repetition? I’ll let you be the judge.

Regardless, Russia does have a lot of gas and China has very little. Both countries wish to deepen their energy ties and finally reach an agreement where Russia begins to pipe Russian gas directly into China. Not surprisingly, disagreements over price have been the stumbling block to this overdue arrangement. Today marked Putin’s first day at the conference where he met with China President Xi Jinping. Following this meeting, officials from both sides are raising expectations that a deal could finally get done.

Let’s get it done

According to China’s official Xinhau news agency, both leaders signed a joint statement calling for Russia’s gas to be exported to China as quick as possible. Putin intends to remain in China until tomorrow with the Chief Executive of Russian state gas company Gazprom OAO (ADR) (OTCMKTS:OGZPY) (MCX:GAZP), Alexei Miller recently saying “The talks are going on without pause, the sides are seeking a compromise.”

Chinese television station CCTV, the official state news service, provided little mention of the state of negotiations today following the meeting of the two leaders.

“We are not satisfied with existing achievements,” said Mr. Xi, according to a recording of remarks broadcast by China National Radio. “We must unswervingly and unflinchingly push forward all areas of cooperation, and continuously obtain even bigger results.”

While a deal is certainly mutually beneficial to both sides, a hurdle to the deal has remained the mistrust the two nations have for each other which goes back decades.

Mutually beneficial arrangement

Natural gas burning is considerably cleaner than the burning of coal that effectively powers China’s economy and chokes its cities with egregious pollution and China needs to remedy this. Russia, on the other hand, has seen European demand for its gas decline in recent years and welcomes China as a partner who can mitigate this.

As global gas supplies continue to grow, China has been holding out for a better price while exploring relationships with countries like former Soviet republic Turkmenistan along with other gas-producing nations.

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Brendan Byrne

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