Go East, Young Comrade! I Mean, West!

Is there less to that Sino-Russian natural gas deal than meets the eye? That’s what Leonid Bershidsky says:

More than six months on, however, the deal doesn’t appear to be moving forward as hoped. In May, Miller counted on a Chinese advance to start building the $55 billion infrastructure for the project. In November, he declared the loan would not be forthcoming. His explanation was somewhat baffling:

We were negotiating concerning an advance and the advance was an element of the price negotiations. But as we have reached a final agreement on the price, we are not considering the possibility of receiving an advance as a financial instrument to further lower the price.

That would appear to mean that Russia had negotiated a higher gas price with China than it would have received if it had initially asked for an advance. In May, however, Miller had declared that the final terms, including price, had been agreed. Have they been renegotiated in the past six months, or did Miller get a little ahead of himself that May day in Beijing?

It’s impossible to know, because no price has been made public. In any case, since Power of Siberia isn’t expected to be operative until 2019, China would hardly be so careless as to fix the gas price, especially given the current downward trend in oil prices. That makes the project’s future uncertain.

Sanctions are bearable so long as a country can find other sources of income, equipment, whatever it is being sanctioned. But if that deal with China never comes to pass, that’s really going to put a crimp in Moscow’s foreign reserves, and ought to forestall any serious talk about replacing King Dollar as the global energy currency.