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Figure II: Russian energy infrastructure<br />
MESUT HAKKI CASIN<br />
94<br />
ent on its energy sales to generate<br />
hard currency but China’s hard negotiating<br />
tactics won out. 12 China<br />
bargained well, taking the advantage<br />
of Russia’s weakening gas sales<br />
in Europe thanks to the ongoing<br />
crisis in Ukraine. They demanded<br />
cheaper rates from Putin and got<br />
them. As Putin himself explained,<br />
“Our Chinese friends are difficult,<br />
hard negotiators.” Russian expert’s<br />
asking price has likely come down to<br />
a level much closer to China’s Turkmen<br />
import price. Lower prices, of<br />
course, will force LNG developers in<br />
British Columbia, Australia, East Africa,<br />
the Mediterranean and Middle<br />
East to cut costs and or cancel projects.<br />
13 The Russia-China agreement<br />
will also set a long-term price floor<br />
of $4 per million Btu for U.S. gas<br />
as regasification, liquefaction and<br />
transport costs of as much as $7 per<br />
million Btu from the U.S. to Asia becoming<br />
a “key component” of Henry<br />
Hub pricing, Bank of America said.<br />
Demand from Asia will likely keep<br />
Western Europe gas prices well bid,<br />
it added. 14<br />
Russia originally wanted China to<br />
pay the same price as Europe for gas,<br />
$380.50 per thousand cubic meters.<br />
But China rejected this proposal.<br />
Since discussions with Russia began,<br />
China has found alternative partners,<br />
most notably Turkmenistan.<br />
Turkmenistan supplies China with<br />
gas at a much lower price. In 2009,<br />
Gazprom and the Chinese state oil<br />
company, China National Petroleum<br />
Corporation (CNPC), signed a memorandum<br />
of agreement on supplying<br />
natural gas from Russia to China. But<br />
this deal was never implemented,<br />
mainly because China demanded<br />
lower prices. Due to mutual suspicion<br />
and price disputes, there have<br />
been repeated delays.<br />
Following this deadlock in negotiations,<br />
who was able re-open the bar-<br />
12.<br />
“China is the Winner in Energy Deal With Russia”, http://www.lignet.com/ArticleAnalysis/China-Isthe-Winner-in-Energy-Deal-With-Russia.aspx.<br />
13.<br />
Andrew Nikiforuk: “Russia-China Gas Deal a Train Wreck for BC”, 27 May <strong>2014</strong>, http://thetyee.ca/<br />
Opinion/<strong>2014</strong>/05/27/Russia-China-Gas-Deal/<br />
14.<br />
Isis Almeida: “Russia-China Natural Gas Deal to Set LNG Price Floor, BofA Says”, 27 May, <strong>2014</strong>, http://<br />
www.bloomberg.com/news/<strong>2014</strong>-05-27/russia-china-natural-gas-deal-to-set-lng-price-floorbofa-says.html.
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