Tuesday, November 06, 2012

China Threatens to Hit Russia Where it Hurts Most

China is threatening to hit Russia in the pocketbook, where it will hurt the dying bear the most.
China is to subsidize the development of shale gas in an effort to increase the share of unconventional energy sources in its economy. This comes as a part of a broader ‘shale revolution’.

...China is now considered to be home to the world’s biggest shale reserves in excess of 26trln cubic metres. To compare, the United States has an estimated 24trln cubic metres of underexplored recoverable resources of shale gas, according to Valery Nesterov, energy analyst at Sberbank Investment Research.

China may take third place in the world gas arena in another 25 year, as extraction of gas is forecast to skyrocket 5 fold during the period, the International Energy Agency said in May 2012. The US is set to top the ranking by 2035, with Russia dropping to second spot.

...A major move by the world’s economic powerhouses such as the US and Japan to develop shale reserves has worried the Russian Government. In late October President Vladimir Putin recognized the threat posed by alternative fuel sources to Russia’s economy, which is reliant on traditional energy sources. He urged Gazprom to revise its export policy, warning that a market reshape, where shale fuel and liquefied natural gas are increasing their weight, could hit Russia’s export revenues really hard. _Russia Today
China is also working hard to develop its domestic coal bed methane

Russia is being pressed to lower the cost of its natural gas, as a result of the increasingly vast resources of shale gas being developed from North America to Europe to China.

No wonder Russia's president and his crony oligarchs are hoping for US President Obama to win today's US election. Obama would preside over a continued weakening of the US, making Russia seem globally stronger in comparison. Obama's EPA and other agencies are already working to ramp up regulations against shale gas fracking, and to restrict other forms of energy such as coal, offshore oil, and nuclear power.

If a nation such as Russia can get its enemy to cut its own throat, what could be sweeter? As for China, Russia cannot expect such luck. But at least Russia understands the nature of China's corrupt kleptocracy, it being very close in nature to Russia's own.

China will be a tough customer for Russia to negotiate gas prices with, particularly as China gets closer to developing its own significant natural gas resource. And every dollar China saves in dealing with Russia, is a dollar that Russian cronies cannot use to build a new mansion, or stuff in a Swiss bank account. That's gotta hurt.

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