September 24, 2018

Replacing Russian gas with American LNG would be ‘absolutely ridiculous’ – expert to RT

Germany currently gets around 60 of its natural gas imports from Russia. Berlin has been sharply criticized by US President Donald Trump for being a “captive to Russia.” In an attempt to push American LNG to German consumers, the White House threatened to sanction European companies for participating in the Gazprom-led Nord Stream 2 gas pipeline project.

Russian gas sales to EU hit record high despite the Skripals, election meddling all that jazz

Earlier this week, US Deputy Secretary of Energy Dan Brouillette announced ambitious plans to enter the German energy market in the near future. “US liquefied natural gas is coming to Germany,” he said, as quoted by German media. “The question is not if, but when.”

RT talked to energy experts to get to the bottom of the issue.

The current market conditions are not favorable for the US, as American LNG gets inevitably outplayed by cheaper Russian natural gas delivered via pipelines, according to Gubkin Russian State University of Oil and Gas Assistant Professor Sergey Eremin.

The analyst stressed that Germany still doesn’t have the necessary facilities for receiving liquefied fuel, and is likely to avoid extra financial losses through paying fees for transits of LNG through other European countries.

Earlier this week, German Economy and Energy Minister Peter Altmaier pledged to decide by the end of the year where to locate the country’s first terminal for receiving liquefied natural gas (LNG). The minister called the step “a gesture to our American friends.”

US about to slap disobedient European firms with sanctions over Russian gas project

“It’s hardly likely that Germany would stop importing gas from Russia, which is cheaper than US gas, which it’d have to import either by new LNG infrastructure which will come at the very high cost or use other LNG terminals in Europe, and then the other pipelines,”  Professor Gerhard Mangott of the University of Innsbruck told RT.

“So, from the business point of view, it would be absolutely ridiculous for Germany to buy US LNG and no longer buy Russian pipeline gas,” Professor Mangott said, stressing that Russian gas is delivered directly to Germany, with no need to pay other countries for transit of the fuel.

Moreover, LNG supplies are commonly temporal in comparison with the gas that is permanently delivered through pipelines, according to Eremin. He stressed that LNG is historically aimed at offsetting demand swings, while piped gas is preferable in the ordinary course.

“Russian gas has the advantage over the American LNG just because the huge pipeline system has already been created and successfully works,” the expert said.

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Japanese refiners stop buying Iran oil ahead of sanctions

Reuters quoted the head of the Petroleum Association of Japan (PAJ) as saying, “It is my view that each firm is taking the same stance and temporarily suspending (the loading) and watching the situation carefully.”

US sanctions scare Total out of Iran despite Brussels ‘protection’ pledge

Japan is one of Iran’s largest oil importers, but it is also the United States’ staunchest ally in Asia—and the combination of the two has not worked to Tokyo’s advantage. While the government has been trying to secure a waiver from the US State Department, the Japanese economy seems to be dependent enough on US lending to make local refiners extra-cautious.

Reuters confirmed the sentiment by noting many Japanese refiners had resigned themselves to the reality that they must stop importing Iranian crude and instead, look for feedstock elsewhere. Iran currently accounts for 5 percent of Japan’s crude oil intake, and as per PAJ’s chief, Takashi Tsukioka, Tokyo will try to maintain a good relationship with Tehran despite the sanctions. How realistic this is remains to be seen.

The last time Iran was the subject of sanctions, Japan curbed its imports of Iranian crude. It did not, however, shut them down completely. Now, it seems like it might have to, unless Washington grants Japanese refiners a waiver. So far, US officials have been guarded about the possibility of granting sanction waivers, although the possibility remains, on a case-by-case basis, as per an earlier statement from the State Department.

READ MORE: Volkswagen agrees pull-out from Iran to comply with US sanctions – reports

Although Japan, along with South Korea, is an important buyer of Iranian crude, which Tehran has done its best to keep on its books by deepening its sales discounts, China is the country that Tehran has pinned most its hopes on. “If China . . . buys Iran’s oil, we can resist the US,” one Iranian analyst told the Financial Times in July, amid reports of import cuts among Iran’s Asian clients. “China is the only country which can tell the US off.”

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BRICS bank to finance new projects in Russia & India

NDB said in a statement that its board has approved “a non-sovereign loan of $300 million to Sibur Holding for environmentally sustainable infrastructure development related to ZapSibNefteKhim project.”

The bank added it will provide financing “including reimbursement of expenses for construction of utilities” such as “water treatment facilities, transport and logistics infrastructure.”

BRICS gearing up for digital revolution

Two loans ($350 million and $175 million) will be provided to the government of India for rehabilitating major district roads with a total length of about 2,000 km. The financing aims improving connectivity of the rural interior with the national and state highway networks and to realize “the full benefits of upgrading the state highways and major districts roads, through constructing and upgrading about 350 bridges in the State of Madhya Pradesh.”

According to the bank’s Vice President Vladimir Kazbekov, some 23 projects have been approved earlier for all BRICS (Brazil, Russia, India, China and South Africa) countries with the total cost of $5.7 billion. “Next year, we plan to expand projects to somewhere around $7.5 billion,” he told TASS.

The Shanghai-headquartered NDB was established in 2014 and formally opened in July 2015. The goal of the bank, with an initial authorized capital of $100 billion, is to fund sustainable development infrastructure projects in emerging economies.

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Russia’s largest energy companies preparing to substitute petrodollar in settlements

Russia may ditch dollar in oil trade as it is too risky – finance minister

According to a message sent by Surgutneftegas to one of its customers, the oil company wants to “avoid any possible problems with payment in USD,” the news agency reports. “We do not comment on our commercial activity,” replied the company, Russia’s fourth largest by output.

The reported move comes in line with the recent comments from the Kremlin. Last month, Finance Minister Anton Siluanov said Russia could reject the greenback in oil trade.

“It is not ruled out. We have significantly reduced our investments in US assets. In fact, the dollar, which was considered the global currency, becomes a risky instrument for settlements,” he told Russian TV.

Russian Energy Minister Aleksandr Novak has said that the government is considering the possibility of oil settlements in national currencies, especially with Turkey and Iran.

Who else is ready to cut dollar dependence in Russian oil sector?

Gazprom Neft

Surgutneftegas is not the only Russian energy company that is reported to be working to reduce dependence on the dollar. A Reuters source in Gazprom Neft, Russia’s third-biggest oil company by output, said its contracts already have a clause to trade without the US dollar. Gazprom’s oil subsidiary has not commented on the issue yet.


The largest Russian oil company Rosneft is also interested in diversifying. The firm has opened banking accounts in Hong Kong dollars and Chinese yuan. Rosneft has also prepared itself for the shutdown of SWIFT interbank cash transfer services, should Russia be shut out of the system as part of Western sanctions. A Russian equivalent of SWIFT was tested by Rosneft in December.

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Iran: We won’t let OPEC boost production

But one of the largest near-term challenges for OPEC is balancing the oil market in the wake of lost barrels from Iran – a key factor driving up prices and also a fact that seems to be lost on the American President.

There are no clear solutions for OPEC+ that leave the oil market satisfied while also maintaining group cohesion.

The obvious course of action is to allow for higher production levels. But there is no way to do this while also getting all parties on board. Iran’s oil minister said that any change to Tehran’s allotment would be blocked.

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“I will definitely veto any decision that threatens our national interest,” Bijan Zanganeh said in an interview with reporters from SP Global Platts and Bloomberg News. “Anyone who says they will compensate for the shortfall in the market is speaking against Iran. This is a 100 percent political statement, not economic.”

Because any OPEC agreement requires unanimous consent, Iran could block any changes to the formal oil production cut deal.

Winter is coming: Russia looks to boost gas sales in tighter European markets

Iran still holds a little bit of leverage because the specifics of the June agreement, which called for increased production on the order of one million barrels per day (mb/d), were not hammered out. In all likelihood, Saudi Arabia and Russia would realistically take on a greater share of output, mostly because they are the only ones that have the ability to choose to produce substantially more.

But formalizing those increases is politically tricky. After all, Iran is taking tangible losses because of US sanctions. Those missing barrels have to be made up elsewhere. Saudi Arabia, Russia and a few Gulf States are the only countries that can increase output on a large scale. But even if Riyadh can physically replace the gap left over by Iran, Iran would never vote in favor of such a scenario.

“No consensus on this issue is likely,” Commerzbank wrote in a note.

Nevertheless, a de facto increase in Saudi production in lieu of supply losses from Iran is the only realistic outcome. The end result could be no formal agreement on specific allotments that take into account falling production from Iran and Venezuela. But the shift in market share may happen anyway, whether or not OPEC+ approves it.

It amounts to a sort of co-presidency between Riyadh and Moscow, the two largest producers within the OPEC+ group, but it certainly will diminish group cohesion.

“They are sacrificing OPEC, they are destroying OPEC and slowly, slowly, without directly saying so, they want to gather some names together to create a forum to replace OPEC and manage the market,” Zanganeh said.

Trump demands OPEC lower oil prices, claims US ‘protects’ Middle East countries

He also said that Saudi officials should fess up to their real motivations. “If they want to produce excessively, we cannot stop them,” Zanganeh said. “There is no forcible instrument in OPEC. But they shouldn’t do it in the name of OPEC. They should come out and say, ‘The US has phoned and told me to increase output. And I have no other way but to do so.’”

Not only are Saudi Arabia and Russia taking on a greater role in the current moment to ensure market stability, but they are also looking to institutionalize the arrangement for the long-term.

In the near-term, the US seems to be counting on Saudi Arabia and Russia, along with American shale drillers, to offset the losses from Iran. Saudi Arabia has added about 400,000 bpd since May, while Russia has added about 300,000 bpd. But covering the accelerating losses from Iran won’t be an easy task. Iran could lose as much as 1.4 mb/d by the end of the year, according to SP Global Platts Analytics. Venezuela could lose another 250,000 bpd.

Saudi Arabia is the only country with the ability to increase production on the scale of what we are talking about here, but any ramp up in production necessarily cuts into spare capacity, which is already at relatively low levels. The oil market will welcome more barrels from Saudi Arabia, but oil traders will nonetheless grow jittery as spare capacity dwindles.

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Reports from earlier this week that Riyadh was content letting oil prices rise above $80 per barrel are perhaps a sign that Saudi officials are acknowledging the challenge of keeping a lid on prices at a time when Iran is seeing significant disruptions. As a result, it won’t be surprising if Saudi Arabia increases output in the months ahead, but that the effort fails to prevent oil from moving higher. 

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Russia to become China’s top supplier of gas soon

Agreement on the Power of Siberia 2 or the ‘Western Route’ for the supply of Russian gas from the Far East to China might be signed in the first half of 2019, according to Nur Bekri, director of the National Energy Administration of China. The new pipeline will deliver 30 billion cubic meters of natural gas per year.

“We continue consultations… If we agree on the ‘Western Route’, then it will be more than 80 billion cubic meters [for all supply routes, including LNG – Ed.] a year. This means that Russia will take the first place among gas suppliers to China,” Bekri told TASS.

Russian energy giant Gazprom’s CEO, Alexey Miller, said earlier that Russia and China have agreed to get approval for gas supplies via the ‘Western Route’ in the shortest possible time.

Demand for Russian gas supplies is increasing in China, and according to Miller, by 2035 it could reach 80 – 100 billion cubic meters a year.

A recent report by the US Energy Information Administration showed that the world’s second-biggest natural gas importer, China, will account for at least a quarter of all global natural gas consumption growth between 2015 and 2040.

All roads lead to China: Russian gas from Arctic Siberia to flow east at full capacity

Supplies via the ‘Eastern Route’ (the Power of Siberia) are expected to start by the end of next year. Initial volumes will stand at 5 billion cubic meters, reaching 38 billion cubic meters per year by 2024.

The 3,000-km (1,900-mile) pipeline will be longer than the distance between Moscow and London. The deal on the ‘Eastern Route’ took more than a decade to negotiate. In May 2014, Gazprom and CNPC signed a $400-billion, 30-year framework to deliver 38 billion cubic meters of Russian gas to China annually.

In 2017, Gazprom invested 158.8 billion rubles ($2.4 billion) in the project. This year it plans to invest another 218 billion rubles ($3.25 billion).

Russia’s Arctic region will also be a major source of gas supplies to China. At the moment, Russian gas producer Novatek is working (in cooperation with CNPC) on the implementation of Russian-led energy project Yamal LNG. China has already purchased the first two batches of liquefied natural gas from Yamal.

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‘We have far more bullets’: Trump threatens China with more tariffs if Beijing dares to retaliate

Trump has cautioned the world’s second-largest economy to think twice before engaging in a trade war in which, he claims, the US has “more bullets.”

China tariffs hammer drops: Trump announces new duties on $200bn worth of Chinese goods

“We’re going to go $200 billion at 25 percent on Chinese made goods. And we will come back with more if they retaliate. We have a lot more to come back with,” Trump told a packed rally in Missouri for Republican Senate candidate Josh Hawley.

China to impose new tariffs on US goods worth $60 billion effective September 24

“We are cracking down on the unfair trade practices of China… We have rebuilt China. We have given them such wealth. And we are changing it,” Trump told the cheering crowd. “So we charged 25 percent on $50 billion worth of merchandise tariffs coming in. And then they said, ‘We’re going to do the same thing’. And I’ve said: ‘That is okay. We have far more bullets’.”

China said it will institute new tariffs on US goods worth $60 billion from September 24, after the US administration slapped new levies on Beijing’s exports.

While both the Chinese and US measures are set to go into effect Monday, Trump previously noted that the initial 10 percent tariffs would rise to 25 percent on January 1, 2019. The world’s two largest economic superpowers have already applied tariffs on $50 billion of each other’s imports.

While the US keeps accusing China of refusing to buy American products to maintain a “fair” trade balance, Beijing is complaining that Washington’s protectionist practices are detrimental to the entire global economy – and has even taken up the issue with the World Trade Organization.

READ MORE: ‘Remedy the mistake or bear the consequences’: China hits back at US over sanctions on military

Yet, despite Beijing’s willingness to negotiate some kind of a deal to stop the escalation of the trade war, the White House is trying to coerce their partner into submission. In a separate slap on the wrist, just days after announcing the new $200bn levies, the Trump administration introduced sanctions against China’s leading arms acquisition body and its director, over the purchase of Russian Su-35 multi-role fighters and S-400 missile defense systems. Beijing immediately hit back at the US administration, urging it to remedy the mistake and cancel the sanctions” which forbid arms export licenses and foreign exchange transactions under US jurisdiction. “Otherwise, the US has to bear the consequences,” the ministry’s spokesperson stressed.

Amid the escalating tensions, China has reportedly canceled a mid-level delegation visit to Washington next week, that was supposed to pave the way for further trade negotiations with President Xi’s top economic adviser and vice-premier Liu He, the Wall Street Journal reported, citing sources.

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Russia could gain from trade wars by cornering new markets – economy minister

These trade wars, these difficult relations between the United States and its trading partners is, first of all, an opportunity that opens on those markets. The US is exporting many goods and services to China and India. The bilateral raise of duties makes such production less competitive,

Oreshkin told RT.

“All this opens niches Russia could fill in. Russia could compete in this sectors by offering its own production,” he added.

China and the US have recently exchanged with a fresh round of tariffs. China added $60 billion of US products to its import tariff list on Tuesday as retaliation to US duties on $200 billion of Chinese goods, which go into effect on September 24. The measure comes into effect next week.

US sanctions are sign of dollar crisis decline of confidence – Lavrov

Earlier, US President Donald Trump threatened China with further tariffs on around $267 billion of imports if Beijing retaliates against the latest measure, which it did.

India is also one of several countries that President Trump has repeatedly criticized for its high trade surplus with the US. The US trade deficit with India stands at $30 billion, according to statistics from Washington.

The US has imposed aluminum and steel tariffs on India that cost the Indian economy almost $250 million a year. India has pledged retaliation but has postponed the decision twice, this time to November.

Speaking about Russia-India trade ahead of President Vladimir Putin’s October visit to New Delhi, Oreshkin said the countries need to diversify their business ties from oil and gas.

“To be honest, despite that we are signing new contract with India and trade is growing, there is large room for diversification of trade from energy supplies,” he said. This could be agriculture, machinery and other sectors of economy, Oreshkin added.

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Fitch slashes global economic growth forecast over US-China trade war

According to Fitch, protectionist US trade policies have now reached the point where they are materially affecting what remains a strong global growth outlook.

“The trade war is now a reality. The recently announced imposition of US tariffs on a further $200 billion of imports from China will have a material impact on global growth and, even though we have now included the 25 percent tariff shock in our GEO [Global Economic Outlook – Ed.] baseline, the downside risks to our global growth forecasts have also increased,” said Fitch Chief Economist Brian Coulton.

Global economic growth may have reached peak due to trade tensions – OECD report

The report cited the significant escalation in US-China trade restrictions as a reason for the 2019 China growth forecast reduction to 6.1 percent – as well as the global growth forecast cut to 3.1 percent.

“Near-term global growth prospects remain strong with growth forecast to reach 3.3 percent this year, up from 3.2 percent in 2017.”

Fitch noted that growth is becoming less balanced and less synchronized. Slowing global growth in 2019 will be accompanied by an important transition in global monetary policy, it said.

The ‘Big Three’ global credit ratings agency now expects combined QE (quantitative easing) asset holdings of the four QE central banks (Fed, ECB, BOJ and BOE) to decline in 2019.

“With the four QE central banks having purchased over $1trillion of assets per annum on average since 2009, the prospect of an outright decline in central bank liquidity is likely to have significant ramifications. These could include upward pressures on global bond yields – as the compression of term premiums that followed QE is unwound – and a ratchet up in financial market volatility,” said Coulton.

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Trump is obsessed with auto trade, French ambassador to the US says

US President Donald Trump may renew his threats to introduce duties on the vehicles produced in Europe in the near future, according to the ambassador. Moreover, Trump might impose import tariffs just because he gets fed up with the prolonged negotiations.

“The cars will be certainly a sort of test case in the coming weeks and months on this European-American relationship — if the Americans go back to this idea of tariffs on cars or not,” Araud said during a briefing at his official residence in Washington.

Brussels readies $20 billion in tariffs on US goods ahead of meeting with Trump

According to the French president’s right-hand man, any substantive decision “will take months to negotiate, and we are not sure that the president — your president — has the patience to wait for it.”

“So the coming months will be critical to whether we have a virtuous negotiation starting between the US and Europe and we forget the threats the tariffs and the trade war, or whether we go back to a trade war with the Europeans,” Araud said.

The partners have been at loggerheads over mutual exports and imports after Washington imposed 25 and 10 percent tariffs on steel and aluminum imports to the US in an attempt to eliminate a significant trade imbalance. Brussels retaliated with taxing the US goods of worth $3.3 billion.

Mutual sales of vehicles have become a hot issue for the US president, who has repeatedly slammed the EU car producers for unfair behavior, urging them to build plants on US territory.

“There is an obsession by the president on trade about cars,” the French ambassador stressed. “Every time he’s talking about trade with the Europeans, he’s talking about BMW or Mercedes.”

Under the current trade deal, the US levies a 25 percent tariff on light trucks and pickups and 2.5 percent on smaller vehicles from Europe, while Brussels applies a 10 percent tariff to all passenger cars imported from the US.

In August, EU Trade Commissioner Cecilia Malmstrom proposed bringing the car tariffs to zero. Trump rejected the offer, saying the proposal is a one-sided deal favoring Europe.

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