Europe Is Losing Russia
Completion of a bilateral agreement package between Russia and China after Vladimir Putin's visit to Beijing this May came as a bombshell in European business circles.
Even though, during the beginning of the crisis in Ukraine and European governments joining the first set of economic sanctions against Russia, the experts warned that such policy would force the Kremlin to strengthen its relationship with China, nobody could foresee such course of events.
Unfortunately, our politicians, who stray further and further from the traditional European pragmatism, completely ignored the opinion of large businesses that urged to build our own US-independent relationships with Russia.
Even in Germany with its powerful industrial lobby, top managements of large concerns fell under the complete influence of the Brussels policy, which may lead to millions in losses for what once was the largest European economy due to decrease in goods turnover with Russia.
All attempts made by business and scientific communities in the EU to start public discussions on potential risks of sanctions against Russia are being cut down, while politically-driven experts effectively mislead the public, predicting the oncoming fall of the Putin's empire.
I would like to disillusion such experts. The Russians will only benefit from the European sanctions that forced Putin to take unprecedented measures to get closer to China.
The agreement on gas supplies between Moscow and Beijing signed this May is only the tip of the iceberg. China will invest significant funds in the development of Russian transportation infrastructure, including the Crimean territory, which will allow Beijing to greatly accelerate the execution of its own ambitious plan for the new "Silk Road."
China has been interested in Crimea for a long time. Last December, Victor Yanukovich, back then the president of Ukraine, made a deal with Chinese companies to carry out an infrastructure project in order to create a Crimean Free Economic Zone, in which China planned to invest $30 mln.
Most of these funds were intended for a deepwater port for ships with a draft of 22-25 m, the first one of its kind in the Black Sea basin. Officially, this port was intended to shorten the trade route from China to the EU. However, China's plans to build a liquid natural gas (LNG) terminal and an oil-loading terminal in the port's vicinity clearly show that Beijing intended to use the new port for oil and LNG transportation.
China experiences severe shortage of energy supplies, and Beijing buys more than half of its imported oil in Iran which is constantly under the threat of military intervention by the USA. By building an oil and LNG harbor in Crimea, China may greatly reduce the risks that may arise from the development of Iranian situation, and increase its own supplies.
The power shift in Ukraine effectively denounced the agreements. However, Crimea joining Russia after the chaos in Ukraine only made the Chinese plans easier to carry out.
It all becomes clear when one recalls a project by Moscow to build a bridge across the Kerch Strait, with plans to install gas and oil pipelines under it, and an agreement between China and Russia on gas supplies to China signed in December 2013.
According to this agreement, China will receive from 36 to 60 billion cub. m of gas per year, and half of this volume will be supplied via Western pipelines. At the same time, Russia also signed a contract on oil shipments to China.
Now one can see that Beijing is no longer interested in Ukraine. China can resolve all of its vital issues together with a single partner - Moscow, especially when Europe pushes Russia into the arms of the new Asian power in every way possible.
I doubt our politicians realize that apart from the officially announced agreements between Russia and China, quite a few more projects are currently being worked over, which are not as large but no less important for the European economy.
Knowing the special nature of China's foreign economic policy, one can confirm that Chinese investments in Russia will bring in a flow of Chinese technologies that are still inferior to the Western ones in a number of areas, but are fairly advanced by Russian standards.
Successful execution of even a fraction of projects announced by China will lead to gradual reorientation of Russian companies from European equipment and technologies to the Chinese market. Lower quality of Chinese items is balanced out by their price and the absence of excessive bureaucratic procedures on export negotiation, which are typical for the EU.
It is entirely possible that Moscow will have to involve Chinese companies in the projects in the Arctic Shelf area in the context of increasing economical and political isolation of Russia by the EU.
Deep involvement of China in Russia's oil and gas extraction sector will gradually increase the share of Chinese goods in other market segments - from industrial machines and communication systems to construction equipment and cars. This will inevitably lead to creation of a Ruble-Yuan trade zone with a potential to establish a new currency backed up by gold from Russian deposits.
If the estimates made by the sober-minded experts are correct, further EU support of the US sanctions against Russia will lead to losses of 30 to 50 percent of Russian market by European companies with a benefit to the Chinese rivals as soon as by the end of this year, with losses in strategically important sectors (power, oil and gas industries and IT technologies) being even bigger.
Having received Russia as an ally because of European politicians, China will be able to freely use its resource potential and still great intellectual assets in years to come, and carry out projects even more ambitions than the New Silk Road.
UK,London
Julian Evans
http://www.pressbox.co.uk/Business/Europe_is_losing_Russia_1489622.html
Even though, during the beginning of the crisis in Ukraine and European governments joining the first set of economic sanctions against Russia, the experts warned that such policy would force the Kremlin to strengthen its relationship with China, nobody could foresee such course of events.
Unfortunately, our politicians, who stray further and further from the traditional European pragmatism, completely ignored the opinion of large businesses that urged to build our own US-independent relationships with Russia.
Even in Germany with its powerful industrial lobby, top managements of large concerns fell under the complete influence of the Brussels policy, which may lead to millions in losses for what once was the largest European economy due to decrease in goods turnover with Russia.
All attempts made by business and scientific communities in the EU to start public discussions on potential risks of sanctions against Russia are being cut down, while politically-driven experts effectively mislead the public, predicting the oncoming fall of the Putin's empire.
I would like to disillusion such experts. The Russians will only benefit from the European sanctions that forced Putin to take unprecedented measures to get closer to China.
The agreement on gas supplies between Moscow and Beijing signed this May is only the tip of the iceberg. China will invest significant funds in the development of Russian transportation infrastructure, including the Crimean territory, which will allow Beijing to greatly accelerate the execution of its own ambitious plan for the new "Silk Road."
China has been interested in Crimea for a long time. Last December, Victor Yanukovich, back then the president of Ukraine, made a deal with Chinese companies to carry out an infrastructure project in order to create a Crimean Free Economic Zone, in which China planned to invest $30 mln.
Most of these funds were intended for a deepwater port for ships with a draft of 22-25 m, the first one of its kind in the Black Sea basin. Officially, this port was intended to shorten the trade route from China to the EU. However, China's plans to build a liquid natural gas (LNG) terminal and an oil-loading terminal in the port's vicinity clearly show that Beijing intended to use the new port for oil and LNG transportation.
China experiences severe shortage of energy supplies, and Beijing buys more than half of its imported oil in Iran which is constantly under the threat of military intervention by the USA. By building an oil and LNG harbor in Crimea, China may greatly reduce the risks that may arise from the development of Iranian situation, and increase its own supplies.
The power shift in Ukraine effectively denounced the agreements. However, Crimea joining Russia after the chaos in Ukraine only made the Chinese plans easier to carry out.
It all becomes clear when one recalls a project by Moscow to build a bridge across the Kerch Strait, with plans to install gas and oil pipelines under it, and an agreement between China and Russia on gas supplies to China signed in December 2013.
According to this agreement, China will receive from 36 to 60 billion cub. m of gas per year, and half of this volume will be supplied via Western pipelines. At the same time, Russia also signed a contract on oil shipments to China.
Now one can see that Beijing is no longer interested in Ukraine. China can resolve all of its vital issues together with a single partner - Moscow, especially when Europe pushes Russia into the arms of the new Asian power in every way possible.
I doubt our politicians realize that apart from the officially announced agreements between Russia and China, quite a few more projects are currently being worked over, which are not as large but no less important for the European economy.
Knowing the special nature of China's foreign economic policy, one can confirm that Chinese investments in Russia will bring in a flow of Chinese technologies that are still inferior to the Western ones in a number of areas, but are fairly advanced by Russian standards.
Successful execution of even a fraction of projects announced by China will lead to gradual reorientation of Russian companies from European equipment and technologies to the Chinese market. Lower quality of Chinese items is balanced out by their price and the absence of excessive bureaucratic procedures on export negotiation, which are typical for the EU.
It is entirely possible that Moscow will have to involve Chinese companies in the projects in the Arctic Shelf area in the context of increasing economical and political isolation of Russia by the EU.
Deep involvement of China in Russia's oil and gas extraction sector will gradually increase the share of Chinese goods in other market segments - from industrial machines and communication systems to construction equipment and cars. This will inevitably lead to creation of a Ruble-Yuan trade zone with a potential to establish a new currency backed up by gold from Russian deposits.
If the estimates made by the sober-minded experts are correct, further EU support of the US sanctions against Russia will lead to losses of 30 to 50 percent of Russian market by European companies with a benefit to the Chinese rivals as soon as by the end of this year, with losses in strategically important sectors (power, oil and gas industries and IT technologies) being even bigger.
Having received Russia as an ally because of European politicians, China will be able to freely use its resource potential and still great intellectual assets in years to come, and carry out projects even more ambitions than the New Silk Road.
UK,London
Julian Evans
http://www.pressbox.co.uk/Business/Europe_is_losing_Russia_1489622.html
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