China has agreed to loan Russia $25 billion. The loan is said to run for 20 years and will be repaid with oil at $20 a barrel.
That's a good deal for China. They're getting oil at, at least, half price and when it goes up again in two or three years time it will be daylight robbery.
Russia must be desperate to agree to a deal like that. I can't believe that they're that bad at negotiating.
Also from the same note
The Executive Director of the IEA said on Monday that there could be an oil supply crunch whenever global demand recovers and the impact of lower investment is felt on oil supplies. The IEA is forecasting that economic recovery will begin in 2010 and that demand for oil could increase by as much as 1 million b/d next year. The Agency continues to warn against further production cuts by OPEC that will only exacerbate the situation when the recovery begins.
Seems to lack a certain amount of logic to me on the part of the IEA. On the one hand they are saying there is a need to invest and on the other they are saying that OPEC shouldn't arrange the market conditions which will allow that investment.
This is basicaly what BP and other internatonals did in the early 90's, although to be fair they didnt grind the price down that far.
The people who borrow £500 from door step creditors and pay back cash weekly on the doorstep at 157% interest arent bad negociators, they're just desperate.
For whatever reason, no one else will deal with them.
Russias in the same situation, for some reason (that would be stealing BP's investment, in my view) no one else will deal with them, they're desperate and have to pay whatever the few people who will demand.
Chinas not overly worried Russia will break the deal, because China is now in a position to break Russias legs if it does.
Re the IEA
It looks like they're telling OPEC, oil will be above $xx a barrel in 2 years, invest on that basis, not on the current price.
Damn site easier to say that than actualy put the money up and do it.
DominicJ wrote:
For whatever reason, no one else will deal with them.
Russias in the same situation, for some reason (that would be stealing BP's investment, in my view) no one else will deal with them, they're desperate and have to pay whatever the few people who will demand.
Chinas not overly worried Russia will break the deal, because China is now in a position to break Russias legs if it does.
They are dealing with China because they got royally f***ed when they dealt with the west in the 1990s.
I don't often use rude words, but this is one occasion it applies.
DominicJ wrote:For the low low price of $25b China has just bought 171,232bpd for the next 20 years.
What exactly did "the west" do that equaled that?
As far as I have read (and sorry I don't have the sources to hand) the West colluded to bring the oil price down so low that Russia fell and became the FSU.
Anybody here remind me where I read this please as have donated my PO books to a Transition Initiatives Library.
More generally, isn't this deal a sign that Russia is in DEEP trouble?
One minute they have dozens of gangster billionaires buying up Western football clubs ... the next minute Russia sells its soul for a relatively measly $25 BN.
This is the sort of data point which worries me more than panics about negative equity etc.
It is possible, but "the west" really doesnt have that much oil production, we're net importers.
Much of our conservation efforts were starting to pay real dividends, and the USSR was becoming more reliant on oil sales to fund itself.
If it was planned, its most likely the Saudis who brought them down for supporting India against Pakistan (The Saudis almost certainly funded Pakistans nuclear program as well).
Regardless, Russia is desperate and the best deal it can get is $25b now in return for 171k bpd for the next 20 years.
DominicJ wrote:So they arent getting royaly f***ed now?
For the low low price of $25b China has just bought 171,232bpd for the next 20 years.
What exactly did "the west" do that equaled that?
In a few years time starving russians will be begging for the 1990's.
But hey, if you think Russias getting a bad deal, feel free to make them a better one.
Try reading The Shock Doctrine. It is an interpretation of events which makes a lot more sense to me than any other I have read for a long time.
Anyway, Russia is getting a large injection of 'money' now, which is merely a promise to pay in the future with real goods to the value of $Xbillion, in exchange for a promise to sell oil at $20/barrel for the next 20 years. Two promises equally easy to break. Once the global banking system collapses both will be completely forgotten. All they are doing is putting off the evil day.
It could be like Al Yamah where the Saudis provide the UK with 600,000bpd at market value and can then use the money to purchase arms.
It could be a more literal, we give you $25b today, you give us 171,000bpd for the next 20 years.
Of course, under either, Russia can simply refuse to hand over the oil, pulling a Ukraine so to speak, but then, who knows what will happen, would China sieze Vladivostok, for example, stanger things have happened
SAO PAULO, Feb 18 (Reuters) - The China Development Bank and Brazil's state-run oil company Petrobras (PETR4.SA: Quote, Profile, Research)(PBR.N: Quote, Profile, Research) are finalizing a deal for the bank to extend a $10 billion line of credit in exchange for future oil supplies, a Brazilian newspaper said on Wednesday.
So that's what the Chinese have been saving up for.
Andy Hunt wrote:So that's what the Chinese have been saving up for.
When we have all run our of oil they'll invaded the rest of the world using all the oil they've still got. Hopefully they'll run out just as they reach Calais. ':D'
Andy Hunt wrote:So that's what the Chinese have been saving up for.
When we have all run our of oil they'll invaded the rest of the world using all the oil they've still got. Hopefully they'll run out just as they reach Calais. ':D'
I hardly think by that time Europe, let alone little ol' UK, will be worth invading. What would tempt them? Natural resources? Cheap labour?
Andy Hunt wrote:So that's what the Chinese have been saving up for.
When we have all run our of oil they'll invaded the rest of the world using all the oil they've still got. Hopefully they'll run out just as they reach Calais. ':D'
I hardly think by that time Europe, let alone little ol' UK, will be worth invading. What would tempt them? Natural resources? Cheap labour?
