china and russia update - 06.28.2014

6/04/2014 @ 8:10PM
In Recent Bilateral Talks, Russia Rediscovers China

Russia seems to be rediscovering China. Over the last month, major Russian energy companies have met with China’s National Petroleum Corporation to discuss joint ventures in oil and gas. And last week, Vladimir Putin was in Shanghai to discuss energy and expanding trade. He inked a 30-year gas deal during his visit.

It’s not that Russia has a lot of things that China wants. But it does have oil and gas, and China needs plenty of that. China accounts for 7% of Russia’s exports, the same as Germany, and much more than the 2% of Russian goods being shipped to the U.S.

On Wednesday, Putin’s Chief of Staff, Sergei Ivanov, hinted that the two countries might be signing yet another energy deal. This time for a gas pipeline construction project.

“Given the pace of Chinese economic growth…it is very likely that a contract could be signed in the very near future for the construction of a western route gas pipeline across Siberia,” Ivanov told reporters in the Siberian city of Novosibirsk today.


Putin with China’s president Xi Jinping. As Ukraine crisis ticks off Russia’s most important trading partners in the E.U., Xi has become Putin’s new BFF.

On Tuesday, Russia reached an agreement with China to create a joint credit rating agency and were also ironing out measures to streamline cross-border trade, Finance Minister Anton Siluanov said.

Both China and Russia are distrustful of the western credit rating firms like Fitch. China has their own agency, as do most countries. But international investors, and surely American and European portfolio managers, will stick with the status quo even if the local credit agency rates debt higher than their western peers.

“In its first phase, the agency will evaluate Russian-Chinese investment projects with the goal to attract a series of Asian countries, and gradually, based on progress and reputation, we believe that it could reach a level when its opinions will attract other countries,” Siluanov reportedly said.

Russia has been touting its new found love for China for weeks now. Much of it can be linked to Russia’s troubled relationship with its main trading partner, the E.U. The two sides have been at odds all year thanks to political woes in former Soviet ally Ukraine. Europe and the U.S. have sanctioned a little over a dozen Russian politicians, banning their entry and financial transactions in the U.S. and E.U. A handful of mostly privately held companies connected to oligarchs and politicians believed to be supporting the ethnic Russian separatist movements inside Ukraine were also sanctioned. And since then, Russia has been courting the Chinese.

Siluanov also said his talks with Chinese officials included the possibility of preferential taxes for Chinese companies investing in Russia, currency swaps and trade settlement in roubles or renminbi instead of dollars.

The two countries pledged last week to increase bilateral trade to $100 billion by 2015 and $200 billion by 2020 from around $90 billion currently.

here:
http://www.forbes.com/sites/kenrapoza/2014/06/04/in-recent-bilateral-talks-russia-rediscovering-china/

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What Russia-China relations mean for the dollar
Matt Clinch    | @mattclinch81
Tuesday, 27 May 2014 | 9:24 AM ET

If there was one takeaway from Russia's annual economic shindig in St Petersburg last week, it was that the country is continually looking to its neighbor China for trade and investment. While the United States can't claim that it might be losing a friend with Russia's pivot east, it might be a different story for the dollar, with the alliance having the potential to undercut the domination of the U.S. currency.

"Taken alone, these actions do not mean the end of the dollar as the leading global reserve currency. But, taken in the context of many other actions around the world including Saudi Arabia's frustration with U.S. foreign policy toward Iran, and China's voracious appetite for gold, these actions are meaningful steps away from the dollar," Jim Rickards, portfolio manager at West Shore Group and partner at Tangent Capital Partners, told CNBC via email.

Speaking at a CNBC-hosted event on Friday, Russian President Vladimir Putin outlined his plans for closer links with China and a new Eurasian union. This followed a high-profile deal by Gazprom, the Russian state-backed gas giant, which signed a $400 billion, 30-year deal to supply gas to China.

 The deal looks promising for Moscow, with Europe - the traditional buyer of its oil - hoping to wean itself off Russian dependency, especially with recent tensions following Russia's annexation of Crimea.

 Despite the details for the deal being scarce, many analysts predict that the oil exports would mean Chinese yuan being exchanged directly, into the Russian ruble. Thus the two countries would bypass the U.S. dollar - the traditional currency used in oil trades and considered to be the international reserve currency of choice.

more here:
http://www.cnbc.com/id/101705303#.

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Drone markets open in Russia, China and rogue states as America's wars wane
The military drone market may grow to $82bn by 2022, and as the US slows its purchases, Russia and China accelerate theirs

Daniel A Medina   
theguardian.com, Sunday 22 June 2014 11.45 EDT   


An RQ-1 predator drone. Photograph: U.S. Air Force/Getty Images

Last October, in a private ceremony held at a stately mansion on the campus of the California Institute of Technology, the Aerospace Historical Society awarded the reclusive, 78-year-old CEO of General Atomics, Neal Blue, with the prestigious Von Karman Wings Award, a sort of Nobel Prize in the field, for “pioneering novel applications" of military drones.

For Blue, whose life reads like a thriller of private jets, oil profits and secret sorties to the Nicaraguan jungle, and whose company makes military drones with names like Predator and Reaper, the award capped the dominance of profits from drone manufacturing for his company and for the US drone industry at large.

That boomtime of drones – a decade-long celebration of war technology – was all largely fueled by the US military’s appetite for stealth and surveillance. Now the US military is backing off, and the drone industry is starting to look elsewhere to profits – even to some of the United States' deep-pocketed, warmongering adversaries.

For drone manufacturers, it doesn't seem to matter where the profits come from, as long as they keep rolling in. Dominated by four major US companies – Northrop Grumman, Boeing, General Atomics and Lockheed Martin – the global drone-making sector is expected to reach a market value of $82bn by 2022, according to internal PowerPoint slides provided to the Guardian by a senior analyst at the leading defense and security agency IHS Jane’s.

The thorny thing is: those billions of dollars in profits are likely to be coming from some unsavory quarters.

The US market for drones is shrinking because the biggest buyer – the US government – is dropping its purchases because of budget pressures and the end of large-scale wars in Afghanistan.

To respond to market pressures, the largest four private US drone manufacturers are now actively courting foreign buyers for business, said the analyst, who requested anonymity for this article in order to speak candidly on issues related to agency clients.

more here:
http://www.theguardian.com/business/2014/jun/22/drones-market-us-military-china-russia-rogue-state

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This Time, Russia-China Alliance Will Last
Jun 5, 2014 11:52 AM EDT
By Leonid Bershidsky

The emerging Sino-Russian alliance looks like an opportunistic arrangement. Russia, rejecting and rejected by the West, needs a strong alternative while resource-poor China hopes to harness the potential of its huge northern neighbor. In fact, China and Russia are made for each other. Despite many cultural differences, their people have more values in common than either share with the West.

Twenty five years ago, when China quashed the student protests in Tiananmen Square and Russia allowed the disintegration of the Warsaw Pact, the two countries appeared to be moving in opposite directions. China's Communist leadership tightened its grip on power. The Soviet Communist Party, by contrast, was noisily falling apart. Yet, amazingly, different paths led the two countries to the same spot.

Evidence of this can be found in the World Values Survey, a compilation of data on public attitudes by a global network of social scientists. In the last four years, they have found:

· Only 2 percent of Chinese and 2 percent of Russians identify protecting freedom of speech as among their personal goals, compared with 17 percent of Americans and 22 percent of Germans;

· Democracy is "absolutely important" to 30 percent of Chinese and 26 percent of Russians but to 59 percent of Germans and 46 percent of Americans;

· Only 45 percent of Chinese and 33 percent of Russians are "very interested" or "somewhat interested" in politics, compared with 62 percent of Germans and 59 percent of Americans;

· Just 29 percent of Chinese and 22 percent of Russians "might attend a peaceful demonstration," compared with 47 percent of Germans and 55 percent of Americans;

· A whopping 38 percent of Chinese believe that when jobs are scarce, men should have more right to them than women. In Russia, 29 percent agree, compared with 15 percent in Germany and 6 percent in the U.S.;

· For 26 percent of Chinese, 23 percent of Russians, 19 percent of Germans and just 6 percent of Americans, it is "important to be rich, to have a lot of money and expensive things."

more here:
http://www.bloombergview.com/articles/2014-06-05/this-time-russia-china-alliance-will-last

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