WSJ:Ecuador Expects to Begin Production at ITT oil block in 2015 or 2016

       the WSJ reports,"Ecuador expects to begin oil production in late 2015 or early 2016 at the Ishpingo-Tambococha-Tiputini oil block, which has estimated reserves of about 900 million barrels and will need investments estimated at $5.6 billion.

The government’s decision to press ahead with the project has enraged environmental groups and indigenous people who are opposed to new drilling in what is one of Ecuador’s most environmentally sensitive spots.

Crude oil from ITT, also known as block 43, is expected to be extracted for 22 years, with a peak production of 225,000 barrels per day by 2019, according the Ministry of Nonrenewable Natural Resources".

"More than a half of the ITT block is located in part of the Yasuni National Park, in the country’s Amazon region. State-run oil company Petroamazonas will develop the ITT heavy crude.

According to the ministry, construction of production facilities could begin in July.

Work on the block will include secondary pipelines, a power plant, a pumping station to supply the oil storage, and other facilities.

The Yasuni National park, a UNESCO world biosphere reserve, is considered by scientists to be one of the most biodiverse areas in the world, home to several endangered species and two indigenous tribes living in isolation, the Tagaeri and Taromenane.

Environmentalist and scientific groups have been lobbying against the new oil development in the park. A coalition of indigenous people, environmentalists and nongovernmental organizations opposed to oil production in the area asked for a referendum on whether to drill at the ITT. Last week Ecuador’s electoral council rejected the request.

The coalition has appealed the decision and plans go to international courts seeking to halt development".

"Ecuador, the smallest member of the Organization of Petroleum Exporting Countries, produces about 550,000 barrels of crude oil per day".

Eurozone's economic troubles are far from over

This month marks the fourth anniversary of the May 2010 financial rescue of Greece. Previously, the idea that a eurozone member would seek emergency assistance from the International Monetary Fund, along with the European Commission and the European Central Bank, was unthinkable. The rescue thus marked Europe's descent into full-blown crisis.

Four years later, European officials are assuring everyone that the crisis is over. The IMF has raised its forecast for eurozone growth this year to 1.2%. Even Greece is forecast to grow by a modest but not insignificant 0.6%.

Bond markets, too, are indicating that the crisis is over. Yields on Irish government bonds have fallen below 3%. Last month, Portugal was able to issue 10-year bonds at 3.57%. Even Greece has been able to sell five-year bonds at rates below 5%.

Clearly, the supposed experts who predicted the imminent disintegration of the eurozone have been proved wrong. But it is equally likely that those now declaring that the crisis is over will be proved wrong as well.

If we have learned one thing from the last four years, it is that theEuropean Union lacks the capacity to act decisively. With 28 member countries, decision-making processes are tedious and time-consuming. Common interests are difficult to define, making burden-sharing agreements difficult to reach. Action is regarded as more urgent in some quarters than in others.

Moreover, the patient is far from cured. Ireland, Portugal, Spain, and Greece have made considerable progress in lowering their unit labour costs to 1999 levels relative to Germany. The problem is that 1999 levels are not enough, because producers now have China and other emerging markets with which to contend. Italy and France, meanwhile, have made considerably less progress on improving their international competitiveness.

Nor is it clear where the crisis countries will find the demand that they need. With domestic spending subdued, they have been relying on exports. But now that growth in emerging markets has slowed, their export markets are weakening. Spanish exports, on a positive trend until recently, have stopped rising. And Spain may be the proverbial canary in a coalmine.

The ECB, for its part, continues to do too little to support demand. It has been behind the curve since 2011. If it finally turns to quantitative easing in June, it will take only baby steps down this path, because ECB President Mario Draghi and his team remain reluctant to embrace the kind of radical measures that would shock their political masters.

On the budgetary front, the new French and Italian prime ministers, Manuel Valls and Matteo Renzi, respectively, have proposed cutting taxes for low-paid workers and their employers. This is a positive step toward addressing the plight of those who have suffered the most fromthe unemployment crisis. But Valls and Renzi also plan to cut spending to prevent their budget deficits from rising, which means that their initiatives will not boost demand.

Meanwhile, Europe's banking crisis is unresolved. Loans to finance fixed investment continue to fall. Remarkably, the European Banking Authority's latest stress test for the eurozone's banks does not contemplate the possibility of deflation in its adverse scenario. The implication is clear: the banks' capital shortfall will be understated, and the amount of new capital they will be required to raise will be inadequate. If the goal is to restore confidence and get the banking system firing on all cylinders, this is not how to go about it.

And everyone knows that Europe's much vaunted banking union is deeply flawed. It creates a single supervisor, but only for the largest banks. It harmonises deposit-insurance coverage but does not provide a common deposit-insurance fund. The resolution mechanism for bad banks is incomprehensible and unworkable. The associated resolution fund will possess only €55bn (£44bn) of its own capital, whereas European bank liabilities are of the order of €1tn.

Finally, there is that pesky matter of public debt, which is still 90% of eurozone GDP. European officials propose to work this down to their target of 60% over a couple of decades. You read that right. Check back to see how they've done in 2034.

All of this has the makings of a dismal prognosis. But it is how Europe progresses. Its banking union may be flawed, but at least it exists, and over time those flaws can be fixed. The stress tests may be flawed, but at least they are better than Europe's two previous attempts. ECB action this summer may underwhelm, but at least the eurozone's monetary-policy officials will do something.

Source: Project-Syndicate  by  Barry Eichengreen is Professor of Economics and Political Science at the University of California, Berkeley.

What place does liquefied natural gas hold in Gazprom’s export strategy?

As for new markets, OAO Gazprom’s marketing strategy provides for increasing supplies of both pipeline gas and LNG. Gazprom Group has been consolidating its positions in the LNG market since 2005 by spot and swap deals effectuated by Gazprom Marketing & Trading. Between 2005 and 2012 the total volume of LNG sales amounted to 8.3 million t (11.0 billion m3). Taking into account the increased scope of LNG trade and marine freight, a special subsidiary company, Gazprom Global LNG, was established in August 2008 to do the LNG business.

In order to be an early entrant into the LNG market, OAO Gazprom has studied the opportunities of taking part in the existing LNG projects by means of acquisition or asset swap.

In 2007 Gazprom became one of the Sakhalin II project participants. Within the project, Russia’s first LNG plant was put into operation in February 2009. In 2010 the plant surpassed its design capacity (9.6 million t per year) by producing over 10 million t of LNG. In 2012 the plant produced 10.9 million t of LNG. The entire output was contracted out based on long-term arrangements. The first carrier containing Sakhalin LNG arrived in Japan in April 2009.

The agreements for LNG supplies from Sakhalin were signed with Shell Eastern Trading Ltd. and Gazprom Global LNG in April 2009. Pursuant to these agreements, Sakhalin Energy will supply some 1 million t of LNG per year to each of the purchasers between 2009 and 2028.

In 2012 Gazprom Group and an Indian company entered into a Purchase and Sale Agreement for liquefied natural gas. The Agreement provides for Russian LNG supply in the amount of 2.5 million t per annum for a period of 20 years.

Moreover, in December 2012 Gazprom Group completed the first LNG supply via the Northern Sea Route (NSR). The successful voyage of the Ob River LNG carrier chartered by Gazprom provides for the opportunity of the full-scale use of the NSR for Russian gas supplies both to the countries of the Asia Pacific and to the European market.

Source: Gazprom

What impact does the European gas market liberalization have on Gazprom’s export policy?

"Gazprom’s international business activities are carried out in full compliance with the applicable legislation in the countries of Gazprom Group’s presence. Recent developments in the European Union legislation aimed at the liberalization of the gas market influenced both organizational issues of the business activities and contracts for gas supplies to the EU member states.

Pursuant to the new regulations, Gazprom’s companies removed the contract provisions that restricted reselling the Russian blue fuel.

Supporting the EU efforts to shape a single European energy market, Gazprom believes – and major European energy companies share this opinion – that the basic architecture should be comprised of long-term arrangements for blue fuel supply to secure stability, reliability and predictability of the gas market.

European consumers are committed to their long-term agreements with Gazprom. This is confirmed by the fact that the Company extends export contracts with its western partners. Thus, GDF SUEZ (France) has renewed its contract until 2030, E.ON Ruhrgas (Germany) – until 2035, Wintershall Holding (Germany) – until 2030, Gasum (Finland) – until 2026, RWE Transgas (Czech Republic) – until 2035, Eni (Italy) – until 2035. Contract extensions until 2027 and new arrangements were agreed on with Austrian EconGas, GWH and Centrex. Contracts were concluded with Romanian Conef Energy for the period from 2010 to 2030, Swiss WIEE for the period from 2013 to 2030, German WIEH until 2027, Czech Vemex for the period until 2018, Italian Premium Gas until 2024 and Sinergie Italiane up to 2022.

Gazprom is alert to the legislative initiatives under consideration in the EU and constantly takes part in discussing the issues that may have a negative impact on the natural gas market and impair the situation for all the players. In particular, the proposal to prohibit natural gas suppliers from acquisition of large gas transmission projects in which they frequently invested their own funds causes concern.

This may lead to a lack of funds and an increase in transmission costs and, therefore, have a negative effect on the gas supply reliability"

Under what terms and conditions does Gazprom export gas?

Gazprom exports gas to European countries mainly under long-term contracts (up to 25 years) concluded, as a rule, on the basis of inter-governmental agreements.

Long-term arrangements are the foundation for steady and reliable gas supplies. Only long-term deals can guarantee the producer and exporter’s returns on multibillion dollar investments required for the implementation of major gas export projects, and assure steady and uninterrupted gas deliveries for the importer in the long run.

Long-term agreements with major buyers typically contain a take-or-pay provision meaning that the customer agrees to pay for a certain minimum amount of gas even when a lesser amount was physically offtaken. For prominent gas suppliers, such as Gazprom, this is an indispensable guarantee of the buyer’s responsibility.

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Source: Gazprom Website.

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What countries does Gazprom supply gas to?

Vietnam: "Riots will hurt Chinese Investments"

Anti-China protests in Vietnam will deter Chinese investment and lead to local job losses. Many Chinese companies and traders have initiated contingency plans and stopped trade activities to safeguard employees and minimise financial losses.

Rioters attacked Vietnam's biggest steel plant overnight as violent anti-China protests spread and escalated in the country.

Vietnam's Industry and Trade Minister Bui Quang Vinh told local newspaper Tien Phong that if the violence can't be contained, the country's economic development will be damaged because foreign companies will abandon ideas of investing in Vietnam.

Not only Chinese factories have been affected. Manufacturing facilities owned by Japanese, South Korean and European companies have also been damaged by mobs. They may also stop investing in Vietnam as they need a safer environment to carry out production, Bui was quoted as saying by the Vietnamese daily newspaper.

The newspaper quoted Tran Van Hang, chairman of the National Assembly's committee for external relations, as saying that the unstable situation in Vietnam has already caused concern among foreign investors and affected their production in the country.

"The government's top priority should be how to ensure healthy economic growth in 2014," said Hang.

Even though the Vietnamese economy has developed faster than neighbouring Cambodia and Laos in recent years, the country still needs a large amount of investment and technical support from China to improve communication, power supply and transportation networks.

Liang Xiaodong, director of sales at SAIC-GM-Wuling Automobile Co Ltd, a joint venture of SAIC Motor Corp, Liuzhou Wuling Motors Co and GM China, said the company has suspended shipments of vehicles to Vietnam amid the turmoil.

"These changes could make Vietnam more vulnerable to unexpected financial risks. It cannot afford having a worsening business environment with China as its economic development level is far behind Japan or the United States," said Li Quan, deputy director of the School of International Trade and Economics at Peking University.

China's investment in Vietnam increased sharply in 2013, with 89 newly licensed projects and capital injections into existing 11 projects, bringing the total investment to more than $2.3 billion. That was up from $371 million in 2012, data from the Beijing-based China Chamber of International Commerce show.

Li said companies in China's Pearl River Delta region will no longer consider Vietnam as an ideal destination, and Cambodia and Myanmar are likely to gain at Vietnam's expense.

Xiao Yanlan, a superviser in the communications department of Guangdong Midea Electric Appliances Co Ltd, which has invested $25 million in production facilities in Vietnam, said that Midea is reviewing the situation and will do "whatever it takes" to avoid risks.

Long Guoqiang, director-general of the general office of the Development Research Center of the State Council, said if the unrest isn't addressed promptly, it will definitely affect the bilateral investment and trade relationship.

"For any country, a stable political environment is an important component of the investment environment. If Vietnam still wants to attract more foreign investment and develop its foreign trade, the rational choice would be to appease those behind the unrest immediately," Long said.



Zheng Yangpeng contributed to this story.

Source: Chinadaily

ChinaDaily: Hanoi on a dangerous course

In recent days, the Vietnamese authorities have dispatched a large number of vessels, including some naval vessels, to the waters off Zhongjian Island, forcibly disturbing the normal drilling operations of a Chinese oil rig and ramming China's civilian escort ships.

Such provocative actions not only pose a serious threat to the safety of the Chinese drilling rig and the lives of those working on it, but also infringe upon the rights of China's government vessels carrying out maritime law-enforcement tasks in the sea areas under China's jurisdiction.

It is true that there is a territorial dispute between China and Vietnam over some islands and reefs of the Nansha Islands, but there is not any dispute between the two countries over the Xisha Islands, in which Zhongjian Island is included.

It is also true that delimitation is yet to be done for the waters between China's Xisha Islands and Vietnam's coastline.

However, the drilling operation by the Chinese company is only 17 miles away from the Zhongjian Island, yet 150 miles from the Vietnamese coastline. The location obviously falls within China's offshore waters, notwithstanding the lack of an official delimitation between China and Vietnam in this area. There is not any possibility of overlapping claims between the two countries.

According to Article 56 and Article 60 of the United Nations Convention on the Law of the Sea, China has exclusive sovereign rights to explore, exploit, conserve and manage resources within the waters off the Xisha Islands. It also owns exclusive jurisdiction over the construction and use of all installations and structures operating in these waters, including oil rigs.

It is clear by using the excuse that maritime delimitation has not been done, Hanoi has chosen to view the whole sea between China and Vietnam as disputable sea areas and sent a flotilla of ships to disturb the normal offshore drilling operations of the Chinese company. Vietnam's activities, a violation of international practices, have also set a dangerous precedent for a country to brazenly interrupt another country's normal maritime operations in waters under the jurisdiction of another, which is obviously in breach of UNCLOS.

The actions of the Vietnamese authorities are a serious provocation. The harassment by Vietnamese ships of the Chinese oil rig operating normally within the waters under China's jurisdiction infringes upon China's exclusive sovereign rights and jurisdiction over the natural resources within waters under China's jurisdiction. Vietnam should be held accountable for the consequences of its actions, which are in violation of international law, and China certainly has the right to take countermeasures in accordance with international law.

The Convention for the Suppression of Unlawful Acts against the Safety of Maritime Navigation and the Protocol for the Suppression of Unlawful Acts against the Safety of Fixed Platforms Located on the Continental Shelf, two documents passed by the International Maritime Organization in 1988, formally came into effect on March 1, 1992. China and Vietnam have both ratified and are party to these two international conventions. As stipulated by the two documents, China has legitimate rights to exercise its jurisdiction and impose some sanctions, against any country whose activities endanger the safety of navigation and its fixed platforms on its continental shelf.

By mobilizing armed vessels to ram Chinese ships in waters only 17 miles away from China's Zhongjian Island, Vietnam has made clear its intention of provoking a head-on clash with China and exerting pressure on China. With such reckless and risk-taking behavior, Vietnam has turned a blind eye to the overall picture of Sino-Vietnamese relations and ignored the ongoing efforts made by both countries to create a good atmosphere and environment for all-round cooperation, and seriously jeopardized bilateral mutual trust.

The Vietnamese attempt to force China into giving up its legitimate rights and interests by escalating regional tension is both dangerous and futile. On the contrary, Hanoi will put itself in a dilemma that it cannot handle.

China warns US against fueling tensions

General Fang Fenghui, chief of the General Staff of the Chinese People's Liberation Army, said a biased stance would risk harming relations between Washington and Beijing.

Fenghui made the remarks at the Pentagon on Thursday after meeting with US Army General Martin Dempsey, the chairman of the Joint Chiefs of Staff.

He also told the US government to be objective about the regional tensions between China and Vietnam.

Fang vowed that despite angry tensions in Vietnam over an offshore oil rig, his country would maintain Beijing’s interests in waters contested by Hanoi. 


The Chinese military official also suggested that the Beijing government is ready to defend its territorial integrity.

"I think it's quite clear...who is conducting normal activity and who is disrupting it," Fang said, adding, "Territory which has passed down by our ancestors into the hands of our generation - we cannot afford to lose an inch."

Vietnamese officials say at least 16 Chinese workers were killed after an anti-China protest turned violent in central Ha Tinh Province on Wednesday night. 

China and Vietnam are locked in a longstanding territorial dispute in the South China Sea over islands and waters claimed by both countries.

Beijing claims sovereignty over almost the whole of the South China Sea, which is also claimed in part by Brunei, Vietnam, Malaysia and the Philippines. The waters are believed to sit atop vast reserves of oil and gas.

Beijing has frequently warned the United States to be cautious in its words and actions with regard to territorial disputes involving China and its neighbors. 
Source: ChinaDaily

WSJ: Sanctions Over Ukraine Crisis Create Tangle for BP, Total Ties With Russian Executives Are Crucial for Western Oil Companies

       The WSJ reports,"on the day the U.S. barred its citizens from conducting business with Russia's Igor Sechin, BP  PLC's American chief executive was in an uncomfortable spot: sitting at a boardroom table in St. Petersburg, Russia, with the oil executive.

BP Chief Executive Bob Dudley is a director of OAO Rosneft,the state-controlled Russian oil company where Mr. Sechin is president and a major shareholder. The British company owns 19.75% of Rosneft.

To ensure access to Russia's vast reserves—and avoid political tangles that can ensnare companies in the country that don't have Kremlin connections—big Western oil companies including BP, Total SA  and Exxon Mobil Corp. have allied themselves with loyalists of Russian President Vladimir Putin. Mr. Sechin, a former government official, is one of Mr. Putin's closest allies.

Now, those connections are becoming liabilities as Western nations push Russia to back off from Ukraine by sanctioning some of those same individuals. That means the Western companies are facing pressure regarding the ties they have developed to gain access to crucial Russian energy prospects".

"All oil majors seek a piece of the Russian cake because they all need to put their hands on new resources, new fields," said a senior executive at France's Total. "Russia is the largest cake that is reachable."

"The U.S. sanctions prevent Americans from doing business with Russian individualsbut allows doing business with the companies in which the sanctioned individuals have minority stakes. Mr. Dudley, for example, may participate in board meetings with Mr. Sechin as long as they are conducting Rosneft's, and not Mr. Sechin's, personal business, the Treasury Department said.

Exxon Mobil recently said it is moving forward with plans for a $3.2 billion exploration effort starting this summer with Rosneft in the Arctic Kara Sea. Exxon and Rosneft also are exploring the Black Sea and Siberian shale and plan to export natural gas from Russia's Far East.

Total struck a deal in 2011 with OAO Novatek  co-founder Gennady Timchenko, another Putin ally on the U.S. sanctions list, to invest $4 billion for a 12.8% stake. Mr. Timchenko owns around 23% of Novatek, Russia's largest independent oil and gas producer, through another company, according to his spokesman. Total, its third-largest investor, expects its stake to rise to 19.6% by year-end. France last autumn awarded Mr. Timchenko the Légion d'Honneur, its highest laurel, for his contribution to Franco-Russian economic ties.

During a trip to Mexico last month, Total's Mr. de Margerie urged French President François Hollande to ease Paris's stance on Russia to avoid jeopardizing business relationships, two people familiar the conversation said.

The Timchenko-de Margerie relationship has remained strong. When the Russian pulled out of a Paris conference in mid-April following his inclusion on the sanctions list, Mr. de Margerie said he intended to cancel his appearance in solidarity, one of the people familiar with the situation said. Mr. de Margerie appeared after all and told the audience that he was speaking for himself as well as for Mr. Timchenko, people who attended the conference said.

No Western company is more enmeshed with Russia than BP. About 10% of its profit in the past quarter was generated from Rosneft, and BP and was bolstered by its Russian cash flow following the 2010 Deepwater Horizon explosion and oil spill in the Gulf of Mexico.

BP's big Rosneft stake requires communication between Mr. Dudley and Mr. Sechin.

"We will continue to work in whatever the appropriate manner is with Rosneft, primarily as a shareholder, but also as a partner," Mr. Dudley told investors on April 29, the day after the U.S. put Mr. Sechin on the sanctions list. BP said that under the current situation, Mr. Dudley will continue to serve on the Rosneft board and that the British company will abide by any applicable sanctions.

Drawn by Russia's promise of substantial reserves, BP in 2003 spent about $8 billion to create TNK-BP Ltd. Mr. Dudley was the 50-50 joint venture's CEO and installed business practices that turned the company into one of Russia's largest oil producers.

BP in 2012 agreed to sell its TNK-BP stake to Rosneft for $27.5 billion in cash and stock. That gave the British company its stake in Rosneft and put Mr. Dudley on the Russian company's board. The deal has turned out well for BP. After an initial $8 billion investment, BP ended up with about $19 billion in dividends and a pile of cash.

While the sanctions allow BP to continue collecting Rosneft dividends, the measures make it difficult for BP to strike further deals with Rosneft. Such partnerships were part of the U.K. company's strategy to boost reserves and production following the 2010 Gulf of Mexico spill, people familiar with the matter said.

One challenge for BP: While it books a share of Rosneft's profit, it has little control over the state-linked company".

Mr. Dudley is one of nine Rosneft directors and must bow out of discussions on joining with other Western companies—a significant part of Rosneft's expansion plans.

"It's hard to imagine Rosneft will be managed better because Bob Dudley is on the board," a person who has worked with BP on its Russia deals said.

State-controlled Rosneft is less efficient than comparatively lean Western oil companies like BP. But with new reserves hard to find, the person said, Western oil companies can't afford to leave Russia.

"BP is sort of stuck. They don't have a liquid position and they can't get out," he said. "But they don't want to."

WSJ: Putin's China Visit Highlights Shifting Power Balance

     The Wall Street Journal reports,"when Russian President Vladimir Putin touches down in China for a closely watched two-day state visit May 20, he will encounter an unbalanced relationship that has grown in Beijing's favor, tilted by shifts in global energy supplies and Moscow's increasing friction with the West.
Beijing's leverage is being tested in negotiations to pipe Siberian gas to China that have dragged on for a decade, but that both sides have said they want to conclude in time for an agreement to be signed during Mr. Putin's visit next week".

"Mr. Putin has already leaned to Beijing in one respect. While he and Chinese President Xi Jinping meet in Shanghai, more than a dozen ships from their navies will hold large-scale joint drills in the East China Sea in what security scholars say is a sign of Russian support for Beijing against what China says is a more militarily assertive Japan.

The gesture hasn't been reciprocated in Russia's current standoff with the West over Ukraine. China has remained on the sidelines as the Crimea region seceded from Ukraine to join Russia, out of concern of instability and alienating Western trade partners. Further provocations in Ukraine's restive east risks inviting scorn from the Chinese side, said Niklas Swanström, director of the Institute for Security and Development Policy in Stockholm".

"The two-day trip is intended to highlight what China and Russia call their strategic partnership. Mr. Putin will participate in a regional leaders' conference while in China. A coal project in Siberia financed by the Export-Import Bank of China is likely to be among the agreements announced, according to Russian officials. Moscow and Beijing have found advantages in working together to diminish U.S. influence and create greater room for them to pursue international economic and strategic interests. Mr. Putin is widely depicted in Chinese official media as a powerful leader unafraid to take on the West".

"Heightened global gas supply has put China in a stronger negotiating position, experts said. 

The latest version of the deal is expected to include the construction of a pipeline to ship 38 billion cubic meters of gas a year to China from fields in eastern Siberia. That represents more than one-fifth of China's total natural-gas consumption last year, and Beijing has pledged to increase use of natural gas to lessen its vast dependence on polluting coal.

The governments have wrangled over the project for a decade—a preliminary agreement was signed in 2004—with Moscow in recent years pushing for higher prices. Beijing played a waiting game, and during the course of protracted negotiations, global gas supplies surged. Countries once deeply dependent on energy imports, including the U.S., are now considering ramping up exports, and China has found other suppliers.

"The longer these negotiations drag out, the more it is in favor of China getting better pricing," said Gordon Kwan, regional head of oil and gas research at Nomura.

The former Soviet republic of Turkmenistan is now China's largest foreign gas supplier, with further plans to boost supplies. Similarly last year, China started importing piped natural gas from Myanmar.

Elsewhere during the past decade, China struck deals with Qatar and Australia, among others, for long-term supplies of LNG. State energy companies such as China Petrochemical Corp. and China National Offshore Oil Corp. have even bought ownership stakes in LNG projects in Canada.

Russia has sealed a raft of energy deals with China in the past two years as it seeks to pivot its energy policy eastward, including a $270-billion, 30-year contract for Russian state oil firm OAO Rosneft to sell oil to China. Increased competition and regulatory pressure has dented demand for Russian natural gas in the European gas market, Gazprom's most lucrative market".

"The deal is now likely more than ever, but it will only happen if Russia makes a concession," according to Michal Meidan, an independent consultant on energy geopolitics. "Having that successful state visit is important to Putin but not as important for Xi."

The unfolding Ukraine crisis signals a new world order. by Tony Brenton former British Ambassador to Russia

Happily, we now seem to be waking up to the reality that we are dealing not with a revanchist Russia, but with a coldly calculating one – a Russia that is neither patsy nor praying mantis. They don't want to fight a war or take on the economic burden of rebuilding eastern Ukraine, but they do have a minimal list of requirements – Ukrainian neutrality, more autonomy for Russian speakers – which have to be met before they will back off.

Should we concede these points? Ukraine is a big heterogeneous country where provincial autonomy makes sense, and in such a mess that Nato membership is certainly at least decades off. Nevertheless, I regularly hear two quite compelling arguments why we should not. First, if the Russians get what they want this time, they – and by extension others – will come back for more. We cannot let the annexation of Crimea go unpunished. Second, what business does Russia have telling Ukraine how it can govern itself anyway? The world has moved beyond the point where big states can tell small states what to do.

Through the crisis the US has regularly charged Russia with behaving in a "19th-century way". This has provoked a leading Russian commentator to suggest that the time has indeed come for the world to relearn the diplomatic arts of that period. He was right. We are no longer in a world where the west can simply enforce its view. Great power politics is back. No doubt we could have a knockdown, drag-out showdown with Vladimir Putin about Ukraine's right to join Nato. But the result would be a split Ukraine, a lot of economic disruption, an even more aggrieved and destructive Russia, and a further enfeebled world order. The only winners would be the likes of China and Iran. As Henry Kissinger, the arch doer of deals with global pariahs, has noted, "We cannot abandon national security in pursuit of virtue".

The best outcome for Ukraine, and for us, would be an agreement with Russia to get the great powers out, as with Finland during the cold war, and give the country space to turn itself into an economic and political success, which would then be an example to Russia itself. And I am afraid we are going to have to brace ourselves for more such transactions in the future.

Source: theguardian

Chinese Official: Natural gas Deal between Russia and China will be signed

China and Russia have agreed on most of a deal for natural gas delivery and cooperation on other projects. It will be signed during Russian President Vladimir Putin's visit to Beijing next week, a senior Chinese official said on Thursday.
Companies from both sides are finalizing the gas contracts in Moscow, and the aim is to sign them during Putin's visit, Deputy Foreign Minister Cheng Guoping told a press briefing.

Putin will attend a summit of the Conference on Interaction and Confidence Building Measures in Asia from May 20 to 21 in Shanghai. It's his first trip to China since his opposite number, President Xi Jinping, took office.

Russia faces Western sanctions after it incorporated Ukraine's Crimea region this year. Russia is looking to Asian markets to reduce dependency on Europe as a buyer of energy. It's "100 percent" that China and Russia will sign a gas deal, Sergey Pikin, director of Russia's Energy Development Fund, said in late April.

Russia's top natural gas producer, Gazprom OAO, plans to supply China with 38 billion cubic meters of gas annually starting from 2018 and increase it to 68 billion cubic meters. The fuel will be supplied through China's western and eastern pipelines. No timetable has been specified for the increased supply.

A person at China National Petroleum Corp, the nation's biggest natural gas importer, told China Daily that the price of delivered gas is being discussed and has been the stumbling block in talks.

Sun Yongxiang, a researcher with the Development and Research Institute of the State Council, China's cabinet, said the price may be around $400 per 1,000 cubic meters, which is close to Russia's demands.

Source:  ChinaDaily

China Daily: Xinjiang has to prove that the best is West

In 2010, the central government decided to establish a Special Economic Zone in Kashgar city in the Xinjiang Uygur autonomous region. The hope is that the city, which has a population of 700,000 - 79 percent of which are members of the Uygur ethnic group - will be able to replicate the success of Shenzhen, China's first and still most-successful SEZ, in the country's less-developed western region.

In the short space of 30 years, Shenzhen, which lies immediately to the north of Hong Kong, was transformed from a fishing village into one of China's wealthiest cities. As part of a pairing assistance program, many of the experts who laid the foundations of that transformation will also be on hand to provide assistance and guidance to the developers in Kashgar.

Bridging the divide

Kashgar prefecture, which includes Kashgar city, is set to become a bridge connecting China with eight countries, including Tajikistan, Afghanistan, Pakistan, and Kyrgyzstan via five land ports. Kashgar city, an important international business hub since the days of the ancient merchants route known as The Silk Road, will become China's only inland SEZ when the preparatory work is completed in 2015.

Currently, about 95 percent of the goods that pass through the land ports, in the prefectures of Kashgar and Kizilsu Kirghiz, are Chinese-made export items, such as daily necessities, household appliances and machinery, said Xu Gang, deputy director of Kashgar Prefecture's Port Administration.

Since President Xi Jinping proposed the establishment of the Silk Road Economic Belt in 2013, Kashgar city has been positioned at the forefront of a policy to open up to Eurasian countries, a status helped by the fact that the Pakistan-China economic corridor also begins in the city, according to Mutalif Wubuli, the commissioner of Kashgar prefecture.

In 2013, during a speech in Kazakhstan, Xi proposed that China and the Central Asian countries should build an "economic belt along the Silk Road", a trans-Eurasian project that would target more than 3 billion people and represent the single biggest market in the world - one with unparalleled potential.

Alibaba targets farmland in new project

China's e-commerce giant Alibaba Group Holding Ltd has launched a new project under which farmers can rent out their land online to the company to grow crops, according to Xinhua news agency.

The platform, which has been launched by Alibaba and Zhejiang Xinghe E-commerce Co, will consolidate the cultivated land under an agriculture cooperative. Users of Taobao, an online shopping website, can receive goods from the land that they have subscribed to from the e-commerce company. Apart from the rent the farmers will get, they can also receive salary from the agricultural cooperative if they participate in production.

At present, more than 26.67 hectares of cultivated land has been subscribed by Taobao users. This project, which started in March, began in Jixi, Anhui Province.

Source: ChinaDaily

Architecture: Skyscraper competition winners offer New York population solutions

For its Living Cities competition, Metropolis magazine asked participants for solutions to the housing crisis facing New York. According to the magazine, the city is expected to gain a million more residents by 2040, placing a strain on housing and transport. The winners have now been announced, and include a twisting tower on the High Line and a multi-transport, entertainment and residential hub.
The competition sought designs that were based within the five boroughs of New York, that incorporated a 30-40 story residential tower and that included an, "innovative structural steel system." Participants were also asked to consider sustainability, multi-use strategies, lifestyle amenities and multi-generational design.

Vivo was designed and submitted by Andrew Duffin and NBRS+Partners. It reworks the concept of New York's High Line, a redevelopment of the West Side Line railroad that was opened in 1934 before falling into disuse and which has spawned similar projects in places such as Sydney. The concept "engulfs" the High Line and extends it vertically.

"It's a hybrid structural system where the triangulated diagrid system acts as an exoskeleton providing lateral stability and vertical support," explains the Vivo team. "This frees the internal space from needing internal intermediate structure allowing ultimate flexibility for remodeling or use changes over its lifespan. VIVO is alive and responds to the daily and seasonal energy of NYC."

The second winner was designed by Chad Kellogg, Matthew Bowles and Nina Mahjoub of AMLGM. Urban Alloy is a huge road and rail transport interchange, with the sprawling steel tendrils of the structure appearing to suck in the surrounding train lines and freeways proving a central connecting point for people across New York. In addition to the transport hub, the building also houses residential units and entertainment spaces, made easily acccessible by the transport links.

"Unlike concrete structures that benefit from a very regular floor to floor height because of the need to reuse formwork, steel structures can efficiently be constructed with each unique member cut by an automated system," explains the Urban Alloy team.

Source: Gizmag

-German industry sees "irreparable damage" from Russia sanctions

Europe's showdown with Moscow over Ukraine is already having a major impact on German business in Russia and imposing economic sanctions would cause lasting damage to industry, a confidential paper sent to the German government by a business lobby warns.

The paper from the German-Russian chamber of foreign trade, a group representing 800 companies that provides support to German firms operating in Russia, underscores the extent of concern among German businesses over the Ukraine crisis.

It also suggests industry is stepping up efforts to dissuade Chancellor Angela Merkel's government from pressing ahead with tougher sanctions.

Merkel has warned of more punitive measures against Russia if a presidential election in Ukraine, scheduled for May 25th, is disrupted.

"The growing destabilisation of Ukraine and the diplomatic tug-of-war for a common solution are already having a massive impact on German business in Russia," the two-page "position paper" dated May 7th warns.

"Deeper economic sanctions would lead to a situation where contracts would increasingly be given to domestic firms, projects would be suspended or delayed by the Russian side, and Russian industry and politicians would turn to Asia, in particular China," the paper says.

It says the loss of market share for German and European firms would be "long-term and sustainable", causing "irreparable damage" to Germany's competitive position in Russia.

The paper says this would lead to job losses in Germany and would leave companies vulnerable to "massive compensation" claims if they were forced to break contracts with Russian counterparts.

Source: Reuters

Italy's Renzi says no corrective budget after GDP fall

Italian Prime Minister Matteo Renzi excluded the possibility on Friday of a new cost-cutting corrective budget after economic growth unexpectedly fell in the first quarter of the year.

Renzi, speaking on a morning radio talk show, said the budget had already been passed and that he did not expect further measures. He said Italy must move ahead with more measures to stimulate the economy, which came out of recession last year but remains fragile.

Preliminary estimates from statistics office ISTAT on Thursday showed gross domestic product fell by 0.1 percent in the first three months of the year from the previous quarter and by 0.5 percent from the same period a year earlier

That contrasted with estimates from 27 analysts polled by Reuters, who forecast a 0.2 percent quarterly rise and a 0.1 percent annual fall.

Source:  Reuters

French government announces tax relief as euro election looms

French Prime Minister Manuel Valls, struggling to win back disgruntled voters, said on Friday his government planned to exempt a further 1.8 million households from income tax, at a cost to the state of 1 billion euros ($1.4 billion).

Valls, whose Socialist Party trails opposition parties in voter polls ahead of the May 25 European Parliament elections, said the move would take effect later this year and was aimed at restoring the dwindling purchasing power of consumers.

"It's one billion euros less in tax, one billion euros more in purchasing power for the French, especially the poorest," Valls said on Europe 1 radio.

"It will in large part be financed by clamping down on tax evasion," he said, adding that the government had already budgeted in 500 million euros to help cover costs of the move.

The tax relief may well add to France's already strained public finances as President Francois Hollande struggles to live up to a promise to cut its public deficit to an EU-agreed limt of three percent of economic output next year. That deadline itself was pushed back by two years.

The Socialist government is looking to make 50 billion euros in budget savings over the next three years which are key to keeping the deficit-reduction plans on track.

The International Monetary Fund warned on Thursday that the deficit targets could come under threat if the savings drive gets watered down while the government extends tax cuts to consumers and companies. 

The French central bank said last month the government had to make sure there was no lag between cutting taxes and reining in spending that could endanger the fiscal targets. 

The tax relief for households comes on top of 30 billion euros in payroll tax that the government plans to phase out in the next three years as part of a push to help French companies regain their competitiveness internationally.

Economy Minister Arnaud Montebourg said that at a time when companies were seeing their tax burden eased, it was a question of "social justice" to also help out consumers.

However, the move may also prove electorally astute with opinion polls suggesting that Hollande's Socialists may come out behind both the far-right National Front and the conservative UMP party in the EU parliament elections.

Hollande's government, reshuffled at the start of April after heavy Socialist losses in local elections, is seeking to counter charges by the UMP and National Front that it has pushed taxes higher but failed to reduce a high jobless rate, revive the economy or halt France's industrial decline.

In addition to the income tax relief, the government has sought to defuse anger among state-employed teachers - a major source of votes for the left wing - by pushing back the day teachers must return to work after summer vacation.

Accused by some opponents of surrendering France's trading power and industrial ownership, the government revealed plans on Thursday to expand its veto power over foreign purchases of French firms, extending a list of sectors where it has a say on the grounds that they are strategically sensitive.

Source: Reuters

Modi’s Victory and India’s Change Election

    The WSJ reports,"more than half a billion Indians, a record 66 percent of eligible voters, cast ballots at some 930,000 polling places. Results released Fridayshow the conservative Hindu nationalist Bharatiya Janata Party (BJP) and its controversial leader, Narendra Modi, on course to win more than half the seats in parliament, the first time in 30 years a single Indian party has won enough seats to rule without coalition partners.

India’s 60-year-old democracy may be young compared with the United States–the world’s oldest–but there are parallels between this election and Barack Obama’s first presidential victory.

Both Mr. Modi and Mr. Obama hugely appealed to young voters and ran on a message of change, expanding economic opportunity and making government more responsive.

Indians desperately want economic growth and have grown frustrated with the corruption and incompetence of the ruling Congress Party. Some think tanks have rated this parliament the least productive in India’s history.

And so Indians turned to Mr. Modi, a charismatic campaigner with a compelling story. Born to the lower caste, he is a former chaiwalla (tea seller). In 12 years as chief minister of the western state of Gujarat, he developed a reputation for getting results and fostering economic development, job creation and improving infrastructure.

But Mr. Modi is feared by many Muslims for his alleged role in riots in 2002 in which more than 1,000 mostly Muslim people were killed in Gujarat. He has denied allegations that he did nothing to stop the violence but was denied a U.S. visa in 2005 over the issue".

Portugal exits bailout poorer and long way from recovery

On Saturday, Portugal becomes the second euro zone state after Ireland to exit a bailout, having stuck to the European Union's recipe of belt-tightening to beat the euro zone crisis.

The 78-billion-euro rescue programme the EU and the International Monetary Fund assembled in 2011 for the nearly bankrupt country will formally conclude with Portugal's budget in much better shape and borrowing costs at eight-year lows.

But a shock 0.7 percent drop in its GDP in the first quarter points to the risks inherent in an economic recovery plan which, by focusing on fuelling export growth by cutting labour costs, has become dependent on volatile foreign demand. [ID:nL6N0O139Y]

That data, released on Thursday, also illustrated how far the country is from a lasting economic recovery.

Portugal's central bank highlighted the challenges, saying progress under the bailout was insufficient, and ensuring sustained growth and getting banks lending again would require further reforms.

But as a government no longer dependent on aid looks anxiously ahead to an election in 2015, these may fail to materialise.


INTERNAL DEVALUATION

For those who have lost their jobs or seen their pensions or their salaries cut, life in a post-bailout world raises painful questions: Were the reforms worth it and will they ever deliver enough growth for jobs and better living standards?

Further south in the industrial city of Setubal - one of Portugal's poorest and plagued by high unemployment - there is little evidence of the growth that, before stalling, had returned to the country in the second quarter of last year.

"Levels of poverty keeps getting worse, especially among people aged 25-40 who lost their jobs," said Constantino Alves, a priest who runs a "Social Restaurant" charity for the poor.

"We get young couples, parents with children seeking meals and aid. There are various small entrepreneurs who had shops here and are now in utter poverty, eating here. Many have lost all faith to find jobs. It's a crisis of confidence," he said.

The problem, say economists, is that reforms already implemented during three years of wrenching recession and austerity will only have a delayed impact.

"These are political economies that are very difficult to reform. The only way to change is incrementally," said Antonio Barroso, senior vice president at the Teneo Intelligence consultancy in London.

The government has made it cheaper for firms to hire and fire. That has lowered the cost of doing business and helped bring unemployment down from its 2013 peak of 17.5 percent.

But many observers say that because austerity during the bailout focused overwhelmingly on cost-cutting - like public sector wages and pensions - and tax hikes, deeper reforms that would have reduced the size of the state or made the economy even more export-oriented have not taken place.

"The (bailout) adjustment programme was basically based on internal devaluation," said Antonio Costa Pinto, political analyst at the University of Lisbon.

That has pleased the creditors. Labour costs in Portugal fell eight percent since 2011 to 11.6 euros per hour in 2013, according to EU statistics agency Eurostat. That brought competitiveness gains, with the value of exports rising to 41 percent of GDP last year. 
But the European Commission has said that after wages fell around 5 percent between 2010 and 2013, Portugal is still only half-way to getting pay down to levels that could tangibly reduce unemployment.

"Portugal's challenges remain the same," said Costa Pinto, pointing to the need for further competitiveness gains.


'DESPERATE FOR GROWTH'

That creates a dilemma for a government that will want to give voters some hope before next year's national election.

"This government is looking like it is desperate to go for growth," said Nicholas Spiro, managing director at Spiro Sovereign Strategy in London.

"...It is still a job half done. The danger is that the reforms grind to a screeching halt, there is a very high risk that that happens."

With government bond yields at record lows, market pressure to persist with tough economic reforms has evaporated.

And now that its lenders from the Commission, European Central Bank and IMF have stopped reviewing the economy, the country can change policies more freely, even if still needs to gradually reduce the budget deficit under EU rules.

The government has already said it will partly reverse salary cuts in the public sector in the next few years and it is considering cutting taxes next year. 

"I don't think there is an incentive to continue pushing reforms," said Teneo Intelligence's Barroso. "I think the pressure to cut taxes before the election is huge."

Perhaps that will give a push to growth in the short term, but will it help generate the high growth necessary to sharply reduce Portugal's high debts at around 125 percent of GDP? Or to create jobs for those outside the few fast-growing sectors?

Back in Almada, Capelo still hopes thing can improve.

"At least we still have hope that the data will one day transform into real improvements," she said. "I want to try and get a bank credit this year for the business."

But bank loans to firms and individuals are continuing to decline, dropping to 240 billion euros in February, their lowest since 2007, according to the Bank of Portugal.

"Getting loans from banks is the big problem even for companies that have managed to survive. There are no loans, so it's difficult to buy new merchandise, not to mention expand," said Anabela Sharamia, vendor in a furniture shop in Setubal.

Source: Reuters