REUTERS/How Hwee Yong Russia's President Vladimir
Putin with Chinese counterpart Xi Jinping during a signing ceremony at the
Diaoyutai State Guesthouse in Beijing on Sunday.
Russia and China just agreed to a second major gas
deal, worth slightly less than the $400 billion agreement reached earlier this year,
according to Bloomberg.
The details of the deal mean Russia will supply China
with another 30 billion cubic metres of gas every year for the next three
decades through the Altai pipeline, a proposed pipe transporting the gas from
western Siberia to China.
Earlier in the fall, Keun-Wook Paik at the Oxford Institute for Energy Studies said this kind
of deal would be "Putin’s revenge," according to the
Financial Times.
Many analysts see the move as evidence that Moscow is
pivoting away from reliance on European customers and toward East Asia, where
relatively rapid economic growth should prop up demand.
It's also a political move, as relations with the rest
of Europe have become increasingly cold after Russia's invasion of Ukraine, and
the tit-for-tat sanctions between the European Union, United States, and
Russia.
The value of the Russian rouble has collapsed recently
as the price of oil has declined. Russia's economy is dependent on oil, so the
currency fluctuates with the oil price. The price declines in turn threaten
Russia's ability to meet its budget obligations and pay debt. In sum, the
country faces an economic crisis if it can't find new demand for oil and currency
.
But the rouble is rallying against the dollar today.
Here's the US currency dropping by nearly 3% against the rouble after the
central bank announced it would stop trying to defend the currency's collapse.
Bloomberg
The China deal helps both Russia and China lessen
their economic dependence on the West. It also helps Russia get around the
economic sanctions imposed by the West because of the Ukraine situation. The Moscow Times notes:
Curtailing the dollar's influence fits well with
China's ambitions to increase the influence of the yuan and eventually turn it
into a global reserve currency. With 32 percent of its $4 trillion foreign
exchange reserves invested in US government debt, China wants to curb
investment risks in dollar.
The quest to limit the dollar's dominance became more
urgent for Moscow this year when US and European governments imposed sanctions
on Russia over its support for separatist rebels in Ukraine.
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