Russia is the second-largest producer and the largest exporter of natural gas in the world. The country’s most important customers are in Europe where the bulk of its exports are consumed. The completion of the Power of Siberia pipeline, however, could be a pivotal moment for Moscow as it reduces its reliance on traditional customers in the West. Besides Russia’s relations with Europe, the completion of the pipeline could also affect the import of LNG into China and potentially the trade deal between Beijing and Washington.
China’s moment
The Chinese gas market (both LNG and piped gas) is not only the biggest in the world but is big enough to absorb both US LNG exports as well as Russian piped gas through the Spirit of Siberia and more. Furthermore, China’s energy strategy like America’s is to diversify its sources of energy imports.
The trade war is not principally about oil or gas or China’s trade surplus and alleged Chinese malpractices. It is about the petro-yuan undermining the supremacy of the petrodollar and by extension the US financial system, Taiwan, refusal by China to comply with US sanctions against Iran, China’s overwhelming dominance in the Asia-Pacific region and its sovereignty claim over 90% of the South China Sea, the new order in the 21st century and above all fear of the US losing its unipolar status.
The delay in reaching a deal to end the trade war is because President Trump knows he has already lost the war and is looking for a face-saving way of presenting this to the American people. So he meanwhile muddies the water.
President Trump’s bizarre behaviour and his reneging on what he says from day to day are squarely behind the alternating moods of the global oil market between optimism and pessimism.
One day he gets the global economy excited by saying that the U.S. and China are in the “final throes” of reaching a trade deal and the following day he is threatening to slap new tariffs on Chinese exports thus deflating the economy. Another day he praises Chinese President Xi Jinping and the Chinese people to be followed almost immediately with signing a legislation supporting the demonstrators in Hong Kong. This is the behaviour of somebody with limited intellect and inability to see the wider picture.
His support of Hong Kong opposition is not only a blatant interference in China’s internal affairs but is also a crude ploy to shift global media focus away from his impeachment proceedings. China will retaliate for sure. Moreover, this will harden its attitude towards ending the trade war. China’s calculations are that the adverse impact of the war on the US economy coupled with the impeachment proceedings could cost President Trump the 2020 presidential elections.
However, it is very probable that President Trump will eventually swallow his pride and end the trade war against China if only to improve his chances of getting four more years in the White House.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London