China in talks to buy Gazprom and Rusal, Bloomberg reports
Bloomberg reports that China is negotiating the purchase of Gazprom and Rusal through its state-owned companies while Europe looks for more expensive gas in other markets.
English · Original discussion in Spanish · Published
China in talks to buy Gazprom and Rusal as Europe runs out of gas
Bloomberg reported that China is considering stepping in to rescue Gazprom and other Russian giants. The deal would be carried out through state-owned companies: China National Petroleum, Sinopec, Aluminium Corp. of China and China Minmetals. Talks are already underway. The sources cited by the agency say Beijing is weighing «any investment opportunity in Russian companies or assets». The move comes as Western sanctions have left Moscow without buyers in Europe and with the price of Russian crude in freefall.
What China is buying, and why now
The Asian country is not starting from scratch. CNPC holds a 20% stake in the Yamal LNG project; China owns 10% of Arctic LNG 2, and Cnooc another 10%. The news fits within an internal directive: senior Chinese government officials issued orders to prioritize securing commodity supplies in the face of the impact on energy and food prices. Foreign minister Wang Yi described ties with Russia as «rock solid».
The move can be read two ways. First: China is buying cheap what Europe has stopped buying. Second: this is not a charity operation, it is a strategic reserve. Some argue that Beijing has been buying metals forward and oil with an eye on the world that will be built afterwards. If Russia needs to sell and Europe is not buying, the buyer sets the price. And there is only one buyer.
The Russian gas Europe no longer wants
The debate over price is at the heart of the matter. Part of the analysis holds that Russia is selling gas and oil at a 40% discount. Another view points out that, in the medium term, Europe does not care whether it buys from a Chinese or a Russian company: what matters is that China lacks the infrastructure to consume all the Russian gas Europe was no longer buying, so its real interest is to keep part of the profit from selling to Europe. The Russians lose sovereignty; the Chinese gain margin.
The detail of the existing stakes dismantles the idea of an improvised operation. China has been weaving energy agreements with Moscow for years. What is new is the scale: buying or increasing positions in strategic energy and commodity companies, including aluminium producer United Co. Rusal. All through state-owned companies. No auction, no competition, no press.
The European bill
Europe is facing the winter with energy prices soaring and gas purchases from the United States more expensive than what it used to buy from Russia. The Chinese move does not solve that problem: it makes it worse. If Russian companies end up in Chinese hands, the price of the gas Europe buys in the future will be set by Beijing. And Beijing has no reason to be more benevolent than Moscow.
The debate over whether Russia was an economy dependent on Europe or a power has grown stale. Russia sold commodities in exchange for colored pieces of paper; now it will sell them to China. The question is whether this change of buyer is a Russian defeat or a Chinese victory. Both. And Europe, meanwhile, watches the heating meter.
The point where the analysis gets stuck: nobody knows whether the Russians will really sell controlling stakes in Gazprom or Rusal. Buying shares is one thing; handing over the gas empire is another. The war started over gas. And gas still calls the shots.
Bloomberg reported that China is considering stepping in to rescue Gazprom and other Russian giants. The deal would be carried out through state-owned companies: China National Petroleum, Sinopec, Aluminium Corp. of China and China Minmetals. Talks are already underway. The sources cited by the agency say Beijing is weighing «any investment opportunity in Russian companies or assets». The move comes as Western sanctions have left Moscow without buyers in Europe and with the price of Russian crude in freefall.
What China is buying, and why now
The Asian country is not starting from scratch. CNPC holds a 20% stake in the Yamal LNG project; China owns 10% of Arctic LNG 2, and Cnooc another 10%. The news fits within an internal directive: senior Chinese government officials issued orders to prioritize securing commodity supplies in the face of the impact on energy and food prices. Foreign minister Wang Yi described ties with Russia as «rock solid».
The move can be read two ways. First: China is buying cheap what Europe has stopped buying. Second: this is not a charity operation, it is a strategic reserve. Some argue that Beijing has been buying metals forward and oil with an eye on the world that will be built afterwards. If Russia needs to sell and Europe is not buying, the buyer sets the price. And there is only one buyer.
The Russian gas Europe no longer wants
The debate over price is at the heart of the matter. Part of the analysis holds that Russia is selling gas and oil at a 40% discount. Another view points out that, in the medium term, Europe does not care whether it buys from a Chinese or a Russian company: what matters is that China lacks the infrastructure to consume all the Russian gas Europe was no longer buying, so its real interest is to keep part of the profit from selling to Europe. The Russians lose sovereignty; the Chinese gain margin.
The detail of the existing stakes dismantles the idea of an improvised operation. China has been weaving energy agreements with Moscow for years. What is new is the scale: buying or increasing positions in strategic energy and commodity companies, including aluminium producer United Co. Rusal. All through state-owned companies. No auction, no competition, no press.
The European bill
Europe is facing the winter with energy prices soaring and gas purchases from the United States more expensive than what it used to buy from Russia. The Chinese move does not solve that problem: it makes it worse. If Russian companies end up in Chinese hands, the price of the gas Europe buys in the future will be set by Beijing. And Beijing has no reason to be more benevolent than Moscow.
The debate over whether Russia was an economy dependent on Europe or a power has grown stale. Russia sold commodities in exchange for colored pieces of paper; now it will sell them to China. The question is whether this change of buyer is a Russian defeat or a Chinese victory. Both. And Europe, meanwhile, watches the heating meter.
The point where the analysis gets stuck: nobody knows whether the Russians will really sell controlling stakes in Gazprom or Rusal. Buying shares is one thing; handing over the gas empire is another. The war started over gas. And gas still calls the shots.
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Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (73 replies).
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