China & Russia Continue to Box Out West

This post was submitted by Erik Oswald, SchiffGold Precious Metals Specialist.

Russia and China have signed a gas deal that would side-step Western markets. This agreement is just the latest development as the two countries continue to cement ties and diversify their holdings away from the United States. Reaching this agreement further removes the Chinese from dependence on oil purchased from OPEC and thereby puts another nail in the coffin for the petrodollar standard. Not only that, but its announcement comes just days after Mikhail Gorbachev warned that the world is nearing another Cold War.

Coupled with a marked upshot in demand for physical gold and silver bullion by both nations, it is clear that Beijing and Moscow are preparing for a world without the US dollar as a reserve currency. They appear to be diversifying their assets accordingly, which we summarized in October’s news roundup. In total, Russia will be supplying China with approximately 68 billion cubic meters of natural gas in 2014. To put that number into perspective, 1 billion cubic meters of liquid natural gas is approximately 730,000 metric tons.

Moscow and Beijing signed an agreement to supply gas from western Siberia to China, in a deal that could eventually see more of Russia’s gas flowing to its vast eastern neighbour than to its traditional European markets.

Assuming crucial details such as price are agreed, the deal would mark another big step in President Vladimir Putin’s efforts to build a closer energy relationship with China to offset increasing isolation from the west.”

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