Leonid Bershidsky: Vladimir Putin’s Gas Crunch

russian-pipeline_300x236National Post

By Leonid Bershidsky

BERLIN — Ever since Russia became something of a rogue state in the eyes of its European energy clients, it has tried to demonstrate that it can mostly do without them — if not immediately, then in a few years’ time. Two major deals have been announced since the annexation of Crimea, one with China and the other with Turkey. It looks increasingly likely, however, that neither of these is a deal in any conventional sense and that Russia is merely putting on a desperate show.

In May, Putin went to Beijing to press for a $400 billion contract to send gas to China through a new pipeline, dubbed Power of Siberia. Alexei Miller, head of Russia’s natural gas monopoly, Gazprom, announced that, after some tense negotiations, a final 30-year deal to supply 38 billion of cubic meters of natural gas annually was signed. This appeared to be a major victory for Putin and a warning both to Europeans, who bought 160 billion cubic meters of natural gas from Gazprom last year (30% of their imports), and to Americans, who would like to supply liquefied natural gas to Asian markets.

More than six months on, however, the deal doesn’t appear to be moving forward as Russia had hoped. In May, Miller counted on a Chinese advance to start building the $55 billion infrastructure for the project. In November, he declared the loan would not be forthcoming. His explanation was somewhat baffling:

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