Wednesday, August 6, 2014

Russia and India agree to $40 Billion Natural Gas Deal

With the US increasing sanctions in an effort to try and isolate Russia, President Putin moves to try and counter those sanctions by announcing new deals. It seems there are moves everywhere on the global chess board and this look like another one.

We can assume that like the energy deals with China, this deal will not use the US dollar as the medium of exchange. Below are some quotes from the article:


"Russian President Vladimir Putin and Indian Prime Minister Narendra Modi are expected to announce a massive natural gas deal during their summit later this year, Indian media reports said Monday.
Russian and Indian officials are negotiating a $40 billion gas pipeline project from Russia to India, oil ministry officials told the Indian daily Hidustan Times."
"Russia is a source of a third of all natural gas used in Western Europe. However, with the economic sanctions imposed by the US and the EU over the Ukraine crisis, Russian authorities are keen to diversify its gas routes."
"Even as the US and EU try to isolate Russia on the Ukraine issue, Beijing and other BRICS capitals have been cementing their business ties with Moscow."
"Meanwhile, the new Indian Prime Minister, who is being courted aggressively by the US and its ally Japan, after his massive win in the Indian elections this summer, said in Fortaleza during a meeting with Putin that Russia is India's greatest friend."
“If you ask anyone among the more than one billion people living in India who is our country’s greatest friend, every person, every child knows that it is Russia. Everyone knows that Russia has always stood side by side with India during the toughest moments and without demanding anything in return,” Modi told Putin."
The US sanction efforts against Russia are a wild card out there that no one really knows what the impact will be. Russia is clearly determined to ignore the sanctions and try to prove it does not isolate them. And now they are starting to move towards retaliation for sanctions. This winter Russia will have increased leverage because it supplies natural gas to the EU nations who will still need to stay warm even as they are pressured by the US to ramp up sanctions against Russia.
This whole area of conflict shows no signs right now of diminishing. Instead it seems like it is headed towards escalation with Russia starting to make moves to retaliate instead of giving in to pressure from the West. If it continues and ramps up, global GDP will certainly be impacted which will add stress to the system.

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