Counting the Cost

Russia and China: Strategic allies?

On Counting the Cost we ask will recent agreement between both countries affect the balance of global economics

Last updated: 24 May 2014 15:40
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This week, Counting the Cost looks at Russia and China. How all political pieces fit together and how they end up effecting the balance of global economics.

Russia's takeover of Crimea sparked Western nations to impose sanctions. The sanctions looked tame but they have ended up accelerating Russia towards recession, and have got Moscow looking for new trade partners.

50 billion dollars invested mostly in bonds and stocks have already left the country. But the country only needed to turn East for support. China has agreed to pay around $400bn for a 30-year supply of Russian gas.

This represents $13bn a year, which is only a little over two percent of Russia's total export revenues of $593bn. And last year, 200 billion cubic meters of gas was exported from Russia, most of it to Europe.

As for the China deal, Russia now needs to find $55bn to build the pipe line. China, on the other hand, is not dependent on Russian gas, it can look to Turkmenistan, Myanmar, Australia and Qatar.

So are both countries strategic allies? And can China save Russia? Al Jazeera's Adrian Brown in Shanghai takes a look at the deal. 

The impact of Russia's sanctions on Eastern Europe and Central Asia

Kirill Dmitriev, CEO of the Russia Direct Investment Fund, tells us about the gas deal and how important it was for Russia. 

"I think it's very critical. Negotiations were going for ten years and the fact that each conclusion is very important. It's not only important that it's a $400bn deal for 30 years but also lots of new projects will be developed because Russia will build a massive gas transmission infrastructure"… very important win for Russia, very important good terms for China so win-win for both. And a very important deal," he said. 

It seems Russia sees the Chinesse deal as a positive step, but the recession, and Ukraine's economy shrinking seven percent, are both concerning factors. 

The European Bank for Reconstruction and Development is watching the deal closely. The organisation is worried that countries in Eastern Europe, the Caucasus, and Central Asia - all with ties to Russia - could see their economies suffer too.

On Counting the Cost we discuss these issues further with Jonathan Charles, a member of the executive board at the European Bank for Reconstruction and Development.   

Vietnam anger over South China Sea 

China towed a billion-dollar oil rig to a position 220km off the coast of Vietnam, close to the Paracel Islands. 

This had unintended consequences in Vietnam. Days of violence in a third of the country's provinces.

It is estimated that the region has oil reserves of 28 billion barrels. More importantly, gas reserves of 900 trillion cubic feet. Vietnam's oil reserves sit at around 4.4 billion barrels with proven gas reserves of 600 billion cubic feet, and the trade between both countries was worth over $50bn last year. 

So what options does Vietnam have? And are these historical claims or potential economic gains?

To explain this further, Counting the Cost speaks to Bill Emmott, former editor of the Economist and author of Rivals which looks at the power struggle between China, India and Japan.

Watch each week at the following times GMT: Friday: 2230; Saturday: 0930; Sunday: 0330; Monday: 1630.  Click here  for more  Counting the Cost .   

Follow Kamahl Santamaria  @KamahlAJE  and business editor Abid Ali  @abidoliverali .


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