BRIC economy driven by China - The union becomes stronger as bi-lateral agreements are signed within
There are several agreements signed with various countries to stimulate trade in efforts to boost the GDP of respective countries.
The latest example was when Prime minister Vladimir Putin and his Chinese counterpart Wen Jiabao both were present when the bi-lateral agreements were signed in China.
This is an example where the BRIC countries, Russia and China creates stronger bonds together and makes and effort to boost BRIC economy.
The other two BRIC countries India and Brazil are also involved in intra BRIC bi-lateral deals with each others and the other BRIC countries. It is believed to be even more of these deals to come.
BRIC countries have also sanctioned a statement of replacing the oil price from USD to a international basket currency where BRIC currency should play a role together with a common Middle East Gulf currency.
Back to the bi-lateral agreement arrangement in China this month.
Prime Minister Vladimir Putin has as a goal during his visit to China to strengthen the realtionship between China and Russia. He also aim to adjust the increasing inbalance in the trade between China and Russia on the economic areas.
The Chinese economy is rebounding from the economic recession experienced since late 2008 and all 2009 so far and is showing signs of expansion. The Russian economy however has shown weakening through all 2009 and continue to send out negative signals with respect to budget deficit and employment rates. Their export industries are hurt very bad and there seem to be no light in the end of the tunnel for these yet. The oil and gas prices have normalized to a level less than 50% than it was at its height in 2008, which also contributes negative to the budget balance in Russia at the moment.
The Chinese Development bank has agreed upon a loan to its Russian counterpart VEB of 500 Million USD. An equal large loan was agreed upon from the Chinese Agricultural Bank to the Russian VTB.
Russia has also agreed with China on a export agreement of gas eqvivalent to 70 billion cubic meter pr year. It is not said what the terms and length of this agreement is, but one owuld assume there is a link to the loans given to the Russian banks.
Gazprom CEO Miller, will not tell how much worth this agreement is, but assuming todays gas prices paid by European clients of Russia gives us some estimate of the value of this deal.
European clients pay around USD 9 pr billion ton of gas imported from Russia.
1 ton is equal to 2.831685 cubic meters. That means that European clients pay around 3.18 USD/billion cubic meter of natural gas.
So the agreement between Russia and China has a potential value of around 222 billion USD. However, it is not believed that China will have to pay this price for gas from Russia, and it is assumed to be strongly linked to the terms of the loans given to the Russian banks VEB and VTB of a total of 1 billion USD.
The more significant side of these bi-lateral agreements is that the relationship between Russia and China will be stronger, and in international diplomacy this will be illustrated very obvious when it comes to voting in international forums like UN and so on.
In addition it will have an effect on ownership of business in Russia in the near future, as indirectly Chinese capital will fund Russian ventures and state owned enterprises.
It will be very intresting to see how this relationship develops and which effect this relationship will have upon the international arena and international commitments to cooperation.
There is a fear that the fronts between east and west can be larger in future, as BRIC counties have signaled they want more influence on the IMF structure and the capital used in its reserve currency basket.
More tension is signaled as international community has given words for less trust in the USD and wants the oil to be decoupled from the oil price in total and replaced by a new international basket currency consisting of other currencies than USD.
It is time that the international society looks closer to what power structure is built in the east and take into account that BRIC economy is driven mainly by the Chinese economy, but the bounds between the BRIC countries are being strengthened dramatically, which this bi-lateral agreement between China and Russia is an example of.
The latest example was when Prime minister Vladimir Putin and his Chinese counterpart Wen Jiabao both were present when the bi-lateral agreements were signed in China.
This is an example where the BRIC countries, Russia and China creates stronger bonds together and makes and effort to boost BRIC economy.
The other two BRIC countries India and Brazil are also involved in intra BRIC bi-lateral deals with each others and the other BRIC countries. It is believed to be even more of these deals to come.
BRIC countries have also sanctioned a statement of replacing the oil price from USD to a international basket currency where BRIC currency should play a role together with a common Middle East Gulf currency.
Back to the bi-lateral agreement arrangement in China this month.
Prime Minister Vladimir Putin has as a goal during his visit to China to strengthen the realtionship between China and Russia. He also aim to adjust the increasing inbalance in the trade between China and Russia on the economic areas.
The Chinese economy is rebounding from the economic recession experienced since late 2008 and all 2009 so far and is showing signs of expansion. The Russian economy however has shown weakening through all 2009 and continue to send out negative signals with respect to budget deficit and employment rates. Their export industries are hurt very bad and there seem to be no light in the end of the tunnel for these yet. The oil and gas prices have normalized to a level less than 50% than it was at its height in 2008, which also contributes negative to the budget balance in Russia at the moment.
The Chinese Development bank has agreed upon a loan to its Russian counterpart VEB of 500 Million USD. An equal large loan was agreed upon from the Chinese Agricultural Bank to the Russian VTB.
Russia has also agreed with China on a export agreement of gas eqvivalent to 70 billion cubic meter pr year. It is not said what the terms and length of this agreement is, but one owuld assume there is a link to the loans given to the Russian banks.
Gazprom CEO Miller, will not tell how much worth this agreement is, but assuming todays gas prices paid by European clients of Russia gives us some estimate of the value of this deal.
European clients pay around USD 9 pr billion ton of gas imported from Russia.
1 ton is equal to 2.831685 cubic meters. That means that European clients pay around 3.18 USD/billion cubic meter of natural gas.
So the agreement between Russia and China has a potential value of around 222 billion USD. However, it is not believed that China will have to pay this price for gas from Russia, and it is assumed to be strongly linked to the terms of the loans given to the Russian banks VEB and VTB of a total of 1 billion USD.
The more significant side of these bi-lateral agreements is that the relationship between Russia and China will be stronger, and in international diplomacy this will be illustrated very obvious when it comes to voting in international forums like UN and so on.
In addition it will have an effect on ownership of business in Russia in the near future, as indirectly Chinese capital will fund Russian ventures and state owned enterprises.
It will be very intresting to see how this relationship develops and which effect this relationship will have upon the international arena and international commitments to cooperation.
There is a fear that the fronts between east and west can be larger in future, as BRIC counties have signaled they want more influence on the IMF structure and the capital used in its reserve currency basket.
More tension is signaled as international community has given words for less trust in the USD and wants the oil to be decoupled from the oil price in total and replaced by a new international basket currency consisting of other currencies than USD.
It is time that the international society looks closer to what power structure is built in the east and take into account that BRIC economy is driven mainly by the Chinese economy, but the bounds between the BRIC countries are being strengthened dramatically, which this bi-lateral agreement between China and Russia is an example of.