Commentary, 23.05.2014

Sergei Ivanenko, renowned economist and member of the Political Committee of the YABLOKO party, gave his commentary on Gazprom and CNPC’ signing of USD 400 billion worth contract on gas supplies to China for a 30-year period.

Such a contract represents a really serious commercial project. This is a remarkable event in the field of raw materials. I can not say that it goes beyond normal commercial practices when we speak about such projects in development of large deposits development and deliveries of raw materials. Anyway, this project is large. However, we must be aware that the political uproar and the self-promotion made by the Russian government around this does not have any economic grounds behind it.

Despite the fact that the project is large-scale, the volume of exports to China – 38 billion cubic meters of gas per annum for the next 30 years – can not be compared with Russia’s gas deliveries to Europe and Turkey, as annual shipments there amount to about 160 billion cubic meters, so this is no alternative to Europe, and [all this uproar] represents some propagandistic cheating, an attempt to convince our citizens that we “weren’t born yesterday” and that we do not need anyone. Nevertheless, in the economic sense, Russia is part of the Western economic system and is to a large extent dependent on the Europe’s and America’s markets. The contract with China is a useful thing, but we have to be aware that it is not a substitute for either Europe or moreover Ukraine. In terms of comparison, I can say that a couple of years ago Ukraine purchased such volume of gas only for its domestic needs – 38 billion cubic meters. This is for one thing.

Second. Normally signing of such contracts is top secrecy, and we do not have answers to many questions. But the key question is as follows: to what extent is it beneficial for the country? Judging by different data and figures leaking from the camp of the Presidential Administration and Gazprom, large investments had been envisaged from the very beginning, because the deposits they referred to in Yakutia and Sakhalin have nothing there, big money need to be invested there and tubes have to be constructed so that to be filled with gas. In the next five years it will be about large expenditures rather than income. The question is what volumes will be required for these investments, who will perform this work – [Russian] national companies or Chinese companies – and how much money will be stolen (which has been our perennial question Russian question). Yet all these questions have remained unanswered.

Finally, because it is a long-term contract, the key issue is the price: how will it be divided as of years? One thing is to get USD 350 in 2014, and it is quite another thing to receive the same amount in 30 years – these will be completely different figures.

In short, there are many questions. We think that Gazprom must be a more open and transparent organisation, because it is all about our national endow. All natural resources do not belong to Gazprom and Putin only. Large monopolies must answer the following questions: how profitable it is, what revenue will they actually get that, the revenue which will go to the citizens of the country and not just to them.