Yves here. The importance of the very long in the conception/negotiation but finally cinched Russian Siberia 2 pipeline to China has not gotten much attention outside the YouTube anti-globalist community. This is a massive project that will increase China’s energy security and help it secure a cost advantage. However, I find it odd to see Korybko depict Russia as dependent in this agreement. Russia is the supplier of a critical product. And Russia does not depend on energy-related revenues to fund its budget. They account for only about 20% of receipts and my understanding is that includes domestic sales.
Keep in mind also that this agreement comes not just from the immediate Trump aggression against Russia’s trading partners, but ultimately the long-standing Western campaign against Russia, particularly the shock and awe sanctions and the destruction of Nordstream 2.
By Andrew Korybko, a Moscow-based American political analyst who specializes in the global systemic transition to multipolarity in the New Cold War. He has a PhD from MGIMO, which is under the umbrella of the Russian Foreign Ministry. Originally published at his website
Trump’s escalatory signals in Ukraine, the Indo-US split that he induced, and the attendant alleviation of the Sino-Indo security dilemma freed Russia up to clinch the long-negotiated Power of Siberia 2 deal.
Trump’s Eurasian grand strategy has sought to preemptively avert Russia’s potentially disproportionate dependence on China in order to avoid having its natural resources turbocharge the superpower trajectory of the US’ only systemic rival. In pursuit of this, the US envisaged entering into a resource-centric strategic partnership with Russia upon the end of the Ukrainian Conflict, expecting that this shared goal would incentivize Putin into agreeing to significant territorial and/or security concessions.
Trump’s unwillingness or inability to coerce Zelensky into any of Putin’s demanded concessions paired with increasingly concerning reports about plans to deploy NATO to Ukraine to spook Putin into ditching his balancing act and pivoting to China. The successful clinching of their long-negotiated deal over the Power of Siberia 2 gas pipeline, which will nearly double Russia’s gas exports to China to ~100 bcm a year and at a cheaper price than the EU receives, signifies the failure of Trump’s Eurasian grand strategy.
Putin might have held out for longer had Trump not inadvertently catalyzed the incipient Sino-Indo rapprochement via his hypocritically punitive tariffs that aim to derail India’s rise as a Great Power. That spooked India into patching up its ties with China, which alleviated their security dilemma that the US was exploiting to divide-and-rule them. This in turn reduced India’s worries about closer Russian-Chinese energy cooperation that it previously feared could lead to Russia becoming China’s junior partner.
It was never officially voiced, but astute observers and those who’ve talked to Indian thinkers know that India was worried that China might leverage its influence over Russia to get it to curtail or cut off military exports to India, therefore giving China a pivotal edge in their border dispute. The Trump-induced Indo-US split and attendant alleviation of the Sino-Indo security dilemma freed Russia up to clinch the Power of Siberia 2 deal without fear of spooking India into the US’ arms and thus dividing-and-ruling Eurasia.
The growing convergence between BRICS and the SCO, which aim to gradually reform global governance via their complementary efforts to accelerate multipolar processes, is due in no small part to India’s embrace of both in response to new strategic threats from the US. Prime Minister Narendra Modi’s first visit to China in seven years to attend the SCO Leaders’ Summit, during which time he held an important bilateral meeting with President Xi Jinping, is expected to lead to a new normal in Sino-Indo ties.
The roots of their tensions haven’t been resolved, but Russia expects that they’ll now be better managed, ergo why it clinched its deal with China over the Power of Siberia 2 gas pipeline right after also concluding that the US won’t try to help it obtain any of what it wants from Ukraine. To review, Trump signaled escalatory intent in Ukraine reportedly as the quid pro quo for the US-EU trade deal and then Sino-Indo ties improved as Indo-US ones worsened, thus making Power of Siberia 2 politically possible.
Trump’s foreign policy towards Eurasia has therefore indisputably failed. His team’s misguided approach towards Russia and India in demanding too much of them led to those two and China working out their differences, which exist amongst themselves bilaterally but also regarding their ties with the US, and consequently accelerated multipolar processes at the expense of the US’ unipolar interests. The Rubicon has clearly been crossed after this latest pipeline deal and it’s anyone’s guess how the US will respond.
This is going to have a big effect on the world LNG market going forward, even the US export terminals. Another under appreciated point will be the future Russian – Indian joint aircraft production. Now the Russians are starting serial production of civilian aircraft they are asking for Indian cooperation in joint ventures which is a no brainer for India going forward.
A major reason China was against this deal was Mongolia. I’m sure everyone knows Mongolia has been pursuing a closer relationship with the West and rejecting both Russia and China in recent years. So I’m not sure why Russia insisted this pipeline to pass through Mongolia other than to have more leverage on the negotiation table. You would think having Ukraine messing with the pipeline all these years would’ve taught the Russia to not repeat the same mistake.
I don’t see the news of this deal being widely reported in China so this is probably not something China is too enthusiastic about. But I guess they don’t have a choice since US navy locking down the sea route to China is pretty much guaranteed in the upcoming clash with Taiwan.
I thought it was the opposite. That Russia wanted the route passing through Xinjiang but China insisted on having it pass through Mongolia and throw them a bone since Mongolia was getting too chummy with western countries and is a NATO partner.
The map of the proposed Siberia2 shows connecting links to Siberia1. This link allows transport to China (and N. Korea) even if there were “issues” in Mongolia.
It has the advantage to all three countries of facilitating Mongolia’s economic development during the construction phase and through the subsequent transit fees, providing training, infrastructure development and the the possibility of increasing trade between the three countries over a relatively short time period, something that NATO cannot and will not do – although it does have a habit of suborning local élites and not necessarily to the benefit of the locals. There is also the possibility of developing alternative routes which only pass through Russia and China but as an initial step going through Mongolia makes strategic sense for all three countries. And anyway, Mongolia has probably worked out that Eurasia is on the up and up and the West is on the slide and it is in its interests to be on the side that’s on he rise.
You would think that simply looking at a map would tell Mongolia that they ought to stay on good terms with China and Russia.
Map, and the population count. They have slightly more than Lithuania, and almost as much as Georgia (the Caucasian one). Not as many sailors, though.
In recent times, I have seen anti-Russian mouthpieces blabbering about Chinese plans to overrun eastern parts of Russia by the sheer volume of their population. For some reason, no such scenario for Mongolia.
bonus joke
Q: How did China got rid of mosquitos.
A: Central committee tasked everyone to kill one.
Mongolia cannot get too chummy with the west. It is a landlock country that borders only Russia and China. Everything that comes in and goes out (by land or air) is at the good will of Russia and China.
I note the heavy promotion on youtube of a Times Radio interview announcing China’s freezing of this deal: what they really intend is to invade the eastern reaches of the Russian Federation and seize the energy source for themselves. The interviewee is a North American NGO guy with a slavic name, based in … Ukraine.
Why invade and antagonise a large powerful neighbor when you can just buy the resources? I keep hearing the same thing from Indian talking heads as well, that China wants to take back the parts of the Northeast they lost during Russian invasions. Are there revisionist elements in China and their government? Sure there are. Are they realistically going to succeed against a large, militarily advanced nuclear power? No.
It is similar to Indian and Pakistani claims over Kashmir. Realistically neither side will ever conquer the others land.
You probably have no idea how empty Russia far east, and also military advanced state?
Haha
You probably have no idea how many thought that Russia is an easy prey because it is mostly empty, and ended up with a bloody nose. Real life is not a game of Risk, and taking Kamchatka is not as easy as bunching up your tokens and rolling the dice few times.
That’s what they do, Times Radio and Youtube. Every time I watch something related to the war, there’s a recommended Times Radio video saying that Russia is about to collapse in some way.
Thanks – I’d noticed those Times Radio recommendations that seemed to have the opposite take as what I was currently listening to. Good to know it’s not just me.
It’s not just Times Radio, but an eclectic mix of MSM, paid shills, and individual grifters trying to get a piece of the action while the gravy train is still running.
I’m surprised, given Russia’s recent experiences with gas and oil pipelines traversing Poland and Ukraine, that they’ve chosen to route the pipeline through Mongolia. It offers the USA the chance to again use a proxy nation to sabotage Russia’s energy trade with its partners.
Um, what?
How would the US make Mongolia a proxy nation when all of its borders are with China and Russia? They (along with the EU/NATO) can’t even handle the Ukraine situation, which has a large percentage of its borders with US “friendly” nations, plus it’s not landlocked.
For some reason, Mongolia decided to be a partner with NATO which does not seem wise-
https://www.nato.int/cps/en/natohq/topics_85297.htm
I’m not sure this is the article to reply to
The ice videos about 90day visas are so evilly crazy.
I am wondering if the department of familyblogging defense rebrand is the only honest act they have done.
Hegseth’s insane declarations are something to behold
“I find it odd to see Korybko depict Russia as dependent in this agreement”
In my opinion Korybko, like everyone else following Western media, is inevitably contaminated to some extent by it’s narrative. Even if one follows the “anti-globalist alt-media”, it will be the same, because they are also inevitably contaminated by the confrontational, destructive and eschatologic approach to everything. As an example, there are no longer “agreements” but “dependencies” created.
Heavy contamination, indeed.
“the US envisaged entering into a resource-centric strategic partnership with Russia upon the end of the Ukrainian Conflict,”
Say what?
The US has been extremely explicit in demands for Europe to only buy super expensive, unreliable (Gulf shutdowns regularly shutdown US LNG exports if needed domestically) LNG.
I can’t imagine Korybko doesn’t know this – Trump and Biden and even Obama have brayed (and loudly!) about it for years and years and years. Self-censorship in support of the narrative.
Actually I think that point is an echo of Alex Krainer’s theory which he presents regularly with Nima on Dialogue Works.
Krainer thinks that Trump is actually working to disengage from Europe and its imperial entanglements and is slowly trying for agreement with Russia. It has a certain logic to it.
Krainer’s ideas are certainly different to most other commentators on You Tube. It has become must watch viewing for me every week or so to see his take on the most recent events. For him the biggest devil in the world is the City of London and MI6.
My views on Alex Kraimer are mixed, but I aways invoke Occam’s Razor. I would be relieved if Trump was a mastermind rather than a bumbling fool, but he keeps on bumbling….
Yes, Krainer has lost 95% of his credibility with me. He actually consistently claims the Trump fake “anti-Neocon” stuff is sincere and will happen, when all evidence indicates the opposite. He is right on the MI6-London stuff, that’s obvious enough, broken clock credit for being right.
I greatly respect Nima and Dialogue Works, it’s good to invite on a variety of perspectives, but videos with Krainer are less likely to be watched by me. Any “alternative” media voice like Krainer that’s in the bag for a dogshit politician like Trump (or Biden, or Chucky Schumer) is either a complete fool or a paid-off tool.
Korybko is trying very hard to get circulation in the west while maintaining the aura of impartial analyst. His weights for the US in particular are quite loaded and the deference to the Trump regime is nauseating at times. And he is a prickly Polak.
The Siberia 2 pipeline has not been signed off or agreed by either party. What happened last week was that a legally meaningless memorandum was signed in order to provide a headline. There has been no agreement on who is to pay for it, and what the end user price will be. Until this is done, there is no pipeline.
China is not particularly dependent on natural gas – its power mix is heavily dependent on coal, renewables and nuclear. The country is more or less fully contracted up for natural gas (mostly LNG) up to 2040, with many fall back options. In simple terms, China does not need the gas, and will only pay for this pipeline if it gets very favourable terms, and this may well make the enormously expensive pipeline unviable (assuming it is viable on current likely terms, which I consider unlikely – there is simply not the existing demand for that gas at a good price). For China, if there is a shortfall in demand, being over contracted could cause multiple future problems for its power users. They will essentially have pre-paid for gas they can’t use.
So it makes for a good headline for the politicians, but it is a long, long way from being a reality.
Yet, if China is not heavily dependent on NG, given it’s size is indeed one of the largest sources of NG demand and currently much in the form of LNG with 79 million metric tons imported in 2024. According to the linked article there is still the very important hurdle about agreement on the NG price. Yet, there is already a binding agreement which includes the pipeline route through Mongolia which can be also seen as a normalization of relations between the three countries. I wouldn’t dismiss this as only a headline generator. If this is still not ready to go, NG negotiations are important multiyear binding agreements, the public announcement not only makes for a headline (that is quite a Westernly way of seeing things through narratives in my opinion), it signals compromise and willingness.
In absolute terms, China is of course a big user, but in relative terms it seem never to have been a high priority, at least since its fracking investments died a death a decade or so ago (China has vast amounts of shale gas, but it seems not to be commercially viable, which is very good news for the plant). China has, though, invested very heavily in LNG infrastructure, ships in particular, but this has implications for its pipeline network. It’s heavily concentrated in coastal areas, as (sof far as I’m aware), are the big industrial natural gas users.
As Yaiyin points out below, this pipeline has been touted for decades and always gets a mention whenever there is some sort of Sino-Russian summit or meeting – it’s one of many cross-national pipelines that keep consultants in work, but rarely end up actually breaking ground. Just a glance at a map shows why. Whatever nice things are being said between the parties are meaningless until the end user signs up a guaranteed pricing deal, and there seems little incentive for China to do this for now in my opinion. Things may change, especially if China gets nervous about events in the Middle East, but even for China, this is a very big investment, so they will drive a hard deal.
When it comes to geopolitics, LNG seems to make more sense for Russia, as it’s a fungible product that is easier to sell and doesn’t tie you into an end user. It makes little sense to put all your eggs in the one basket of locking in your most valuable resources to a single user – they’ve learned that lesson from the European pipelines.
I agree with your points, but note that LNG ships can be interdicted on the sea by a hostile military nautical power that periodically declares it will be at war with China in XX years and is not above sabotage by proxies on merchant shipping. Point: Cost is a consideration that often takes second seat to national security — see Europe and LNG!
Also, the existing, unused pipelines to Europe will remain for Russian use should the geopolitical landscape change (and the price improve).
Also, natural gas is the typical feedstock for fertilizer (95%), so analysis also includes food security.
Ha! I take yours and PK points and say diversification, diversification! This can be played both in favour and against Siberia 2. Apart from this i believe that this goes beyond mere economic calculus and has great politic symbolism and that might turn the balance towards an agreement.
Yet no politician has actually been seeing touting this. All the references are to Gazprom CEO Miller, who seems to think it’s legally binding (as does the article you link to, btw).
Au contraire, Putin and Peskov have both had to defend the memorandum against media scepticism. Same goes for the PM of Mongolia, Zandanshatar. China seems to not wanting to discuss the memorandum at all.
So, pray tell, who are these politicians that are getting good headlines? They sure ain’t in Russia, Mongolia or China.
You may not have noticed, but the announcement was made as Putin and Xi were meeting and was openly welcomed by Putin.
It could, of course, have been entirely a coincidence that such a big announcement just happened to coincide with the meeting of the leaders and they were as surprised as anyone to be asked about it. I’m sure Gasprom never pay attention to Putin or any other political leaders when making such statements.
The back-pedalling occurred later when everyone realised that the announcement amounted to very little at all.
Unless you have a hidden microphone in the Kremlin or Zhongnanhai, I don’t know how anyone can claim to know what China and Russia need and are truly thinking.
Second, I think it goes without saying China wants “favorable terms” as does Russia or anybody making a business deal.
But as to the “enormously expensive pipeline” the most inexpensive method for transporting oil and gas is by pipeline. Building that much steel pipe would not be a burden and, in fact, likely be a huge boost to the respective steel industries. Also, it will depend on the level of contributions of government and/or private companies in Russia and China.
Project Ukraine was supposed to weaken Russia, if not break it apart, so the US could grab its resources. It now seems those resources are headed for Asia and might eventually include US allies Japan and South Korea.
Lastly, China gets energy from Iran and Israel wants its vassal, the US, to wreck Iran. Russia is far more secure.
Related to “China does not need the gas, and will only pay for this pipeline if it gets very favourable terms, and this may well make the enormously expensive pipeline unviable (assuming it is viable on current likely terms, which I consider unlikely. . . ” I have wondered if is more economical for China to support the expansion of Siberian LNG facilities and LNG ships that can work through ice flows for most of the year.
It’s not just about LNG facilities and LNG ships, but physics. Liquifying gas requires lots of energy for compression and cooling (which you can generate by burning gas). It can be economical in the short term because of high initial costs of pipeline. In the long term, there is no competition. Merkel was not a fool to build those northern streams.
China spent large ammounts of money on high speed rails in rural regions knowing that they would not be economically viable. Compared to that, pipeline sounds like a no brainer.
“What happened last week was that a legally meaningless memorandum was signed in order to provide a headline.”
Are you sure about that? Russia is one of the most legally meticulous nations on Earth, so even something like this will hold weight/importance. As for China, the last thing they would want to do is lose face by backing out of a potential deal with a peer nation which is keeping the US and NATO off its back (even if that is not by design).
It’s important to remember these nations are not like the US and those in the EU who appear to have no issues breaking formal legal agreements, let alone memorandums like this.
This approach is pretty standard in the development of major infrastructure projects involving two or more parties. My guess is that all the negotiating teams will be at work dealing with the technical issues and the related costs and pricing, etc, will be worked out to the benefit of all the parties. My guess is that the the contracts will be signed off later this year and they will contain provisions specifying the review cycles and the approach to contingencies and the whole thing will be up and running long before the contractual deadlines. They may create a joint corporate entity specifically for the construction and testing stages of the project for the reasons Coase outlined when he wondered if markets were so efficient why then do we create firms incorporating a multiplicity of functions. And we need to bear in mind that China and Russia are foreign countries; they do things differently there.
I will believe it when i see it that this pipeline will be build. Russia and China have being dragging their feet on this pipeline for decades. Its the perfect strategy for both countries but USA have accomplish to divide and conquer on these two countries that they haven’t build these pipeline lines. Russia have say its because they want to negotiate that is just cop out excuse. I think Hudson said BRICS will beat west, love the guy but i just think these nation still love too much west and they are still too neolibs to win this economy war. Even if USA have 50 million people living in tent city, my bet is still on USA, because USA believe in MMT, sure they use it only for the rich and war machine but that is enough to win against these countries who are not fully united.
Trump also thinks that.
https://www.youtube.com/watch?v=EyGutR4O-TY
Everything is possible if you believe.
https://www.youtube.com/watch?v=_6y5bgrKhLI
It is quite incredible to me how everybody is celebrating this, including in Russia. There is barely anyone objecting to it for the first reason I will list below and absolutely nobody for the second.
1) This cements Russia once again as a resource appendage, only this time it is to China, not to the West. But the general arrangement remains the same. The USSR started going down the moment it began exporting raw resources to the West in the 1960s. For two reasons — first, this generated way too much interaction between Soviet bureaucrats and Western representatives, which is how the mental rot in the system set in (when you are signing multi-billion dollar deals in some fancy mansion in the West while you yourself, despite controlling all that immense real wealth, live in a simple two-room apartment not much different from those of ordinary people, that generates a certain feeling of resentment and desire of having more for yourself than what you have now), and second, why invest in indigenous technology development when you can just buy what you need from abroad in exchange for oil and gas (i.e., the classic resource curse).
2) Oil and gas (and lots of other things, of course) are non-renewable resources. They have to be carefully husbanded and rationed, thus pumping them out and selling them as fast as possible constitutes grand treason of the worst kind. Future generations of Russians will wish that Putin had not sold a significant percentage of the oil and gas that was under their land first to Westerners and then to the Chinese, because those future generations will need that oil and gas for their own needs. But it won’t be there because Putin sent it abroad in exchange for megayachts and mansions (mostly not even in Rusisa) for Gasprom execs and other oligarchs (all things that are of no use to ordinary Russians) and the continued suppression of indigenous development (see the first point above; which is actively harming ordinary Russians).
Unlike places like Saudi Arabia, which had only one key resource and were too weak to resist even if they wanted to, i.e. they either sell their oil, or the West was going to invade and take it by force anyway, Russia is in the unique position of being self-sufficient in everything of vital necessity for survival and having the ability to be self-sufficient in everything else too. It does not have to sell its natural resources, it can keep them to itself and for its own future generations. But that means no oligarchs and megayachts and that would be such a horror…
GM: “first, this generated way too much interaction between Soviet bureaucrats and Western representatives, which is how the mental rot in the system set in (when you are signing multi-billion dollar deals in some fancy mansion in the West while you yourself, despite controlling all that immense real wealth, live in a simple two-room apartment not much different from those of ordinary people”
Just to address this small part of your point. The real problem started in 1975 with the Helsinki Accords which allowed the USSR to be flooded with NGOs.
I’m not saying your point does have validity, and my argument and yours may be connected, but the Accords were what destroyed the USSR.
Indeed – it really does not look like a good deal for Russia if it locks them into a long term sale at discount prices to a monopsony buyer. Apart from the obvious environmental issues, Russia would be wiser husbanding its fossil fuels and maximising their value to the domestic economy.
I just find this weirdly unrealistic. “Grand treason”? Damned balderdash, more like. That is if you take the real world into account. And as for PlutoniumKun’s “locks them into a long term sale at discount prices to a monopsony buyer”, that’s why they are negotiating over which comparator to use to determine price movements over time. My guess is that they will devise a comparator which will settle somewhere between the market prices in Asia and the market prices in Russia and take into account the fact that it will be much cheaper to provide gas to China than it was or is ever likely to be to Europe.
Not everything is Trump’s fault. Gawd, why does this have to be even said? American foreign policy has been based on the idea to cripple or destroy any rising powers that might challenge American hegemony (there is a document showing this). Under this policy, they have totally crippled the EU and Trump tried to do the same to India the past several weeks. Recognizing this, Russia has been slowly turning towards the East for many years but it is the present war that enabled Putin to supercharge this shift. The Russians themselves saw what Westerners thought of Russians three years ago and it was ugly so now Russians themselves are also looking East. And the Russian Federation have said that they have written off Russian-European relations for at least a generation. It was Obama that got the ball rolling with the 2014 coup in trying to cripple Russia and after the 4 year pause of Trump 1.0, it was Biden that went full bore against Russia. That demented old man could have gotten the US into a shooting war with Russia as he was so obsessed with destroying Russia.
When Trump came in the Russians probably decided to see what he was all about and if he offered a more rational set of US policies. Well the receipts are in and Trump is no different to Biden in wanting a Russian defeat in the Ukraine so ‘nothing fundamentally changed.’ Trump’s action have merely confirmed the shift in Russia’s priorities and the US and the west are not one of them. Trump has no grand strategy and the ceasefire, the Kellogg Plan – these were all attempts to enable the Ukraine to come back again in a few more years to go after Russia again. He could have shut down the war anytime he wanted by cutting supplies & intel but has not done so which the Russians would have seen. Trump is into zero-sum games so in order for him to win, then countries like Russia & China must lose. We’ll see how that works out. So now the Russian have written off Trump and major moves are afoot to remake the rules of the game. The first rule of the International Rules Based Order was simply that the west must always win so is now being dismantled. Europe goes back to what it once was – a peninsular off the mainland. And the US? It will probably be marginalized. No, change that. Under Trump the US is marginalizing itself from most of the world (rant mode disengaged).
To agree with you; Russia has been has been held back by the oligarchical faction which is reliant on the West and its finance systems. Until the aggression in Ukraine the Russians couldn’t disengage but the West made that all too easy by sidelining the only faction that had buy-in with the western system.
It’s not clear to me that this pipeline makes economic sense, not at current market prices anyway. Gazprom’s shares actually dropped following the announcement of the memorandum’s signing. But money isn’t everything, and I think economics is taking a back seat to long-term strategy in this case. RU-China tying the knot (with Mongolia on board too, presumably) along with Modi’s very public turn to China sends a clear political signal to the USA/EU. And of course it makes sense for Gazprom to diversify its client base, and likewise for China to diversify its energy suppliers.
In part (2) of his comment above, GM makes an important point. Strange as it may seem, there are still many places in RU that are not yet supplied with natural gas. My wife’s farm in Moscow region (not exactly the boonies of Siberia!) still does not have gas supply, nor does the adjacent village; the local Gazprom affiliate has been dragging its feet on this hookup for decades (it was the site of a Soviet collective farm back in the day). It’s far more interesting to sell natural gas to foreigners (higher prices, plus the opportunity to travel abroad for meetings and, perhaps, to embezzle hard currency into offshore accounts) than to supply one’s own citizens.
There are two possible views of rational economic man. The first is maximise benefit to yourself at every point in time regardless of the consequences for the other party. The second is to ensure that benefit are opyomised between the parties. The first approach is pure hit and run; the second is how to run mutually beneficial long term relationships whilst maintaining a reputation as someone who is trustworthy and good to do business with because they will look after your interests as well as they look after their own.
I am sorry to hear about the problem facing your wife’s farm.
I adhere to the second view of rational economic man.
My wife and her farm will be just fine; she’s Russian, they can handle anything. I did not intend to elicit sympathy: my point was that while Gazprom (which is to all intents and purposes a tool of the Russian government) spends megabucks on export projects, millions of domestic Russian taxpayers remain stranded without natural gas. It’s a foolish policy that ultimately will come back to haunt the Russian government.
There is a fundamental principle here that most people simply don’t grasp, which is that power is a zero-sum game.
Wealth may not be, in conditions of fast economic growth. If there is no growth it is zero-sum too. But power always is. And to the extent that power and wealth are directly linked (they don’t have to be, but usually are, and in post-1991 Russia they definitely are; and they are linked in both directions — money means power and power brings further wealth), then wealth becomes zero-sum even in conditions of fast economic growth. But it’s not even that fast in Russia now, and it hasn’t been for quite some time.
What this means with respect to our particular discussion is that the resource export industries have absolutely no interest in developing the internal economy. Quite the opposite in fact, their interest is for the internal economy to remain depressed and dependent on imports paid for with resource exports.
Because that is how they maximize their own power within the country. If a strong and robust internal economy was to develop, then alternative centers of power would grow around domestic manufacturing, and automatically, because it is a zero-sum game, the power of the resource export oligarchs would decrease. It hurts them quite directly too — domestic prices in Russia are much lower than export prices, so it is personally more profitable to export than for the resources to go into the domestic economy.
P.S. Financialization in the West unfolded in a somewhat analogous way, with the end result being the deindustrialization of the host countries.
The way out of which trap is for the government to step in and directly crush the FIRE sector. And that is precisely what the Chinese did a few years ago, when Xi came out and said “Housing is for living, not for speculation”, the real estate bubble was burst, the real estate speculants ate the cost of that, investment was redirected into manufacturing, and you see the results today. So it can be done, but it requires a strong state and will.
Nothing of the sort has ever happened in Russia with respect to the resource export and banking sectors though. Putin is a weak man playing some kind of stupid “balancer” role instead of taking a firm stand and crushing the parasites. Even if we assume he sincerely thinks he can solve the problem through evolution and not revolution, he is long out of time for that, as the war he had to be prepared for a decade ago is already in its fourth year now, but he is still not prepared. And despite all that he is now doubling down on resource exports with this cursed project…
I think this is fantasy thinking. The current leadership in Russia would have never ditched China for the US even if the US had offered up everything that Russia demanded. For all we know, Witkoff even dangled that carrot in exchange for a “strategic partnership” after the war but the Russian leadership are not naifs born yesterday. They know that that a) the US is not agreement capable ; and b) such a move would catapult China as a rival ; and c) the US would then refocus on Russia after it was able to subdue China anyway.
I don’t know how western commentators keep overlooking the fact that the US is an existential threat to any country seeking to get out from under its hegemony.