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Forbes: gas agreement between Russia and China important, but its concrete meaning obscure

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Gas_Pipeline_060109The day before yesterday I wrote that Russia and China established close relationship and this seriously threatens the West. This is an odd couple, which has a long-standing history of hatred and suspicion, writes Forbes.

Growing fear and contempt of West by Russia and China is the background against which $400 billion worth contracts between Gasprom and China National Petroleum Corporation has been signed.

I believe that partnership between Russia and China is important and I urge to carefully analyze importance of this gas deal. When one has to deal with the “state capitalist” enterprise, the contract cannot be considered a contract anymore. If after ten years Gasprom realizes that it subsidizes Chinese gas import, it will do what it has always done before: threaten to turn off a valve, if it does not get more money. China will act the same: if the CNPC administration understands that it pays way too much for Russian gas, it will try to find new suppliers. The ability to conclude and terminate contracts fast is the best advantage of the state capitalism and its brightest drawback. If necessary, such companies as Gasprom and CNPC could act very fast concluding agreements, because they do not have to hold meetings of shareholders and discuss the issue with the Board of Directors. They could take advantage of arising possibilities without warning anybody. When such companies feel the necessity to drop out of the contract, they should not worry about legal nuances  – they just do what they need to.

The problem is that lack of legal accountability creates uncertainty in long-term projects.  The 30-year-old agreement could last 5,10, 15 or 20 years, but sometimes even 30. Nobody can know for sure. Therefore, the contract is important and it shows that Russia and China will establish closer economic and diplomatic cooperation. One should not overestimate its possible achievements, because there are no guarantees that the project will be implemented, writes author of Forbes.

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