Posted by: Dark Defender | October 29, 2008

Russian oil companies turn to China for loans

IHT is reporting, China is preparing to pump tens of billions into Russian oil companies.  I find this interesting because I suspect this will be the beginning of two trends.

Quoting the article:

MOSCOW:As chances of rolling over loans with troubled Western banks dwindle in the financial crisis, Russian oil companies are negotiating multibillion dollar lines of credit from a more reliable source: the cash-rich Chinese government.

Prime Minister Wen Jiabao of China was in Moscow on Tuesday for talks with his Russian counterpart, Vladimir Putin, about a potential loan-for-oil deal that would be backed by future exports to China, Russian officials said.

If signed, the deal would mark a significant commitment from Russian companies to redirect some of their energy exports to Asia at a time when Russia’s relations with the West are strained.

Few details of the proposed deal have been made public. The Russian deputy prime minister for energy, Igor Sechin, said after the talks Tuesday that “considerable” sums of money were being negotiated.

First of Russia going to China when it needs money, they have chosen a path which puts them in conflict with the West and have little choice (unless the West wises up and cut a deal with the Russians) but to go to the rich Chinese now.  As time goes by I expect these deals to put Russia  more and more at the mercy of China rather than the opposite.

Secondly I think we are going to see China cutting more deals like this with oil exporters.  They are flush with money at a time the West is down, its a good time for them to take advantage and ensure their access/control of the oil they need.

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Responses

  1. How funny that the CNOOC-UNOCAL scenario from 2005 does not seem to repeat itself here, but I guess the conditions are different in 2008 than in 2005.

  2. Yes if China was trying to outright buy the companies I bet the Russna public would be up in arms and Putin woudn’t even really consider it.

    Of course the move still gives them leverdge over the companies and Russia but I guess in a more palatable way. Perhaps the Chinese learned from the CNOOC-UNOCAL fiasco.


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