Thursday, May 22, 2014

Putin Secures Economic Lifeline While US Bumbles

According to the media the big story of the day comes from the White House where President Obama promised that those involved in the VA scandal would be held accountable.

The far bigger story comes from the Kremlin where the Russian government announced a $400 billion dollar deal to ship natural gas to China over the next 30 years. The Russians will invest $100 million in infrastructure near the Chinese border to facilitate the transport. This unprecedented deal comes on the heels of a similar agreement last year which involved among other things $70 billion in upfront payments to Russia from the Chinese. China has said that it will invest another $20 billion in domestic projects within Russia and expects to increase its investment in Russia fourfold by 2020.

The Russian economy is struggling, their infrastructure crumbling, and their cash reserves held hostage by western sanctions. Russia is in dire need of cash. The only thing Russia has to offer the rest of the world economically is energy…lots of it. But their primary customers are the European markets that are now pulling back in anger over Putin’s invasion of Crimea and Ukraine. The Russians are cash poor with seemingly no one willing to buy their primary source of income.

Enter China! The Chinese do not share the western world’s indignation over Putin’s aggression. The Chinese desperately need energy sources to fuel their growing economy…lots of it. Russia can provide all the energy they need. China has plenty of money to invest. A deal is struck. A marriage made in heaven. No longer dependent on European markets, Putin can now continue his western expansion without fear of economic repercussions.

And where was the world’s loan superpower while this deal was being struck?

The US is on the verge of becoming the world’s largest producer of oil and natural gas. The only thing standing in our way is us. Democrat leaning environmentalists threaten to withhold millions in campaign contributions if the White House tries to mine our greatest natural resource. Conservative groups block anything that might give the White House a win. We should be finding ways to extract the gas and oil resources we have in a manner that does not endanger the environment. That requires investments in infrastructure and research and development. Partisan gridlock prevents us from moving forward.

Take the Keystone Pipeline for instance. The Canadians are going to transport their oil sands to refineries on the coast. They can either do it across the US to our refineries in Texas us or find another partner. The project will create jobs and improve our economy. Environmental concerns are legitimate. Surely we can find a way to address environmentalist concerns while moving this project forward.

The Chinese needed reliable sources of energy. They found a willing partner in Russians. It should have been us cutting that deal. Instead Putin is a hero and Russia gets handed an economic get out of jail free card.

Meanwhile we sit on the sidelines playing with ourselves.

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