Grigory Pasko: Comrade Sechin Gets a Good Oil Deal with China?


Comrade Sechin, the oil economist?

Grigory Pasko, journalist

Inasmuch as I’m not an economist, I didn’t pay much attention to a report from the Bloomberg agency. However, there are more observant people on Live Journal. One of them, a certain “rusanalit“, did notice a Feb. 17 report from Bloomberg about Russia’s seemingly desperate long-term oil deal with China (20 years, $25 billion credit, 15 metric tonnes a year supplied).

Subsequently, this Livejournal user rusanalit decided to do some calculations. And here’s what he came up with:

Term of the contract – 20 years.
Annual delivery – 15 mln. metric tons.
Payment – 25 bln. dollars.

Calculation: 20 years x 15 mln.metric tons * 7.3 barrels per metric ton = 2.2 bln. barrels that Russia will deliver to China for 25 bln.dollars.

That is, Russia has sold 1 barrel to China at 11 dollars!


1.Bloomberg is lying or did not quite understand.
2. China squeezed Russia to the maximum, having obtained a price four times below the current one.
3. There’s a huge kickback built in there. Several tens of billions of dollars.

People correctly point out to me that money has its price, and for a credit with a length of 25 years you need to pay interest. Likewise RBK reported that a credit was granted at 6% per year. Abstracting from the annual repayment of part of the credit with oil, we calculate: 20 years x 25bln. x 6% per year = 30 bln.  That is, China has paid Russia 25 bln. (the body of the debt) + 30 bln. (the interest) = 55 bln. 55bln./2.2 bln. barrels=25 dollars per barrel. In reality – seriouslyless, after all, ever year we’re repaying 5% of the body of the debtwith oil.

And now the main thing:

1. Russia has the Stabfund – it would have been much better to take 25bln. out of there and not sign an onerous contract with China, sellinga barrel at around 20 dollars.

2. Rosneft needs funds in order to get re-credit itself for previouslyattracted credits, taken for the purchase of the remains of YUKOS. Thatis, had they not destroyed YUKOS – there would not have been the firstonerous contract (48 mln. metric tons of oil against 6 bln. doll.) norwould there have been the second one, either. Such is the cost of theYUKOS affair for the country. Doesn’t it seem to you that the lossesfrom the sale of the oil to China at understated prices have alreadyseriously exceeded all the receipts into the budget from the YUKOSfire-sale?

And yet, in order to get that first credit, Russia had to quickly give away islands on the Amur to China. On top of the oil.

Well, and the very last thing.

It is in the interests of Rosneft, Transneft, Sechin and Putin to giveout a maximum of information about the given credit – so thateverything about it would be clear and understandable.

And if this does not happen – that means that in reality they sold our oil at 11 dollars.
In case anybody has forgotten – that’s precisely how it was the firsttime. They immediately classified everything as secret. That meansthere was a secret worth keeping. From the people. That means – badconditions. IF THEY WERE GOOD – THEY WOULD HAVE DISCLOSED EVERYTHINGTHEMSELVES.

At the rate of 6% sounded by RBK and a reduction of the sum of thecredit every year by 5%, the overall sum of the interest over 20 yearsis equal to 15.75 bln.
I.e. for 2.2 bln. barrels, China is going to pay Russia 25+15.75=40.75 bln.dollars
Which gives a price per barrel of 40.75/2.2=18.52 dollars».

That’s the kind of analysis rusanalit made. Later I dug around inLive Journal and found yet another link: Reuters had a reporton the same thing.  What do I think? The topic, of course, is not new. But under Putin’srule, it is topical and will be so for a long time to come, apparently.Rusanalit touched upon the oil affairs of Putin’scomrades-in-arms/accomplices-in-crime, but there are also the gasaffairs, after all. In the words of specialists, for example theRussian economist, president of the Institute for energy policy, formerdeputy minister of energy of the RF Vladimir Milov, the contracts forthe delivery of gas through Blue Stream (already being implemented) andthrough Nord Stream (construction has not yet begun, but long-termcontracts with the Germans are already signed) are very disadvantageousfor Russia. My attempts to find out the details, for example, of thecontract with Nord Stream, led to a dead end.

Gazprom sends me to thecompany Nord Stream (headquarters in Zug, Switzerland), while NordStream says to go for commentaries to chairman of the board ofdirectors Gerhard Schroeder or executive director Matthias Warnig.  The former says to this correspondentthat he does not give interviews, while the second – is altogether aformer Stasi and a friend of Putin’s. Verily, be this a great secret?Or: a secret – is the wisdom of idiots? Although, judging by the wages,they’re not such idiots after all. It looks like they take the citizensof Russia for idiots.

And for now, they’re not doing too badly at this.