In Geopolitics Today: Tuesday, September 6th
China to Pay in Rubles, Yuan for Russian Gas, Spanish and German Companies Building Hypersonic Missile Interceptor, and other stories.
China to Pay in Rubles, Yuan for Russian Gas
Russia’s energy giant Gazprom has said an agreement has been signed with China to start payments for natural gas supplies in yuan and roubles instead of US dollars. The move is part of what appears to be a coordinated push by Russia and China to reduce reliance on the US dollar, euro and other currencies trade. This process has accelerated since an extensive sanctions regime was imposed on Moscow.
Conducting trade in local currencies will allow both countries to reduce reliance on a US-dominated financial system. It is a sign of warming relations between Beijing and Moscow as Russia forges closer economic ties with states that offer new markets for its sanctioned hydrocarbon exports. Gazprom is preparing to begin operations at the Kovykta field that is expected to increase the flow of natural gas through the Power of Siberia pipeline. This promises to increase the volume of Russian natural gas deliveries to China in 2023.
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Spanish and German Companies Building Hypersonic Missile Interceptor
As part of a European Defence Fund project, German and Spanish missile developers are beginning work on a new hypersonic defence interceptor. The German company Diehl Defence will take the technical lead in the project while Spain’s SENER Aerospacial is coordinating the European Hypersonic Defence Interceptor program.
The goal is to eventually field a counter-hypersonic endo-atmospheric interceptor that could be integrated into an air defence system capable of early warning, tracking, and interception of high-speed airborne threats. The European Commission approved 100 million euros ($102 million) for the concept phase in August, and work on developing the interceptors is reportedly now underway.
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Germany’s Uniper Partners with Australia’s Woodside in LNG Deal
Germany’s Uniper has signed a deal with Woodside that will see the Australian energy group supply liquefied natural gas (LNG) to help Germany reduce reliance on Russian natural gas supplies. Under the long-term agreement, a Woodside subsidiary will sell one billion cubic metres per year of LNG to Uniper Global Commodities.
The vast distance between Australia and Europe means the Woodside LNG destined for Germany is set to come from the US rather than its own export projects in Western Australia, with up to 12 cargoes of LNG per year to be delivered to Uniper. The deal highlights the ability for Australian energy majors to benefit from the upheaval in European energy markets. At the same time, Australian energy and commodities companies are expanding domestic production to meet the needs of traditional customers in Asia.
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Saudi Aramco Lowers Oil Prices for Asia and Europe
Saudi Arabia’s state-owned oil producer Aramco has lowered selling prices for its flagship Arab light crude to its customers in Asia and Europe. Aramco cut prices to Asia by $3.95 per barrel, and to European buyers by $2 a barrel. Arab light crude prices for US buyers saw no changes, while the exception of other variants that will see a $0.50 per barrel increase.
Aramco's light crude still carries a premium price tag over most regional benchmarks. The price changes come as oil prices have fallen from their recent highs. The OPEC+ alliance of leading oil producers cut their output by 100,000 barrels a day this week despite signals of slowing consumption in many major economies. Nevertheless, global demand is still expected to outstrip supply in the coming months, especially if Russia limits exports in response to a price cap proposed by G7 economies.