Gazprom, CNPC discuss future Russian gas supplies to China
Russia, the holder of world's largest gas reserves, has diverted oil supplies from Europe to India and China since the start of the conflict in Ukraine in February 2022.
At the same time, Russia's diversification of pipeline natural gas from the European Union has been slow.
It started gas exports to China via the Power of Siberia pipeline in the end of 2019 and plans to reach the pipeline's annual exporting capacity of 38 billion cubic metres this year.
Russia and China have also agreed on exports of 10 bcm of gas from Russia's Pacific island of Sakhalin starting from 2027.
However, years of talks about the Power of Siberia 2 pipeline, which would ship 50 bcm of gas per year to China via Mongolia, have yet to be concluded as the two sides disagree over issues such as the gas price.
Russian President Vladimir Putin is set to travel to China in early September to participate in celebrations marking the anniversary of the victory over Japan in World War II.
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CNA
40 minutes ago
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US senators aim to arm Trump with 'sledgehammer' sanctions against Russia
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Business Times
2 hours ago
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Grasping the mettle of geopolitics in portfolios
[SINGAPORE] Geopolitical crises and conflicts are springing up with greater frequency; do they warrant action on your portfolio? How should you approach geopolitical risk, if at all? US-China tensions have simmered for years, but US President Donald Trump's tariff salvos against the world have further exacerbated the strains – and not just vis-a-vis China. Some issues may seem to have a straightforward impact on economies and markets. In a tariff-ridden world, for instance, higher-for-longer inflation seems par for the course. Some themes may jump out when war erupts such as higher oil prices and more defence spending. But is it as simple – and reactive – as that? For institutions – and certainly global corporates – which seek to take a longer, forward-looking view, taking geopolitics into account is increasingly seen as crucial for decision-making. 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BT in your inbox Start and end each day with the latest news stories and analyses delivered straight to your inbox. Sign Up Sign Up Geopolitics driving 'the great diversification' Amundi, with more than 2.2 trillion euros (S$3.3 trillion) under management, hired a geopolitical strategist in 2022, said Monica Defend, head of Amundi Investment Institute, to enhance its approach to asset allocation. She spoke to The Business Times on the sidelines of Amundi's World Investment Forum in Paris. Amundi seeks to be 'more scientific' in its approach to geopolitics, says Monica Defend, head of Amundi Investment Institute. Its Geopolitical Sentiment Tracker alerts investors to rising risks. PHOTO: AMUNDI Defend said: 'We've experienced crisis after crisis, and the pandemic was a shock that induced a paradigm shift. We recognised that some things became national security issues when we were short of some goods, and this started the global supply chain relocation. 'The new US administration has accelerated this further. We're moving to a polarised way of arranging deals. We've been looking at the potential winners of this new trend – the emerging markets... Asia and Latin America are emerging as new routes for supply chains. This is also creating a new super trend for commodities. 'Geopolitics is exacerbating the movements, whether it's energy transition or trade agreements. We used to focus on economic stability as a component in assessing the economic backdrop of a country. But we want to be more scientific.' Amundi's first initiative was to design a Geopolitical Sentiment Tracker to alert investors to rising risks, said Defend. 'The second thing is to see is if there is some connection between the geopolitical tracker and financial regimes. For us, the assessment of the financial regime is the first step towards asset allocation.' Amundi developed a tool using variables relating to growth, inflation, monetary policy and financial leverage. Five financial regimes or phases – correction, contraction, recovery, late cycle and asset reflation – are found to have persisted. 'The geopolitical evidence helps us to screen asset classes, such as oil, US dollar and gold. We want to be as disciplined as we can in the way we navigate the geopolitical environment, to help us decide what asset classes we want to be on or off, and how to hedge the risk.' The bottom line, based on a paper by Anna Rosenberg, Amundi Investment Institute's head of geopolitics, is the unfolding of what she calls 'The Great Diversification' currently underway. This is evident in a few aspects: The US dollar's share of global reserves is expected to decline from around 58 per cent currently to 55 per cent over the next decade, while the renminbi's share is likely to exceed 5 per cent. Demand for eurozone bonds is rising, and European assets are attracting more capital flows. Gold is at all-time highs. Rosenberg wrote: 'Politics will continue to hit global investors where they are most exposed – in US assets… Winners and losers will not be clear until tariff negotiations and the re-routing process are completed, but Europe is likely to remain a net winner from US uncertainty. 'While political risks remain, Europe is growing more united, as leaders understand they are stronger together than as individual member states… There is momentum towards single and financial market integration and creating an environment that could make the euro more attractive.' A multipolar world: negative for US dollar Marko Papic, BCA Research's chief strategist for 'geomacro', a framework which combines geopolitics and markets, noted in a paper that global asset allocators are scrambling to incorporate geopolitics into strategic asset allocations. But they made the mistake of treating geopolitics as 'exogenous' to the portfolio – that is, as a series of external shocks fundamentally different from the core anchors of valuation, growth and inflation. 'There is nothing exogenous about geopolitics. It is very much endogenous to the macroeconomic and financial assumptions that define the strategic asset allocation,' he wrote. It is a mistake to take the approach of anticipating the future 'end state', he wrote, but instead, 'global allocators need to consider the transition away from American unipolarity'. Until now, most investors have been accustomed to thinking of the world as 'unipolar' with low levels of geopolitical volatility, and where the US has served as the consumer of last resort and the magnet for capital flows. But this is ending, as evidenced in the frequency of armed conflict and rise in defence spending. Together with BCA's global asset allocation team, the geomacro team has created an approach linking geopolitical regimes and asset prices, 'using trade and capital flows as a bridge'. 'The next five to 10 years will be a decade of transition, during which the world will see the global macro imbalances shift.' He posits two multipolar scenarios as most likely – balanced and unbalanced – with negative implications for the US dollar. In either scenario, US assets are expected to underperform due to US dollar devaluation. Both scenarios are positive for the commodities cycle. Asset allocation approaches Meanwhile, the Bank of Singapore (BOS) has rolled out a 'robust optimisation' (RO) technique for strategic asset allocation, which it says is a first for an Asian private bank. The RO aims to help clients build more resilient portfolios at a time of more frequent spikes in volatility and asset correlations. The system, said BOS, does not directly incorporate geopolitics. 'Geopolitics is very hard to quantify. But they still have real effects on the economy. Growing geo-economic fragmentation can disrupt global trade and cause supply shortages, leading to inflation and slower economic growth. We factor these in when making capital market assumptions around expected returns.' With the RO technique, the result is a far more diversified portfolio – with lower exposure to US equities, for instance – that reduces risk and focuses on minimising the potential loss in the worst-case scenario. The approach, however, may sacrifice some market return in favour of resilience. DBS chief investment officer Hou Wey Fook said geopolitical tensions have long-term implications for portfolios, particularly through a sustained increase in infrastructure and defence spending. The bank highlighted these in its latest market insight publication. In its asset allocation framework, DBS assesses the impact of key macro drivers on three dimensions – fundamentals, valuation and momentum. For geopolitical risk, the 'first order impact' is short-term volatility, reflected in the momentum factor. 'The second-order effects, such as changes to earnings expectations or inflation, will be captured under fundamentals.'
CNA
2 hours ago
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Commentary: China's Yellow Sea moves put South Korea's new president in a tight spot
BUSAN: Since 2018, China has installed several marine structures in overlapping South Korean-Chinese waters in the Yellow Sea. There are now three of them, which Beijing refers to as 'deep-sea fishery aquaculture facilities'. This has been a point of contention between the two governments, but the issue has risen in South Korean public awareness after Chinese coast guard ships and civilian boats forced away a South Korean research vessel sent to investigate these structures in February. This led to a two-hour standoff, during which the South Korean coast guard was also deployed. China has rejected requests from South Korea to relocate the structures outside of the shared area and in May unilaterally declared 'no-sail zones' within the area, according to a report by Asia Maritime Transparency Initiative. The situation creates a tough dilemma for South Korea, especially its new progressive president, Lee Jae-myung. Unlike his conservative predecessor, Mr Lee wants to pivot away from a United States-aligned hawkishness on China and pursue a more transactional relationship which does not tie South Korea into a camp in the emerging Sino-US cold war. But that would almost certainly require appeasement of China – such as tolerating these Yellow Sea encroachments. PARALLELS WITH SOUTH CHINA SEA China's moves in the Yellow Sea parallel its behaviour in the South China Sea. There, for decades, China has steadily encroached on the maritime claims of the littoral states, most particularly Vietnam and the Philippines. China has justified these expansions via an ostensibly historical claim to the South China Sea – the nine-dash line. Such claims are highly contestable, of course. Almost every nation can put forward historically based claims to adjacent but disputed territory. Indeed, the United Nations Convention on the Law of the Sea (UNCLOS) was promulgated precisely to adjudicate these sorts of irreconcilable assertions. And an UNCLOS arbitration panel ruled unanimously against the nine-dash line in 2016. China has ignored that ruling and continued to assert its position by reclaiming land, building artificial islands, and ramping up its air and naval facilities and patrols. To avoid the open perception of military expansion however, Chinese civilian fleets – fishing boats and the coast guard – have led this territorial creep. The military only shows up later, after other claimants have effectively given up trying to stop the Chinese takeover. Strategic theory calls this 'grey zone tactics' - craftily changing facts on the ground (and water) without the explicit use of force. China's opponents then struggle to find an appropriate response. For example, the US is a security partner to both the Philippines and Vietnam, but America is unlikely to risk war with China over low stakes like coast guard vessels circling sand bars. GREY ZONE TACTICS IN THE YELLOW SEA China's steady gains in the South China Sea have likely encouraged it to try the same strategy in the East China Sea and the Yellow Sea. Pushing into the East China Sea has been hard. Japan has the resources and naval capabilities, which the Philippines and Vietnam lack, to push back on Chinese maritime expansion. But the Yellow Sea is a better domain for China. Its North Korean ally is one the relevant littoral states, and it will do nothing to deter China. South Korea, the other relevant party, has a capable but small navy. Most of South Korean defence spending goes into land power. Although South Korea has a long coast, the North Koreans have built such a massive army – 1.5 million men – and stationed it so close to South Korea's capital, that South Korea spends disproportionately on its army and air force to outgun the North Korean threat. The South, for example, recently considered building an aircraft carrier to challenge China's maritime expansion, but the national legislature rejected it as too expensive. At present, South Korea mostly relies on US naval power for maritime security. This arrangement has been feasible in the past, but the Chinese navy is expanding rapidly. The US is unlikely to risk war with China over indeterminate structures in the East China Sea - just as it has been reticent to help the Philippines directly over low stakes like shoals and coral reefs. TRICKY FOR SOUTH KOREA'S NEW PRESIDENT All this puts South Korea's president in a tight spot. South Korean progressives have a long foreign policy tradition of anti-Americanism and downplaying North Korean totalitarianism to facilitate detente. More broadly, this has led to equivocation on Russia and China, and a reticence to admit that China, Russia and North Korea cooperate. Mr Lee, for example, has blamed Ukraine for its invasion by Russian and said South Korea should not help Taiwan if China attacks it. This nationalist-minded foreign policy is attractive for the independence it promises from American 'domination'. But it also means that South Korea must stand on its own if North Korea, China and Russia bully it. The South Korean public opinion senses this. The public strongly supports the US alliance and has become increasingly anti-Chinese. According to a survey by JoongAng Ilbo and the East Asia Institute in June, 66.3 per cent of respondents said they held an unfavourable view of China. This is up from 63.8 per cent in a similar survey last August. If Mr Lee is seen as folding before Chinese pressure in the Yellow Sea, the public backlash will be sharp. On the other hand, if Mr Lee falls back on alignment with the US to push back China, the price will be greater South Korean cooperation on Taiwan, the East and South China Seas, Ukraine, and so on. This choice was easy for Mr Lee's conservative predecessor. For Mr Lee, it is likely to lead to a sharp foreign policy fight inside his left-progressive coalition.
