Russia and the US are both preparing to make major shiftsby Jay Elwes / December 10, 2014 / Leave a comment
Published in January 2015 issue of Prospect Magazine
2015 will be a year of two pivots. Russia is performing the first, turning east towards China, away from Europe. Sanctions imposed by the west after Russia’s invasion of Ukraine, and the plunging oil price, have hit the Russian economy hard. In November, the rouble fell by 15 per cent in just one week to an all-time low. Foreign currency reserves are down by $100bn and interest rates are rising. The Russian government now expects the economy to contract in 2015 by 0.8 per cent—it had previously forecast 1.2 per cent growth.
In November, Russia cancelled the $40bn South Stream pipeline, which would have carried Russian gas into the EU via Bulgaria. With few friends left in Europe, Russia has cast about for new ones—and new markets for its gas. In 2014, Russia and China signed two colossal energy deals, the first, in May, worth $400bn. These amount to a 30-year arrangement for Russia to supply China with 68bn cubic metres of gas each year from Siberia. China has also acquired a 10 per cent stake in a western Siberian gas field. Eventually more Russian gas will flow east than west.
The US will perform the second pivot. Obama’s previous declaration of a “pivot” in late 2011—away from Europe and the Middle East and towards Asia—succeeded in annoying or alarming all those from whom the spotlight of attention was apparently to be withdrawn (such as Israel and Saudi Arabia); some of those i…