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Forget G20, APEC Is the Summit That Matters Now

  • APEC saw a flurry of China-Russia deals including to build a major gas pipeline and agreement to circumventing the dollar in mutual trade
  • The G20, in contrast, was notable only for its lack of substantive results
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Liam Halligan took a close the recent APEC and G20 summits and concluded they could not have been more different.

While G20 produced "little apart from grand words and vague aspirations" ,at APEC, major moves took place.

This is an excerpt from an article that originally appeared at Business New Europe

Throughout the APEC summit, China delivered a barrage of deals, spreading its influence across the region.

Beijing is spending $50bn to set up a new Asian Infrastructure Investment Bank and another $40bn was allocated to infrastructure development along “The New Silk Road” – a network of railways and airports across Central Asia.

By far the most important event at APEC, though, was the signing of another major gas supply deal – the second in six months – between China and Russia.

Back in May, at the St Petersburg International Economic Forum, these two countries announced a $400bn agreement, under which Russia supplies 38bn cubic metres (cm) of gas to China over 30 years from 2018 along the new “Power of Siberia” pipeline, stretching from Eastern Siberia to China’s populous north-east, with Beijing and Moscow sharing the building costs.

Ten years in the making, this deal seemed specifically timed to counter the Western narrative that Russia was “isolated” as a result of events in Ukraine.

This latest APEC summit saw another Sino-Russian mega-deal – again signed despite ongoing Western sanctions against Moscow – to build a second major supply route to the Western Provinces of the People’s Republic, expanding the annual Chinese purchase of Russian gas to 61bn cm.

Exploiting the huge synergy between China’s fast-growing population and Russia’s natural resources, these two countries are now building serious commercial ties across their 2,700-mile land border.

In 2009, Rosneft secured a $25bn oil swap contract with China. Last year, the state-run Russian oil giant signed an additional $270bn deal, agreeing to send an extra 300,000 barrels a day (b/d) eastward for 25 years, doubling its crude supplies to China.

Russia now sells 750,000 b/d to Asia as a whole, a fifth of its oil exports. Having previously relied on cumbersome freight rail, Sino-Russian oil trade now benefits from a direct link – the ESPO (East-Siberia-Pacific-Ocean) pipeline, which opened in 2010.

These eastward energy flows from Russia pose questions for Western European energy security. The newly-agreed “Western route,” in particular, while it will take years to build, will allow fields that have traditionally pumped gas towards Europe to be easily diverted to China.

Moscow and Beijing signed no fewer than 17 major bilateral business deals at APEC. The contrast with the G20 could hardly be more stark.

Beijing bought additional stakes in several Russian electricity-generation facilities, and Russia’s largest lender Sberbank and Export-Import Bank of China announced agreements on insurance and credit lines.

These Sino-Russian tie-ups aren’t only about commerce. Both powers have a mutual interest in demonstrating they reject any notion of a US-dominated “unipolar” world, dealing with each other on their own terms.

In that sense, it was telling that Beijing and Moscow confirmed their future energy trades would be conducted in yuan and rubles, circumventing the dollar.

When the world’s biggest exporter of hydrocarbons and the soon-to-be largest economy conduct their business in their own currencies, the dollar’s petrocurrency role will be seriously undermined.

That, in turn, questions the reserve currency status that allows Washington the “exorbitant privilege” to print money to pay off foreign creditors.

At APEC, Vladimir Putin railed against “the dictatorship of the dollar”.

Just after, Beijing launched Shanghai Stock-Connect, finally providing a convenient link between Chinese markets and international investors, so removing a major obstacle to the yuan’s reserve currency claims.

While the G20 summit need not have happened, APEC is rapidly becoming the most important summit of the year.

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