China and Russia Strike Massive Blow to America

An in-depth look at the massive gas deal between Russia and China and how it will affect the world. This deal is much bigger than the world even knows and it could mean that many significant events are about to unfold.

China and Russia Strike Massive Blow to America

Dear Readers,

I’ve got a lot to talk about this week and every bit of it is as important as ever.

The events I talk about in this Letter will affect the rest of your life.

For many years now, I have been writing about the real reason for war in Syria, Ukraine, and the Middle East.

For many years, the battle for energy – and thus money – has been intensifying.

But just recently, it has exploded.

And the West may soon fall victim to the powers of the East.

If you want to catch up on the full story, you can read my past Letters by visiting the following link:

A Major Blow to America

For the past few years, Russia has significantly increased its political status by preying on a weak Obama.

But this week, Putin may have delivered Obama’s final blow.

Before I get to that, let me start at the root of the problem.

Growing Debt Burden

For years Obama has been on a major spending spree; spending money that America doesn’t have in order to stay in power.

But this money has to come from somewhere, and it has to be paid back.

Obama believes that shipping LNG to Europe will generate enough jobs and tax revenue to pay off America’s growing debt.

The problem is that his solution is not only many years away, but LNG can’t (yet) be shipped from America to Europe cheap enough for Europe to wean itself from Russian gas supply. Russian gas supplies are estimated to be 40% cheaper than LNG from America.

So unless Russia decides to raise prices by 35 to 40 percent, it’s not economic for Europe to buy gas from America – not unless America can find a way to reduce costs.

Even if America is capable of reducing costs, it can still easily be undercut by Russia’s cheaper pipeline gas.

Obama has told the world that when it gets its LNG exports up and running, Europe will pay less for gas; thus, removing Russia’s “energy blackmail” on Europe. What he hasn’t told the world is how much money he expects to make for America.

But given today’s cost estimates, how will America be able to provide Europe with cheaper gas, and make money to pay for the nation’s growing debt?

A Piece of the Pie

The truth is Obama wants a piece of the energy revenue to pay for America’s extravagant spending spree over the last decade.

Just last year, America spent over $416 billion in interest payments, while running a deficit of over $750 billion.

No nation can remain a dominant power if it continues to rack up debt.

America needs additional revenue now.

The Real Reason for War in Syria, Ukraine, and Everywhere

War stems from the control of energy and resources. Everything you hear and see on the news regarding Syria, Ukraine, and just about everywhere, stems from the control of energy.

For example, Russia’ annexation Crimea isn’t just about politics.

As I mentioned in a past letter:

“One of the primary reasons for Russia’s annexation of Crimea is access to the Black Sea.

While Crimea accounts for less than 4 percent of Ukraine’s GDP, the region is vital to developing the substantial Black Sea oil and gas that lies in its watershed.

According to Ukrainian government figures, the deep-water natural gas reserves in the region were estimated between 4 trillion and 13 trillion cubic meters. It was estimated that with a small investment of around $8-9 billion, production could reach nearly 10 billion cubic meters per year by the year 2030 – right around the time Russia’s oil production is expected to decline.

Putin’s annexation of Crimea now blocks Ukraine’s physical access to those resources, much of which foreign capital (from Western nations, including Exxon Mobil) was ready to deploy for development.”

Both Russian and American intentions are clear in the battle for Ukraine and Syria; it’s a battle over energy corridors that control much of Europe’s gas supply. If the U.S. wins control over those corridors, it would make it harder for the Russians to supply Europe with cheaper gas.

However, even if America is successful in supplying Europe with cheaper gas, Russia still has a wildcard.

China: The Next Biggest Consumer

Don’t think for one second that Russia has not thought about the potential loss of gas sales to the U.S. via LNG prospects.

LNG from America to Europe is inevitable. That’s why so many LNG gas stocks continue to hit new 52-week highs.

Eventually, America will be able to use LNG sales to not only help repay its massive debt, but also undermine Russian profits.

This is America’s lifeline.

As I mentioned earlier, Putin has been planning for this a long time. He knows that America has incredible influence over Europe and could easily persuade Europe to purchase gas from America – even at a higher price.

That’s why Russia has, over the last decade, been negotiating with China – the world’s second biggest consumer of energy – to provide energy to the growing nation.

In a recent letter I said:

“State-owned Russian gas firm Gazprom hopes to pump 38 billion cubic meters (bcm) of natural gas per year to China in 2018 via the first pipeline between the world’s largest producer of conventional gas to the largest consumer.

Putin is visiting China in May and many sources, including those from Gazprom, believe that a deal will be struck.

If this deal can be inked when Putin visits China in May, it will show that global power doesn’t have to remain in the West.

China already overtook Germany as Russia’s biggest buyer of crude oil this year thanks to Rosneft securing deals to boost eastward oil supplies via the East Siberia-Pacific Ocean pipeline and another crossing Kazakhstan.

If Russia continues to be isolated by additional Western sanctions, we may see Russia attempt to step up further cooperation, such as an arms deal, with China.

America may claim to be in the process of providing cheaper gas to Europe, but this may actually result in higher overall gas prices – especially after 2015.

Mongolia is already setup to become one of the world’s biggest energy corridors.

It’s only a matter of time before a deal is struck.

This will change the world.”

Changing the World 

Everything has unfolded exactly as I have talked about over the past year and months.

Russia has just struck a massive gas deal with China.

It’s a 30-year supply deal for 38 billion cubic metres – exactly as expected – worth a whopping $400 billion beginning in 2018.

It’s so big it puts the amount of gas that Russia ships to Western Europe to shame – by a factor of five.

More importantly, it now means that global power through the control of oil and gas is now shifting to the East.

What do you think of the Russia-China Gas Deal? How Will it Affect You?

What this Means for the World

First, here’s a quick history lesson.

Many years ago, the dollar became the world’s reserve currency.

Many people talk about this term, but no one really knows what it means or how it came about.

Furthermore, people forget how the dollar received this prestigious status.

In 1971, President Nixon closed the gold window and prevented foreign governments from converting their dollars to gold.

This was a result of foreign investors (and their lack of faith in the U.S.) rushing to cash in their U.S. dollars for gold, dramatically emptying the gold in Fort Knox.

(No one still knows how much gold America has left; the vaults have yet to be audited and all of the gold America holds for foreign nations somehow can’t be repaid.)

As a result, a new monetary system was created backed by nothing more than promises from bankers and politicians.

Using their connections and relationships, and promises of protection and military backing, a deal was struck with OPEC to price oil in U.S. dollars exclusively for international transactions.

As a result, the dollar received a special place in world currencies, backed essentially by oil. This gave the U.S. artificial strength by allowing the U.S. to export its monetary inflation by importing oil and other goods at a major discount; thus, other nations ended up with piles of the dollar, while the U.S. ended up with real hard assets (and political favours.)

Now that the printing press in America has been set on overdrive, nations around the world are feeling the dramatic effects of importing inflation from the use of the dollar.

They are not happy. But there’s nothing they can do about it…yet.

Gold Standard?

We may hear that America will never go back to the gold standard.

But what happens if other nations do?

What happens when nations who control a large part of the energy market decide to not necessarily abandon the dollar in trade, but bypass it as the only form of currency acceptable?

We’ll soon find out because it’s already happening.

In 2003 Iran began pricing its oil exports in Euro for Asian and European buyers. Five years later, the Iranian government opened an oil exchange on the island of Kish in the Persian Gulf for the purpose of trading oil in Euro and other currencies.

By 2009 Iran completely ceased any oil transactions in U.S. dollars.

Iran is the second largest OPEC oil producer. Its actions pose a direct threat to the dollar, hence America’s ongoing hostility toward Tehran.

I have also mentioned in many past letters the many nations who are now bypassing the dollar in trade.

As this continues, the dollar’s rule will slowly begin to crumble, as oil and gas that was once traded only in dollars will slowly begin to trade in other currencies; thus, the dollar’s role as the world’s reserve currency will be diminished.

The Final Blow?

With so much of the world now trading energy supplies in other currencies, the final blow would be Russia striking a massive energy deal with China.

Obama, along with his meaningless sanctions against Russian officials, finally pushed Russia into inking a deal with China that was ten years in the making.

In a few years, possibly sooner, the ramifications of the East’s actions on the dollar will come to light and force America to the brink of either full-on world war, or the demise of its nations power.

For now, the Fed will likely raise rates or cut back on stimulus in order to instill confidence back in the dollar.

However, the wheels are already in motion to undermine the dollar, and they continue to turn with aggressive momentum.

No More Dollar?

Just before the massive gas deal was struck between Russia and China, VTB Bank (Russia’s second biggest lender) and the Bank of China signed an Agreement on Cooperation to bypass the dollar in bilateral trade.

Via VTB:

“The agreement was signed by First Deputy President and Chairman of VTB Bank Management Board Vasily Titov and Bank of China President Chen Siqing.

Under the agreement, the banks plan to develop their partnership in a number of areas, including cooperation on ruble and renminbi settlements, investment banking, inter-bank lending, trade finance and capital-markets transactions.”

Meanwhile, it appears that Chinese banks have halted dollar transactions with most Afghan commercial banks.

While it’s easy to say the dollar is going to fall, there has to be another currency to take its place if that were to happen. Many believe that the Yuan could take over this spot.

However, the Yuan lacks full convertibility in world trade and many still don’t “trust” it.

But what happens if the currency was pegged to something…say, gold?

There’s no doubt that both China and Russia, now energy-partner powerhouses, have been buying every bit of gold they can find.

Russia, in particular, has been dumping U.S. bonds and using those funds to buy – you guessed it – gold.

Since 2006, Russia has consistently increased its gold holdings. In April alone, Russia bought 900,000 ounces of gold.

China, on the other hand, has been secretly buying up gold through many different sources – but have yet to announce its true holdings and accumulation. The nation is certainly enjoying cheaper gold prices as a result of what appears to manipulation by Western banks.

(Barclay’s was just fined for manipulating the price of gold over the last ten years.) 

It’s no wonder Russia’s President Vladimir Putin told foreign journalists at the St Petersburg International Economic Forum that gold is better than the dollar:

“For us (Russia and China) it is important to deposit those (gold and currency reserves) in a rational and secure way,” he said. “And we together need to think of how to do that keeping in mind the uneasy situation in the global economy.”

Putin also said China and Russia will consider further steps to shift to use of national currencies in bilateral transactions.”

In Your Face, Obama 

As you now understand from my tone, it’s not about politics, it’s about money.

So much that even one of America’s biggest companies, Exxon Mobil, slapped Obama in the face by recently signing a deal for a joint project to drill for oil in the Arctic and Siberia and to liquefy natural gas for export to the Far East, with Rosneft’s (Russia’s largest oil firm) CEO, Igor Sechin – despite recent sanctions by Obama’s administration.

Igor Sechin warned Western governments that more sanctions over Moscow’s seizure of the Black Sea peninsula from Ukraine would be counter-productive. His underlying message was clear: If you isolate Russia, Moscow will find business elsewhere. Given the recent half-trillion dollar gas deal with China, I’d say Russia already has.

What You Don’t Know About the Oil Boom

While most of the power plays in the energy sector surround oil and gas, they are not the only energy source with strength.

Despite what you hear, uranium and nuclear power continues to be a dominant form of sustainable energy – especially in America.

Don’t think for one second that Russia doesn’t know this…heck its, been supplying America with this power source over the last twenty years.

As the dollar’s dominance continues to fade in world energy trade, so will its purchasing power. The once highly leveraged dollar, which exported inflation to other nations and gave America a major upper hand in trade, will eventually lose its purchasing power.

That not only means the dollar will fall, but it also means that the price of energy will increase for every American.

Despite having a new found wealth of oil and gas, via fracking etc., other forms of energy such as uranium – for example – is very limited when compared to what’s being produced at home.

As a matter of fact, all of this oil and gas boom may not be as “booming” as what was once thought.

Fracking: Boom or Bust?

The Energy Information Administration (EIA) just slashed its estimate of recoverable reserves from California’s Monterey Shale by a ridiculous 96 percent, saying oil from the largest U.S. formation will be harder to extract than previously anticipated.

Via Bloomberg:

“The Monterey Shale is now estimated to hold 600 million barrels of recoverable oil, down from a 2012 projection of 13.7 billion barrels, John Staub, a liquid fuels analyst for the EIA, said in a phone interview.”

Via LA Times:

“The new estimate, expected to be released publicly next month, is a blow to the nation’s oil future and to projections that an oil boom would bring as many as 2.8 million new jobs to California and boost tax revenue by $24.6 billion annually.

The Monterey Shale formation contains about two-thirds of the nation’s shale oil reserves.”

Simply put, the EIA just told us this:

Nearly two-thirds of America’s shale oil reserves can’t be recovered…at least, not at today’s prices.

In other words, America may have lots of oil at home, but it’s going to cost you.

What’s worse is that uranium, another energy source used widely in America, is also going to cost you.

That’s because, as I mentioned in my letter, “An Explosive Opportunity,” Russia controls much of this energy supply and is still currently supplying America with it.

Only now, it gets to dictate prices. Given the animosity towards America, will Russia continue to sell America uranium supplies for cheap?

The World Uranium Market: A Different View 

My understanding of the uranium and nuclear energy market is very different from what western media portrays.

Western media has shunned nuclear energy; yet it never mentions how much of it is still being used at home. More specifically, it never mentions better and viable alternatives.

I always like to look at situations from many different angles.

Could it be that the West has instilled a lack of trust in nuclear energy in order to force prices down, just as it has gold? Especially since the East controls so much of the uranium supply?

For now, uranium prices remain low as the negativity instilled by western media continues to tarnish the sector. Therefore, Russia can’t dramatically increase the price of uranium it supplies to America at higher prices because it can’t justify the increase due to what appears to be a lack of demand. This simply wouldn’t make international political sense.

However, if eastern nations – such as China and Japan – continue with their nuclear start-ups, the supply and demand pricing issue would change very quickly.

But Russia won’t wait to influence those it has little control over. What it will do is kill numerous birds with one stone: Anger the West, strengthen the uranium market, and strategically gain a toehold in the Strait of Hormuz

Russia Set To Build Eight Nuclear Power Plants In Iran

Just a day after Russia announced the massive gas deal with China, it announced that it struck a deal with the Tehran regime to build – not one – but 8 more nuclear power plants in the country.

According to RIA:

“Moscow may sign an intergovernmental agreement with Teheran this year to build eight new reactors for nuclear power plants in Iran, a source close to the negotiations told journalists Thursday.

Two reactors could be built at the Bushehr Power Plant and six reactors at other sites, the source said, adding that the talks were in their final stage.

Russian President Vladimir Putin said earlier this week that Russian-Iranian cooperation would continue despite international turbulence around Tehran. Putin said that Russia and Iran are not only neighbors, but also long-standing reliable partners.”

I just talked about Iran’s attack against the Petrodollar over the past decade. Putin’s remark not only increases the validity of uranium assets while slapping Obama again in the face, but it also shows Putin’s strategy of uniting nations against the West.

Furthermore, the recent gas deal between Russia and China could be made exponentially stronger if the two nations had a toehold on the Strait of Hormuz.

(The Strait of Hormuz passes approximately 35 per cent of the world’s oil traded by sea and 20% of oil traded worldwide. If Iran is successful in blocking the passage, it would be extremely painful for the already fragile economies of Britain, Europe, the United States and Japan – all of which rely heavily on oil and gas supplies from the Gulf.)

How to Take Advantage of Obama’s Lack of Action

I am not here today to scare you or tell you to dump your dollars.

I am here today to tell you how to protect yourself.

That’s because aside from the renewed oil and gas sector in America, there is something else that may put all Americans at risk.

You see, not only is Russia taking control of gas sales, but it is also taking control of a major resource that powers much of America: uranium.

As a matter of fact, over the last twenty years, Russian supplies powered one in every ten light bulbs in America.

I believe that current uranium prices cannot go any lower. That means if you participate in the sector now, you could likely be getting in at the ground floor.

I’ve already written in the past that the only real way to play a rise in uranium prices is to play uranium stocks.

That is why I continue to favour uranium producers located in the U.S., such as Uranerz Energy Corporation (TSX: URZ) (NYSE MKT: URZ).

If you haven’t read my report on Uranerz, you can by CLICKING HERE.

However, note that since my report, the Company has made significant progress and is now in production mode and could soon be announcing production numbers.

That means it may begin to announce revenues from that production soon.

If the price of uranium climbs later this year, as I expect it to, Uranerz could be in a great position to take advantage of that.

The last time uranium prices boomed, many uranium stocks saw gains of over 500%…some many more.

It could happen again.


Until Next Time,

Ivan Lo

The Equedia Letter

Comments 10
  1. I cannot say the the concerns are not true. They are though incomplete. Russia and China have been in talk for years on how to replace the US dollar as the world standard of exchange. They had an agreement made on the two of them bypassing the dollar and use what method to exachange they created. Also, Gazprom’s major stockholder is V. Putin. Reneff while larger by most measures were left out. Russia also claims all the oil under the north pole is all theirs.

    I also do not agree with your summation on the Ukraine purpose. There are no natural resources. The have a port on the Black Sea. I find it funny that all the TV cameras showing people crying that they are Russian and are so happy to return tO Russia. What was shown how he can take land masses without much fight in that part of the world. What had to be a laugh for Putin was a;; these claims. The current boder was set at the end of WWI. 95 years ago. If living in Russia was so all consuming important, they had plenty od time to move.

    Syria, the true reason would never sell here. All navy ports in the west are either icebound part of the year. Or they can be held in port by the two straits they need to go through to reach the Mediterranean Sea. Again Syria has no natural resources. They have access.

    We have a navel base and can use Isreal airports if needed. Syria has been letting Russia have the same access there. They have no interest in anything there except access to the middle east. If the US would work out a deal similat to ours in Gitmo. The present ruler would be out in a day.

    But, that would mean giving equality with them and that will never do, never do at all.

    1. Howard, you should perhaps read Ivan’s other posts regarding Syria and Ukraine. It’s about energy corridors, as he has put it many times…pipelines. Look at the maps You will see why.

  2. Ivan, you talk about Russia building 8 nuclear plants in IRAN. Isn’t Iran self sufficient in energy with so much oil? I am just curious!

    1. I can answer this one: nuclear is clean and much more cost effective. In other words, why would you use your oil when you can sell it for more?

      Burning oil to generate electricity produces significant air pollution in the forms of nitrogen oxides, and, depending on the sulfur content of the oil, sulfur dioxide and particulates. Carbon dioxide and methane (as well as other greenhouse gases), heavy metals such as mercury, and volatile organic compounds (which contribute to ground-level ozone) all can come out of the smoke stack of an oil-burning power plant.

      The operation of oil-fired power plants also impacts water, land use and solid waste disposal. Similar to the operations of other conventional steam technologies, oil-fired conventional steam plants require large amounts of water for steam and cooling, and can negatively impact local water resources and aquatic habitats. Sludges and oil residues that are not consumed during combustion became a sold waste burden and contain toxic and hazardous wastes.

  3. hope russia and china can make a deal and leave Europe to the west. it is about time that someone put the u.s. in it’s place. a few of the top americans–Nixon, the dulles brothers, bushes(george and George w.),Johnson, congress members, senators, to name a few have caused too many problems all for the sake of money. they will do anything and let their own people suffer because they are sooo greedy and never happy with what they have. they even went so far as to blow up the trade towers and blamed terrorists to take attention from themselves and the fact that a few trillion dollars were missing. check the videos of the towers coming down and you can see the blasts in the corners of the buildings(controlled demolitions) as they are falling. what kind of animals are in control of the U.S. that would kill their own people(workers, police, firemen, etc) they have no conscience what so ever. they pulled this off on the American people knowing the general populance is either too naïve or stupid to notice this or put the blame where it belongs. the people think the U.S. is so fantastic and the people in power are taking them to the limit. thankfully, some of the people are beginning to wake up. s.romanko

  4. Countries are frustrated with the DOLLAR ECONOMICS
    After all its based of inflation pressures OF BOOMS & BUSTS.
    Inflation methods is the guarantee of CONVERTION of assets with no value into real assets.
    War is to take place cause of control of that east area.
    The Fed does not want gold reserves thus must buy all the gold it can and strike a deal with the another currency to make sure that current capitalistic REALM continues to survive, THUS A NEW WORLD ORDER is surface-ing now.
    The U.S. was at one time the growing power house just perfect for FED Bank, thus the DOLLAR CURRENCY WAS INVENTED (1916).
    They will take the side that will show the same ECONOMIC GROWTH signs the Us did,and we all know can guess who this power economic house will be if the concept of a New World Order fails.

    FOR IT IS FULLY CAPABLE OF SELF-SUFFICIENCY.Far away from current inflationary economics.
    It will take a revolution otherwise peaceful hopefully to end the current inflationary system on economics.
    There are better ways more beneficial to the overall societies. The NOW minds of wisdom know this and how, just need the majority to jump in the wagon. Its not that difficult.
    THE BANKING SYSTEM IS SIMPLE: nothing is created for return of REAL ASSETS. and the most important real asset is the NATURAL BEING. Only if we all would understand this concept we could change the world to a more prosperous and peacefull place.
    FOR WE ALL LIVE ON IT, ARE BORN FROM IT and must abide by its consciousness thus all cycles are ended as a result if not dealt with harmony that takes all involved into consideration..

  5. another short note: nuclear power is dangerous and can easily destroy the planet and yet most nations, notably continue to use it because that is how plutonium is produced which is used in the making of atom bombs. as l understand it, there is another element that can be used that causes no radiation, produces about 10 or more times the power, factory is about the size of a large school bus instead of taking up acres of land and is extremely cheaper. the problem(as the U.S. sees it)is that it produces very little plutonium making it difficult and expensive to produce atomic warfare. with the u.s. dollar disappearing, the only answer is for the U.S. to get a war started, which they will. they are experts at this game–U.S. power mongers start a war while staying at home and sending the men and women to fight. wonder what would happen if everybody refused and let the politicians do their own dirty work. by the way, the element for producing power—one gram could power your vehicle for a number of years is called thorium which Nixon squashed from use to enable the U.S. to continue 8using uranium, therefore producing plutonium for bomb making and staying powerful. don’t get me wrong—l am a friend of the U.S. and believe the American people are a great nation but their leaders leave a bad taste in everyone else’s mouth worldwide. American people—WAKE UP AND GET RID OF YOUR WARMONGERING PEOPLE IN POWER. l am a Canadian and proud to have the U.S. as my neighbor, but this pride is waning. s.romanko

  6. I would like to refer to your mention that Mr Obama have to pay so much interest , may I mention that the main cause is the cost for the Irak war declared by your friend Georges W.Bush ? witch was very costly for ? .
    One more reason for America with a big debt is a lot of the rich people in America in order to make more money switched their production In China ( product quality very questionable )
    and now you mention China’economy will surpass America , I think you should stop blaming somebody else for sombody’s responsability .Being a little impartial is more acceptable .
    I am Canadian , have a property In Florida and spend my winters there and enjoy it so far ?


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