Siberia? The LNG Revolution?

Siberia 2

There is a lot of talk about the Siberia 2 contract formalized in Tianjin recently-- how it will "revolutionize" global LNG supply chains . But let us remember that while both Russia and China are committed to this project there are still a lot of details to hammer out, including pricing and the project will not come online for years.

Up until now, China has seen the Middle East as its main supplier, with some LNG imported from other sources. But neither the Middle East nor those other sources can be considered reliable in the face of the collapse of Western governance.

In the long-term, Siberia 2-- and also Siberia 3, which is seldom mentioned--are solutions revolutionizing energy supply in the new multipolar world.

Siberia 3

Siberia 3 is LNG from Sakhalin Island.

The Japanese have somehow assumed illogically that Sakhalin Island LNG will go to them – so, Mitsui and Mitsubishi have investments in Sakhalin LNG development-- but the future for them is uncertain since they have to renegotiate terms with Russia starting in 2026– and the new terms may not be very favorable, given Japan support for Ukraine and its antipathy to what is now Russia's main ally – China.

Japan’s obstinate stance on formally ending World War II with Russia and affirming Russia's control of the Kurile islands is not going to help.

However, since Siberia 2 and Siberia 3 are not scheduled to go online until the 2030s-- a lot of things can change, including Japanese policy, as its economy sinks.

American Shale and Xi Thought

Although China has the world's largest reserves of shale gas, it has chosen to invest in the exploitation of American shale gas-- until recently – largely, some say, for environmental reasons.

Xi Jinping ‘s concept of “ecological civilization” should be amended to “ecological Chinese civilization” – an area where China has made huge strides, leading the world.

Shale gas exploitation is by its nature environmentally destructive – so the Chinese preferred to get their shale gas LNG from the US where “down & dirty” is AOK. The Americans are going to destroy their environment anyway, and the Chinese might as well take advantage of their stupidity.

Siberia 2, however allows the Chinese to cut off imports of American shale gas, which, of course means, having to redirect their dirty gas investments to other areas, in this case to financing their leg of the Siberia 2 pipeline – which they can do more easily than most economies-- one of the advantages of “managed capitalism”, as opposed to “free market financialization”.

This shift will naturally hurt the US economy and raise the price of already pricey American LNG imports for Europe and Japan.

Looking Ahead

But, to reiterate, we are looking ahead 5 or 6 years to this major global re-alignment, and a few years after that to full fall-out.

In Asia, US allies like Japan and South Korea are going to suffer. BRICS and SCO members will boom. India and China are net importers of energy.

Modern industrial economies run on energy. It was cheap Russian gas that fueled the EU’s industrial development. Without it, the EU is as redundant as NATO.Back to the horse & buggy

Of course, if you don’t have much industrial or energy consuming infrastructure, your energy needs are lower! Naturally, you have to figure in things like climate change.

The US is de-industrializing rapidly but it is a large country with antiquated, energy-inefficient infrastructure – so it still uses a lot of energy, although per capita use has been declining, thanks to the hollowing out of the economy.

Engineering the Future

How did this come about?

The American media have pounced on a just-out book by Dan Wang, Breakneck: China’s Quest to Engineer the Future which argues that the West is run lawyers and Russia and China by engineers.

I argued something like this some years ago, as some others do as well., It is easy to generalize about things like this— more difficult to look at the phenomena in from the point of view of social anthropology.

But I think it is more correct to say that the West is run by MBAs and most of the lawyers in government have never practiced, Barak Obama, for example.

Wang, as you may know, as born in China but educated in Canada and the US. He lived in China from 2017 to 2023 and his views of the CCCP and Xi are in line with his academic milieu in North America.

Putting aside his theories, China and Russia turn out at least 4 times as many engineers per capita. it is a mindset.

Xi Jinping studied engineering, Putin, although a lawyer studied the economics of energy supply and application at the Saint Petersburg Mining University. They were technologists before they came to power. They do not just run their governments – they engineer their civilizations. But societal engineering takes time – it has to be pragmatic and gradual.

Wang, nuanced as he is, still does not like social engineering He does not like socialism. He’s more of a laissez-faire kind of guy. In China he worked for Western financial research organization Gavekal Dragonomics, was a fellow at the Yale Law School's Paul Tsai China Center and, among other things, writes for the NYT. So, he pretty much follows the Party Line — the Western one.

Both the Russians and the Chinese plan ahead 5 and 10 years, rather than the next news cycle like the Americans – or not at all, like Trump.

Don’t expect anything to happen fast – but expect something to happen.

What will happen?

Wait and see.

The great mistake is to anticipate the outcome of the engagement; you ought not to be thinking of whether it ends in victory or defeat. Let nature take its course, and your tools will strike at the right moment.

― Bruce Lee

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