China's Oil Grab
You work long enough on Wall Street, you meet interesting people. Some are charming, some colorful, some sardonic, some brilliant.
I was fortunate enough to befriend someone who is a combination of all four. And, this person -- call her the Penobscot Princess -- is publicity-averse (shy), so I know their kind words aren't merely a ruse to pick up some media coverage.
The bad news is this person's brilliance is only seen by a handful of high-spending Buy-side funds. The good news is I'm on the short list.
Lucky for you, too. Here's PP's comment's on China's Oil Grab:
"First things first. I am sittin’ here and it’s a little after 3 a.m. I just read about Chavez wanting to cut the US off from Venezuelan oil and his intentions to sell to others instead. China was mentioned. Right behind that, I read another article about China having lent $6 bil to Rosneft in what amounts to, IMHO, a forward contract for oil purchases.
China: We gotta’ follow this story carefully. As mentioned above, they lent state-owned Rosneft $6 bil when they “bought” Yukos’ biggest-producing unit, Yugansk. The implication here, then, is that oil is the collateral. Thus, the Chinese in effect have bought forward, eh? Okay. Reuters reports today that “western banks have
called in a $540 mil loan secured on the assets of Russian oil major Yukos’s former key unit Yugansk… The guarantees mean oil receivables of Yugansk, which pumps a million bbls of crude a day, can’t be used by Rosneft as collateral until creditors are paid off…”
Starting to feel like you’re reading a Russian novel? Me, too. “Dr. Zhivago” is gonna’ read like “Little House on the Prairie” in comparison to this saga by the time the banks and the other conspirators get finished with this shootin’ match. But what is so disconcerting is that here we have China again, lookin’ to glom world resources. Here’s a blurb from our 1/14/05 missive which refers to a November ’04 trip made by the Chinese Prez: … “Hu also signed five letters of intent in Argentina. If successful, they could result in Chinese investments worth $20 bil over the next 10 years. Among those financing programs are an $8 bil plan to expand the Argentine railway system, $6 bil for low-cost homes and other construction projects and $5 bil for oil exploration.
… The reality is that almost overnight, China has gone from a negligible trading partner to Argentina’s fourth largest. (Brazil’s third, by the way.) Argentine-Chinese trade is up by about 300% over the past 5 years…
“The upshot? They’re sure gettin’ around town, spreadin’ the green pretty good. Some times for food. Some times for energy. So don’t look at me when we start fightin’ over water.
Next case. Look:
Chavez: Intending to spite the US by blowing out their Citgo refineries here. The implication, I guess, is that they won’t be supplying them with the sour Crude for which these refineries are configured. The creepy part is that they are one of our most important sources. But we have known for years that this Castro wanna-be detests the US, so shame on us for not anticipating that he would go completely haywire at some point. Well, looks like that point has arrived. Solution? Start drilling in the Alaskan Wildlife Reserve; let the caribou get a motel room.
We’ll leave the light on for ya’. Next."
Fascinating stuff . . .
Morning Comment --- Tuesday, February 2, 2005
subscription only electronic distribution
Global: China's Choice
Stephen Roach (New York)
Morgan Stanley, Feb 11, 2005
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Tracked on Feb 11, 2005 10:35:03 AM
» Oil, Sea Lanes and Navies from EagleSpeak
he Big Picture notes China's Oil Grab in its dealings with Venzuela and Russia. Don't forget its action in the Sudan (one reason why Darfur gets no UN traction) and its deal with Iran. [Read More]
Tracked on Feb 19, 2005 3:18:24 PM
Good comments about China, less-good about Chavez, unless you're trading petroleum. China's ascendance as a trading partner to the world and an investor in same is a story that affects everything, while Chavez's petulance is a hiccup in the grand scheme. My father used to deal with the pre-Chavez Venezuelans when he worked for Chevron, and his opinion of their acumen wasn't high then. I don't see how Chavez changes much.
Posted by: wcw | Feb 11, 2005 1:18:34 PM
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