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INTERNATIONAL TRADE EU AND CHINA / PORK BlowMe AI: China & Russia's UNEXPECTED Decision SHOCKED the EU... What the Hell Is Happening!? PLAY YOUTUBE VIDEO Original article: https://www.youtube.com/watch?v=_12vW88vbtw Peter Burgess COMMENTARY Peter Burgess
China & Russia's UNEXPECTED Decision SHOCKED the EU... What the Hell Is Happening!? BlowMe AI Oct 5, 2024 57.6K subscribers ... 60,972 views ... 915 likes Russia has made a significant entry into China's pork market, long dominated by European Union producers. With the EU’s stronghold weakened by trade disputes and tariffs, Russia has swiftly moved in to fill the gap. This video explores how recent trade conflicts, especially over Chinese electric vehicles, led to this shift, and what it means for both European and Russian pork producers. Russia’s ambitions to capture a larger share of the world's biggest pork market could reshape the global trade landscape. Join this channel to get access to perks: / @blowmeai MAIN SECTIONS PORK EU ... CHINA EVs CHINA ... EU NATURAL GAS RUSSIA ... CHINA Transcript ///////////////////////////////////////////// FOOD ... MEAT ... PORK ///////////////////////////////////////////// 0:00 China opens an anti-dumping investigation into imported pork and its byproducts from the European Union that move seen as an apparent response by Beijing to tariff hikes announced by the regional block on imported electric vehicles from China the investigation which will begin on June it is a crucial industry for the clean economy with a huge potential in Europe but Global Market are now flooded with cheaper Chinese electric cars and their price is kept artificially Low by huge State subsidies this is distorting our market and as we do not accept this Distortion from the inside in our Market we do not accept this from the outside so I can announce today that the commission is launching an anti-subsidy investigation into electric vehicles coming from 1:06 China China has opened an anti-dumping probe into imported pork from the European Union the step comes less than a week after Brussels announced new curbs on electric vehicle exports from China China's pork Market the largest in the world has undergone a significant shift in recent months with an estimated import value of $3.5 billion this Market has long been dominating ated by European Union producers who held a 51% share however recent developments have altered this landscape dramatically with Russia emerging as a new player in this lucrative Market the eu's stronghold in China's pork Market was built on the back of major exporters like Spain Denmark and the Netherlands Spain in particular commanded a significant 21% market share benefiting from the eu's reputation for high product quality and stable Supply chains the EU pork 2:00 industry not only LED in volume but also maintained High product quality and a stable supply chain making it a primary supplier for China this dominance however began to erode following a series of trade disputes between China and the EU the Catalyst for this change was the eu's decision to impose a tariff of up to 37.6% on Chinese electric vehicles in July ostensibly to counter what it deemed unfair subsidies this move disrupted the econ omic balance between the two regions and China's response was Swift and targeted Global food companies have been on high alert for retaliatory action from China since then in retaliation the Chinese government launched anti-dumping investigations on pork imports from Denmark the Netherlands and Spain this move not only rattled the EU internally but also posed unprecedented challenges to EU pork producers who have long relied on the Chinese market the impact of these investig ations on EU pork producers was immediate and severe Spanish government 3:05 officials quickly voiced their concerns committing to collaborate with EU counterparts to prevent tariffs on their pork products Spanish minister of economy and trade Carlos quero stated just as we cannot have a trade War we also cannot engage in a subsidy race we are seeking Solutions through the EU that allow us to move forward without harming the industry Spain is the top supplier of pork to China and its pork producers group into pork said they would fully cooperate with China's investigation European pork producers should be able to keep exporting to China tariff free while the investigation is underway prime minister Pedro Sanchez's recent trip to China and subsequent statements highlight this shift after meeting with President Xi Jinping Sanchez suggested that the EU should rethink its tariff plans stating I have to be blunt and Frank with you that we need to reconsider all of us not only member states but also the European commission 4:03 are positioned towards this movement additionally Spanish agriculture Minister Luis pliss expressed hope for Mutual understanding and negotiation to avoid tariffs on agricultural products and food Stuffs the sentiment was echoed across other EU countries in France inap pork president Richard remarked we are currently considering the questions we will be asked and how we must respond she highlighted that China accounts for 18% of France's pork export Revenue Vue and lamented that given the cheaper meat exports from Brazil and the United States France has already struggled with competitiveness in pork exports which is now exacerbated by the new measures similarly the Danish Agriculture and food Council warned that restrictions on European meat Imports by China would severely impact Denmark's pork industry and called for Solutions the impact was already visible in the trade data recent figures show that pork imports from France decreased by 12% % additionally 5:01 imports from the Netherlands fell by 7% and from the United States by 3% indicating an accelerating Trend towards diversification in China's pork import market as the EU grappled with these challenges Russia saw an opportunity to fill the gap having been absent from China's pork market for 15 years due to an African swine fever outbreak Russia re-entered the market in February when Beijing authorized three Russian producers to sell pork into China Constantine kovalev head of Russia's national Union of pig breeders outlined an ambitious goal Russia's goal is to secure 10% of China's pork import market within 3 to four years this target if achieved would position Russia as a significant supplier in China's pork Market further diminishing the eu's influence Russia's entry into the market was not without challenges the country had to overcome a long-standing import ban and meet stringent quarantine conditions in September of the previous year China's General administration of Customs lifted the import ban on Russian pork that had been in place since 2008 6:05 allowing Russian pork into the Chinese market under strict quarantine conditions subsequently in February China approved three Russian companies to export pork to China by June Russian pork exports to China were gaining momentum Gus gav senior vice president of the Russian export Center expressed confidence in Russia becoming one of China's top three pork suppliers and announced the launch of a dedic ated meat line to ensure Russian pork products enter the Chinese market smoothly and swiftly the shift in market dynamics is evident in the numbers by July Russia's share of China's pork import market had grown to over 5% up from 4.3% in June placing Russia among China's top five pork suppliers for the first time concurrently the eu's supply volume significantly declined with Spain's market share particularly at risk of further reduction according to data released by the Europe Commission in 2023 the EU exported over 610,000 7:05 tons of pork and related products to China accounting for 54% of China's total pork Imports while this is a substantial proportion the deepening trade ties between China and Russia are increasing Russia's market share it is projected that by the end of 2024 Russia's pork exports to China could exceed 50,000 tons looking further ahead by 2030 Russia could Supply a third of the growth in China's pork demand the China animal husbandry Association noted in its anti-dumping investigation application that the EU is China's largest source of pork and pork byproducts accounting for an average annual share of 54% from 2020 to 2023 additionally in 2023 The eu's Dumping margin on Chinese Imports reached over 60% allowing pork products to compete in the Chinese market at extremely low and 8:00 unfair prices the association further pointed out that substantial subsidies exist within the eu's agricultural sector with the eu's swine and pork Industries receiving significant financial support the EU also has significant overcapacity in pork production averaging 4.26 million tons annually naturally China as the eu's largest pork export Market becomes the ideal destination for this Surplus capacity the impact on the EU pork industry has been substantial Justin sherard Global strategist animal protein at rabo bank warned the full suspension of EU pork exports to China would be a potential nightmare scenario for the pork supply chain with implications across the EU he added that the disruption would result in lower prices and profit margins on unwanted stock produced by the Region's Farmers sherard further explained it would take time but maybe Poss possible for EU exporters to find alternative markets for the pork muscle meat cuts that are currently shipped to China 9:05 however I doubt alternative markets could be found for EU pork Variety Meat exports that are currently shipped to China this concern is particularly acute because China buys pig meat including ears noses and feet for which there is little demand from European customers the ability to export these parts of the animal helps generate a higher value for the whole carcass analysts say according to Reuters in 2023 China imported $6 billion worth of pork with more than half coming from the EU Spain alone accounted for about a quarter of this with other major EU exporters including the Netherlands Denmark and France the China animal husbandry Association listed five EU related production companies from Spain the Netherlands Denmark France and other countries in their application Customs data showed that in 2023 the EU accounted for more than half the roughly $ 6 billion worth of pork 10:00 China imported around a quarter of which was from Spain pork suppliers from South America the United States and Russia could be among those gaining market share if Beijing restricts imports from the European Union China's Commerce Ministry said that the investigation should be completed by June the 17th 2025 but could be extended by another 6 months if required Russia's rise in this market is not merely opportunistic the country has been steadily increasing its pork production capacity kovalov reported that Russian pork production is expected to reach 5.2 million metric tons in 2024 up from 4.9 million in 2023 and a posts Soviet low of 1.5 million in 1999 the Soviet Union's record was 3.5 million tons in 1989 this growth has positioned Russia as the fourth largest producer globally behind China the EU and the United States and puts it on par with Brazil 11:00 Russian producers are also adapting to meet China's specific Market demands kavalo noted that Russian pork exports were currently 60% meat and 40% awul mirroring the mix in China's Imports this strategic alignment with Chinese preferences has helped Russian producers gain a foothold in the market the Russian private producers authorized to sell pork to China miratorg vuki Pig breeding complex and rouso are among Russia's top five port producers Alexander tasov Rus sagro Deputy CEO stated we cautiously estimate that we will export 10,000 tons to China this year the prices are at a premium of 30 to 40% to domestic prices miratorg one of the authorized Russian producers reported making the first deliveries from its Logistics Hub in Russia's belgorod region to the port of Nona in southern China by both Rail and sea the company said its overall pork exports jumped 70% last year and it plans to increase pork production by 5% to match 12:05 demand growth Marina demova miratorg head of exports emphasized Russia's potential stating Russia definitely has the natural resources feed base and freshwater reserves to increase meat production multiple times over for the EU the loss of market share in China represents more than just economic losses it threatens the survival and development of EU pork producers particularly in countries like Spain the Netherlands and Denmark which are heavily reliant on the Chinese market Spain as the largest exporter of pork to China globally selling about $ 1.5 billion dollar of product every year is particularly vulnerable speaking to reporters in the Spanish livestock Hub of Y Spain's industry Minister said both regions would lose out if the measures took effect the other day I was with the Chinese minister of trade and Industry and we were all in agreement that we should not fall into the Dynamics of trade Wars he said interp pork which represents Spanish pork producers echoed 13:05 that sentiment what we hope is that the relationship between the EU and China will always be a good one and we are working to ensure that this good relationship continues Germany's pork industry has already suffered an import ban by China since 2020 after the disease swine fever was found in Germany its largest meat processor Tony's expects pork prices to fall if exporters such as Spain seek new markets for lost Chinese sales resulting in a painful loss of income Thomas do toen spokesperson explained if EU exporters particularly Spain cannot sell pork to China some sales would have to be made within Europe and downward pressure on EU pork prices can be expected after finding themselves unable to sell pork to China following the swine fever ban Germany's pork producers sought Al alternative uses for unwanted Pig Parts including as ingredients in 14:03 sausages pet food and Industrial fats while alternative uses can be found they are not as profitable as selling directly to China Dosh added in response to this dire situation the EU has begun seeking compromises there have been announcements of reductions in punitive tariffs on Chinese electric vehicles to ease tensions Russia and China are reconsidering the route of their ambitious $1 13 billion oil and gas pipeline project known as power of Siberia 2 initially the plan included Mongolia as a key Transit country however recent developments suggest that Mongolia May no longer be needed with Kazakhstan emerging as a potential alternative ///////////////////////////////////////////// ENERGY ... NATURAL GAS ... PIPELINES ///////////////////////////////////////////// 15:08 [Music] life is tough along China's border with Siberia it's min-1 12° C there's not much industry not many J most around here use coal to cook and Heat their homes burning coal it's obviously very dirty it's polluting and also a lot of physical work but two big infrastructure projects are bringing change first is this bridge opening next year it crosses the Amore River Frozen at the moment the river divides Russia and China the bridge will link the cities of blackor ches and ha her I'm working on the construction of 16:03 the bridge I feel proud when I tell friends and one of the contributors but it's the second project that is the more significant this is one of the most remote parts of China and just a kilometer or two over there is one of the most remote parts of Russia and now linking the two is this pipeline it's an economic project of course but it's all about politics two The Power of Siberia pipeline is about to deliver gas from Russia to cities across China it's cost $ 55 billion and on the Russian side stretches more than 3,000 km the pipeline through China will eventually reach Shanghai almost 3,000 km to the South for China it means well priced energy that's relatively clean other than for heating Natural Gas can be used to generate power is much 17:01 better than oil and coal it has much less pollution and fewer emissions of CO2 natural gas in China's Energy Mix uh last year natural gas counted for almost 9% of China's total energy consumption and that compares to 24% for the world as a whole uh China would like to increase the role of natur natural gas in its energy consumption mix uh both to reduce air pollution and to combat climate change uh the government has a target of increasing the share of natural gas to 15% of the energy mix by 2030 uh and to tie that into today's discussion that is good news for countries that want to export natural gas to China because in order for China to achieve that Target uh they are are going to have to import more 18:00 natural gas the power of Siberia 2 project a joint venture between Russia and China aims to transport natural gas from Russia's vast Siberian fields to China's energy hungry markets the project scale is immense with a planned pipeline length of 2600 km and an annual capacity of 50 billion cubic M when Russia and China reached an initial agreement in 2021 the project was to begin Construction in 2024 with completion expected within 4 years however the geopolitical landscape has shifted dramatically since then the invasion of Ukraine in February 2022 has had severe repercussions for Russia's gas exports to Europe since the conflict began these exports have plummeted resulting in an annual loss of approximately $150 billion for Russia this financial blow has forced Russia to look Eastward for new buyers with China 19:01 becoming the primary target Russia faces significant challenges in this pivot towards Asia one of the main obstacles is Russia's lack of liquefied natural gas LNG infrastructure LNG facilities allow natural gas to be cooled and compressed into a liquid form which can then be transported by ships to markets around the world without adequate LNG infrastructure Russia's ability to export gas to distant markets is severely Limited in a bid to address this issue and secure new export routes Russian President Vladimir Putin recently visited China to discuss the power of Siberia 2 project despite Russia's eagerness to seal the deal China has shown a surprising lack of enthusiasm this tepid response from China has raised questions about the Project's viability and the future of Russia China energy cooperation to understand the context of this new pipeline proposal we need to examine China's current natural gas demand and sources in 2022 natural gas accounted for 9% of China's total energy 20:06 consumption this might not seem like a large percentage but given the size of China's economy it represents a significant amount of gas moreover China has set an ambitious Target to increase this share to 15% by 2030 as part of its efforts to reduce carbon emissions and improve air quality China's growing appetite for natural gas necessitates increased Imports currently China sources its natural gas through a combination of pipeline Imports and LG shipments the country has existing pipeline connections with several neighboring countries including Turkmenistan Russia and Myanmar additionally China receives LNG from various Global suppliers allowing it to diversify its sources of natural gas and then getting back to your other question about China's choices uh as I mentioned earlier year you know China's approach to oil and gas supply security is diversity diversity of suppliers diversity of import channels and so if 21:06 we look at China's natural gas import portfolio I think last year about 35% of natural gas Imports were pipeline gas so Russia Central Asia Myanmar um other 65% are LNG um and if you look at you know China's gas suppliers as a whole I think 77% of China's natural gas Imports last year came from um just six countries but they nicely sort of illustrate this diversity of suppliers and routes so we have you know Australia and Turkmenistan and Russia and the United States um and Malaysia and cutter forecasts of China's gas demand through 2030 and 2040 show a potential Supply gap which Russia hopes to fill with the power of Siberia 2 pipeline however the situation is complicated by China's existing import commitments and the uncertain trajectory of its future demand these factors make it challenging to predict exactly how much additional 22:05 gas China will need and when let's take a closer look at China's current gas pipeline infrastructure the country has three major pipelines from Turkmenistan known as a b and c uh the main play in Central Asia in gas is turkistan and turkistan pumping gas to China um Eric already mentioned the fourth P pipeline the pipeline d uh to increase uh the supply of gas uh to China um these pipelines were constructed between 2008 and 2014 at a combined cost of approximately $14 billion together they currently Supply 55 billion cubic meters of gas annually to China there are plans to increase this capacity to 85 bcms in the next 3 years reflecting China's growing demand for natural gas the power of Siberia 1 pipeline 23:06 connecting Russia to China became operational in 2019 this massive infrastructure project spans 3,000 kmet and cost an estimated $55 billion to construct in 2023 it delivered 22 BCM of natural gas to China the pipeline's capacity is expected to increase gradually with projections to reach a maximum capacity of 38 business continuity management China also receives gas from Myanmar through a pipeline constructed in 2013 this pipeline was designed to deliver 12 BCM of gas per year however it currently operates at only onethird of its capacity due to various operational issues despite these challenges the pipeline remains an important part of China's gas import infrastructure the proposed power of Siberia 2 pipeline would take a different route from its predecessor while power of Siberia 1 travels through 24:05 Eastern Siberia and enters China in its Northeastern region power of Siberia 2 was initially planned to pass through Mongolia to reach China this route presents both opportunities and challenges the estimated cost of the power of Siberia 2 project is 13.6 billion this is a significant investment especially considering the current geopolitical IC tensions and economic uncertainties the high cost raises questions about funding and economic viability particularly given China's apparent hesitation the pipeline's proposed route through Mongolia introduces additional political risks agreements must be reached not only between Russia and China but also with Mongolia for Transit rights this adds complexity to the negotiations and potential vulnerabilities to the gas supply chain any future political tensions between these countries could potenti disrupt gas flows however recent 25:01 discussions about this project have hit some unexpected complications China it turns out isn't too keen on the pipeline passing through Mongolia instead they're pushing for a route through Kazakhstan you know there is a lot of enthusiasm I think right now in Russia and in Mongolia for routing the power of Siberia to pipeline through Mongolia um I think that right now that there's not an equal amount of enthusiasm in China One you know they don't need this gas right away uh and two I think there are concerns about routing this pipeline through a third country that isn't supplying natural gas to China um you know obviously you know the more countries you route a pipeline through the more chances there are for things to um you know disrupt the flow of gas you know intentional or accidental so I'll leave it at that there are several reasons for this potential change firstly China has expressed concerns 26:04 about mongolia's growing alliance with the United States Mongolia has been strengthening its ties with the US in recent years signing a strategic partnership in 2019 and participating in joint military exercises this closer relationship between Mongolia and the US has raised eyebrows in Beijing as China is wary of increased American influence in the region Kazakhstan on the other hand presents several advantages as a Transit country it already has experience with oil and gas pipelines including those connecting to China the Kazakhstan China oil pipeline operational since 2006 and the central Asia China gas pipeline which passes through Kazakhstan demonstrate the country's existing energy infrastructure links with China the Kazakhstan route would also be shorter than the Mongolia route potentially reducing construction costs and transit times this could make the project more more economically viable an important consideration given the estimated $1 13 billion price tag 27:05 Chris weer CEO of Eurasia based strategic consultancy macro advisory said using the kazak route where the cost of repair and upgrade will be considerably less than power of Siberia 2 is a much more attractive option and one which appears to be acceptable to Beijing he further added they share a long Common border and the old Soviet infrastructure is repairing to allow more gas via Kazakhstan selling at a price lower than it gets from Europe and turkey is an acceptable cost to expand volumes and infrastructure Russia currently holds about 24% of the world's proven natural gas reserves making it the country with the largest gas reserves globally however these vast reserves are of little value if Russia cannot get the gas to Market it's worth noting that the power of Siberia 2 project is not just about natural gas recent statements from 28:02 Russian officials suggest that the pipeline could also be used to transport oil Russian President Vladimir Putin stated moreover it's possible to lay both a gas pipeline and an oil pipeline in the same Corridor this dual use potential could make the project more attractive economically the geopolitical implications of the power of Siberia 2 project extend beyond just Russia and China the United States which has been promoting its own LNG exports to Asia is likely watching these developments closely increased energy ties between Russia and China could potentially challenge US influence in the region the US has limited direct involvement in Central Asia but has strategic concerns about Russia China energy cooperation the strengthening of energy ties between these two Powers could potenti challenge US influence in the region the power of 29:01 Siberia 2 project could potentially compete with the US LNG exports affecting the US position in the global gas market despite all the challenges Russia remains optimistic about the project Alexander Novak Russia's Deputy Prime Minister has stated that they expect to sign a contract for power of Siberia 2 soon the negotiations surrounding the power of Siberia 2 project are intricate with pricing being a key point of discussion Russia and the United States um and Malaysia and cter um and you know earlier this year there were reports of Chinese companies Chinese National oil companies negotiating with cutter um you know so at the same time that we have China signing more contracts with the United States um you know they're also negotiating uh with cutter obviously another big natural gas supplier and then there's the question of you know the line D of the Central Asia pipeline might we see a power of Siberia too um 30:01 and I'll just sort of close by saying by having sort of all these different irons in the fires there's you know probably you know a hope you know for some you know for China sort of as a whole that you know does this give certain companies sort of Leverage in negotiations if they can sort of say oh you know we're interested in you know in maybe signing an agreement for this pipeline but you know we also have all this LNG coming in so you know what can you do for us and I'll stop there thank you some good questions are coming in from the audience and we only have got despite these complexities Putin remains confident in the Project's potential he emphasized that China's expanding economy has a growing need for energy resources and he positioned Russia as the most Dependable supplier to meet this demand Putin also highlighted the Project's resilience against potential Western interference Putin stated nobody can get in the way of this neither sanctions on tanker fleets or even sanctions on financial institutions we will buy and 31:02 sell everything in our national currencies so the interest from both sides is confirmed by conducting transactions in their National currencies Russia and China aim to circumvent potential Financial restrictions the potential shift from Mongolia to Kazakhstan as a Transit country for power of Siberia 2 has significant implications for regional Dynamics in Central Asia the relationships between Russia China and Central Asian countries countries are evolving with Kazakhstan potentially playing a more prominent role in this energy project the global energy Market implications of the power of Siberia 2 project are significant the project could potentially affect LNG markets as it would provide China with a substantial new source of pipeline gas this could reduce China's Reliance on LNG Imports potentially impacting Global LNG prices and trade flows the project also represents increased competition for other gas suppliers to China including Central Asian countries and 32:01 LNG exporters such as Australia Qatar and the United States these countries may need to adjust their export strategies and potentially offer more competitive pricing to maintain their market share in China the project could also accelerate the trend of dollarization in International Energy trade as Russia and China plan to conduct transactions in their National currencies this could have wider implications for the global Financial system and the US Dollar's role as the world's primary Reserve currency Russia has long been a major player in the natural gas export Market with Europe as its primary customer but a new agreement between Russia and China caught the world's attention this wasn't just any deal it was a massive $13 billion investment in a 2,600 km pipeline project the original plan was ambitious start construction in 2024 and complete the entire project in Just 4 4 years however recent discussions about this project have hit some unexpected complications China it turns out isn't 33:05 too keen on the pipeline passing through Mongolia instead they're pushing for a route through Kazakhstan this change has raised eyebrows and left people wondering why is China hesitant about the Mongolian route and how's the project progressing now to understand the significance of this project let's look into Russia's natural gas resources the Siberian plane is loaded with natural gas in 2011 Siberia was producing 40% of Russia's total natural gas output that's an enormous amount of gas but getting that gas from Siberia to where it needs to go isn't cheap the transportation costs are a real challenge for Russia this is where China comes into the picture in 2015 China and Russia shook hands on something called the Far East Route memorandum this led to the development of the Siberia 1 natural gas pipeline which started pumping gas to China in 2019 currently it's sending about 15 billion cubic met 34:03 of gas to China each year but that's just the beginning they're planning to ramp that up to 38 billion cubic met by 2027 with this pipeline Russia has become one of China's primary suppliers for natural gas and China needs a lot of gas in 2021 China's natural gas consumption hit a staggering 390 billion cubic met that's a 7.6 % increase from the previous year out of that total about 100 billion cubic met came from Russia approximately 13d of China's total consumption looking ahead China's national energy Administration predicts even greater demand they're forecasting consumption to reach between 420 and 425 billion cubic met by 2024 with numbers like these it's clear why China and Russia are discussing the construction of another pipeline enter the Siberia number 2 pipeline project the plan 35:00 involves investing $13 billion in this massive project the pipeline would start in thaum in Russia cross through Mongolia and end up in Eastern China we're talking about a 2600 km pipeline here to break it down about 900 km would be in Mongolia 100 km in Russia and, 1600 km in China originally they plan to start building in 2024 and finish by 2028 if everything went according to plan the pipeline would be operational around 2030 this pipeline could deliver up to 50 billion cubic M of natural gas to China every year this project could be a win to win for both China and Russia for China it means a more stable supply of natural gas for Russia it's a new market for their gas giving them more flexibility in the global energy Market but as of now there's no solid news about when construction will actually start back in June there were reports that China and Russia were stuck 36:00 in negotiations the main issues they couldn't agree on the price of the gas or how much gas China would buy some Western media Outlets jumped on this painting a picture of tense sinor Russian relations but is that really what's going on the real issue seems to be China's concerns about the pipeline going through Mongolia in recent years Mongolia has been getting Cozier with Western countries like the United States and the United Kingdom they're even talking about direct flights between Mongolia and the US bypassing China and Russia mongolia's third Neighbor policy is making China nervous if the pipeline goes through Mongolia that's 900 km of pipeline that China doesn't control what if there are political changes in Mongolia what if someone decides to turn off the tap these are the kind of energy security threats that keep policy makers up at night there's also the financial aspect to consider if the pipeline goes through Mongolia Mong molia will charge tolls experts estimate that Mongolia 37:01 could make up to $30 million a year from these tolls that's great for Mongolia but it means higher costs for China so what's the alternative China has suggested bypassing Mongolia altogether and running the pipeline through Kazakhstan instead this route would be shorter which means lower construction and maintenance costs from a geographical perspective if the pipeline passes through Kazakhstan its route will be relatively short this not only greatly reduces the construction cost but also reduces the difficulty of Maintenance it's worth noting that the Kazakhstan ambassador to Russia has stated that Russia is planning to build a new natural gas pipeline in the near future this pipeline will pass through Kazakhstan and eventually transport natural gas to China but this project isn't just about money and gas it's about strategy oil and gas are strategic resources right now China gets most of its oil and natural gas from the Middle East and Africa almost all of that has 38:03 to go through the malaka straight that's a problem because if there's ever a conflict countries like India or the United States could block that route India and the United States have stated multiple times that if China takes action to unify Taiwan they will quickly block the routes in the Indian Ocean and the straight of Mala thereby cutting off China's energy supply chain in addition the US Navy off holds joint military exercises with India and other so-called allies on a regular basis which is actually practicing the ability to block the Indian Ocean route

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