I am not sure what other industry event or announcement could have had a more prominent and extended effect on natural gas markets than the simple contract entered between Russia and China, two countries located on an opposing side of the Earth from North America. Is this contract a disaster or a savior for those economies that have just recently announced their pending dominance in this sector? I think it really depends on how you look at it.

Now, let’s take a quick glimpse at how the story developed. At first, Ukraine and Russia become engaged in a heated fight over the Crimean peninsula, followed by Russia’s actual annexation of the territory. The annexation was undertaken on the premise of “historical fairness” and was caused by internal Ukrainian events resulting in “the wrong people getting power in the wrong manner,” at least according to Russia’s line of reasoning. Then another part of Ukraine became involved in real in-fighting, with real shooting, bombing, and victims. Most of the global parties of interest then jumped on a bandwagon, condemning Russia for stirring up the land that was “otherwise peaceful and quiet.” Global decision makers demanded that Russia stop interfering in Ukraine’s matters and promised isolation and various sanctions against Russia. Russia claimed that it had nothing to do with that. Finally, all matters reached the point I have been awaiting for several months: energy resource matters came into play.

No doubt Russia’s misbehavior has increased an already looming pressure on Europe, given the fact that the European natural gas supply is predominately controlled by Russia. The largest natural gas producer now represents an unreliable party to work with, at least as per Russia’s opponents’ line of reasoning. According to the same line of reasoning, this will effectively create a giant, gaping energy hole in Europe. This hole can be fixed by the North American nations that are now experiencing shale gas production revolutions and boast resources sufficient to meet not only their own domestic demand but also the demand of their friends in need. Hence, the U.S. and Canada are rushing to offer this support to their friends by filling in the expected European energy void and assisting with diversifying their gas imports. LNG is the North American answer to all the energy concerns brewing in far-away countries.

Just take a quick look at all the efficiency and agility of usually not-so-quick on their feet regulatory bodies. LNG terminals received expedited approvals in the U.S. and Canada. March 24, 2014–the U.S. Department of Energy approved Jordan Coves’ LNG export license. March 26, 2014–four LNG

terminals in British Columbia received similar approvals from the Canadian minister of resources. The U.S. House Energy and Commerce Committee is now pushing legislation that will speed up the approval process of pending applications for LNG exports. Promises of help and support are pouring in from North American friends to their European counterparties. Non-FTA member countries will receive their share of help and support, as U.S. legislation has allocated a cozy spot for them by fast-tracking the approval of export licenses to these countries as well. Non- FTA countries such as Japan, China, and India are probably the most attractive targets, as they have a heavy reliance on imported fossil fuels.

At this moment, Russia and China have struck a $400 billion deal: Russia will supply China with gas for 30 years starting in 2018–a volume of 38 Bcm a year, with an option to increase this volume to 60 Bcm a year. After a decade of consistently failing efforts by these two countries, a contract that has associated with it the construction of gas production and transportation infrastructure, as well as revived industries, labor markets, and territories, has finally been signed following just a few days of negotiations.

Is this the beginning of the imminent dissolution of LNG markets taking over? Some say this is unlikely, and China dropping out from the mix does not necessarily mean the end of all expectations of the U.S. becoming “the Saudi Arabia of natural gas.” There is still Europe left, and Japan, with its complete dependence on gas imports due to a nationwide nuclear freeze. But have you been following the news from Japan? On May 21, 2014, the Japanese court ruled against restarting nuclear power, thus stopping government efforts to end this freeze. Japan’s government announced it will change some top officials at its nuclear regulator, which is interpreted as an attempt to remove those opposed to the restarting of the country’s reactors. Provided the Japanese government finally succeeds at restoring the country’s 48 currently idling reactors, how much will LNG demand be affected? I think quite substantially. What will be left for LNG providers? India, Korea, and Europe, I guess. But then Australia, with its own fossil fuels revolution, is right there, at least geographically.

But forget about natural gas for a second. Are we missing something bigger looming out there? Have you noticed that the Russia-China contract payments will be executed in rubles and yuan, not traditional U.S. dollars? Have you heard that Russia and China are creating a joint credit rating agency due to their frustration over existing systems that seem to be driven by political agendas rather than economic factors? Do you remember BRICS? Have you noticed that BRICS members have been very quiet in their condemnation of Russia over Ukraine and slow in imposing sanctions? Do you remember that India, probably the last desired target for LNG exports, is a member of BRICS?

I do not attempt to judge or forecast, but it seems to me that U.S. expectations of taking over the natural gas markets are getting a serious blow. This blow is somewhat quiet and even has been downplayed for a while by the Western media. Nonetheless, at the hour of awakening, there may be just too many surprises for those who have been ignoring this quiet and slowly-developing revolution, a revolution in which energy markets have been taken over by those who have been on the “naughty list” so long that their influence has been ignored and overseen for too much time. There is good news for members of the shale gas revolution: procrastination in approving LNG facilities has been good for both countries. Aside from talking and announcing victories, bragging and promising to take over the world,not much has been done; hence, there is not much to lose.

Read an in-depth article in this month’s ZE DataWatch issue that discusses dynamics and shifts in global energy demand.