Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

China Secures Gas Supply

By -

On December 14, 2009, an inauguration took place that deserves more attention than it received because it marks an economic power shift to the benefit of three Central Asian countries and China and to the detriment of Russia.  The presidents of China – Hu Jintao, Turkmenistan – Gurlanguly Berdymukhamedov, Kazakhstan – Nursultan Nazarbayev, and Uzbekistan -Islam Karimov, inaugurated the Central Asia–China gas pipeline that links Turkmenistan’s natural gas fields on the Caspian Sea to the Western Chinese border in the Xinjiang province.

This pipeline then connects with the West-East Gas Pipeline that crosses China and supplies cities as far as Shanghai and Hong Kong. 13 billion cubic meters (bcm) are supposed to transit through this pipeline in 2010, 30bcm by the end of 2011 and over 40bcm by 2013. Ultimately that pipeline could supply China with more than half of China’s present day natural gas consumption.

Diversification of gas export routes seen as a regional security factor

Most commentators and officials have stirred clear from saying openly that Russia is losing ground in Central Asia because of political sensitivities. Despite years of recurrent official declarations that there are no spheres of influence – with the word “influence” being astutely replaced by the word “interest” – there is a delicate balance of powers in the region with historic, cultural and economic ties that cannot be ignored. There is also the need to accommodate the growing interest in the region of new players such China, the United States and the European Union. Russia sees the region as its natural backyard but many countries no longer consider Russia as the most rewarding partner or one that should always have the upper hand.

Turkmenistan is the big winner with this new pipeline as this new export route for its gas production frees it from the diktats of Gazprom: about 70% of its natural gas production used to exit the country through the Gazprom network. Turkmen President Berdymukhamedov stated, "The successful implementation of this project could become a prototype for all international energy partnerships,” adding that "this pipeline will have a positive impact across the entire region and beyond, and it will become a major contributing factor to security in Asia." Other winners are Uzbekistan and Kazakhstan that will also be able to supply the pipeline with their own gas production, notably from the Karachaganak, Kashagan and Tengiz fields in Kazakhstan.

The Central Asia-China gas pipeline is a US$7.3bn project, 1,833 km long with 188 km going through Turkmenistan, 530 from Uzbekistan to Kazakhstan, and 1,115 km from Kazakhstan to China. The West-East Gas Pipeline crossing China is over 4,500 km long, making of the joint pipelines the longest in the world.

A new natural gas player: Turkmenistan

In 2008 the independent British auditing company Gaffney, Cline & Associates Ltd was tasked with assessing the volumes of Turkmen gas reserves in the Yoloton-Osman fields. Despite allegations that Turkmen officials – which included the heads of Turkmengas, Turkmenneft and Turkmenneftegazstroy – misled the auditors by providing inaccurate inflated data, it remains reasonable to believe that Turkmenistan holds the 4th or 5th largest natural gas reserves in the world in light of regularly announced gas discoveries in regions with already proven reserves. President Berdymukhamedov himself sacked the Turkmen officials entangled in this scandal in October 2009.

The problem for Turkmenistan until now was that its export routes were limited as over 70% of its gas exports transited through Gazprom’s pipelines. An explosion at a key pipeline in April 2009 resulted in bitter battles: Turkmenistan and Russia blaming each other as to the causes of the accident; Turkmenistan supposedly losing over $1 billion per month in revenues; Gazprom refusing to pay European market prices for Turkmen gas per a deal concluded when prices were higher; Turkmenistan announcing it would provide gas to Nabucco, the nemesis of Russian-sponsored South Stream pipeline; etc.

The recent report by Vedomosti that Gazprom plans to purchase "not more than" 10.5 bcm from Turkmenistan during 2010-2012 compared to the usual 50 billion bcm is the confirmation that Turkmenistan absolutely must diversify its export routes. The bringing online of this new pipeline could not have been timelier.

A crack in Gazprom’s Hegemony

Gazprom has for many years monopolized gas supplies from Central Asia. With growing interest from China and Europe to diversify their gas supplies, Gazprom engaged in a risky pre-empting game consisting of securing supply agreements, notably with Central Asian countries, to cut the grass under the feet of European countries that have been looking at alternative supply routes bypassing Russia. This has proven to be a costly and risky game, notably with Turkmenistan, as world market prices and demand dropped and the contracted prices were higher than the prices Russia could reasonably resell the gas for. The game played also includes undermining the Nabucco pipeline.

Nabucco, a natural gas pipeline bypassing Russia and endorsed by European countries and the United States, is the perfect example of the power struggle at play: by securing large gas volumes from Turkmenistan and Azerbaijan, the financial viability of Nabucco comes into doubt as it is not clear that there would be enough gas available to supply both Nabucco and the South Stream pipeline supported by Gazprom. Turkmenistan, bitterly annoyed by Gazprom running away from its contractual obligations, announced in July 2009 its willingness to supply Nabucco. Azerbaijan had also conveyed its willingness to supply both pipelines, though is recently playing harder to get in light of the recent Turkey-Armenia rapprochement.

 China’s steady approach to diversifying its suppliers for everything

China is very well aware that its economic growth and even domestic stability is conditioned upon securing supply chains through long-term agreements. One step at a time China is securing its supply of staple commodities, minerals and energy supplies. To further secure its position in the supply country, China offers loans and technical expertise in addition to gaining the management authority to run the local operations. China has become one of Africa’s top three trading partners and several countries, no matter how unsavoury and corrupt they may be, became important trading partners like Sudan, which exports a majority of its oil to China, while others guarantee China’s food supply.  In November 2009, the China Metallurgical Group bought for US$3 billion a 30-year lease to exploit copper deposits in Afghanistan further demonstrating that no country, no matter how troubled it is, is off-limit.

Money helps shift the balance of power

As Cicero’s saying goes “nervi bellorum pecuniae” (money is the sinews of war) and in the commercial wars that are being fought, China has huge financial reserves that it can put in the balance, notably through its state-run financial institutions such as the China Development Bank (CDB). The CDB played a critical role in financing the construction of the US$6.7bn Kazakh section, the largest and most expensive chunk of the pipeline. The China National Petroleum Corporation (CNPC) acquired 50% of MangistauMunaiGas in April 2009 for US$2.6bn and the China Investment Corporation acquired about 11% of KazMunaiGas Exploration & Production in September 2009 for about US$939 million.

China has a financial advantage at a time of liquidity shortages: its ability to instruct it state-owned companies to work on specific projects and to coordinate the involvement of all possible Chinese players (finance providers, construction and management companies, etc.) enables China to strategically position itself at every level of the food chain. For instance in Central Asia, China acquired shares in companies that exploit gas fields (MangistauMunaiGas and KazMunaiGas E & P); China got the rights to exploit fields in Turkmenistan when other countries are still struggling to obtain such rights; China financed and helped in the construction of the pipelines running from the fields (CNPC, China Petroleum Pipeline Bureau and China Petroleum Engineering and Construction Corporation); and China purchases the gas production.

China is at an advantage compared to its American or European competitors as the US has no state companies while Europe’s few state companies are held to the same standards as private sector companies and cannot as easily be told what to do. Also, China’s financial support has no string attached beyond a long-term commitment for guaranteed supply. The United States or members of the European Union often condition the granting of financing to the improvement of democracy and human rights which is seen by Central Asian countries as an intolerable mingling with domestic issues. Furthermore, China has a lot of state companies that the government can “instruct” to work on a project such as a pipeline. CNPC was the leading operator of the Central Asia-China pipeline project, working closely with each country towards its completion.

This conjunction of companies “ready-to-go” with guaranteed financing and full government endorsement and support gives China a competitive edge. However, moving away from Russia’s arms into China’s is not a love story but more a marriage of convenience. Concerns exist over China’s growing influence and its lower environmental standards. Central Asian countries remain interested in American and European commercial involvement to see it have a balancing role. In addition US and European companies implement good business practices such as transparency, accountability, sanctity of contracts, rule of law, etc. that would greatly benefit Central Asia that is plagued by corruption.

One successful example of mutually beneficial regional collaboration

The fact that Turkmenistan, Uzbekistan and Kazakhstan managed to coordinate their efforts towards the common goal of building a pipeline that will serve them all is an achievement. China played an instrumental role as conductor in making it happen. President Hu Jintao himself underlined the benefits of mutual collaboration through a win-win situation, stating “in line with the principle of mutual complementarity, mutual benefit, equality and win-win cooperation, the four countries have actively carried out energy cooperation and achieved fruitful results.”

This said, regional cooperation is far from being a reality in Central Asia despite the well-recognized benefits of cross-border commercial activities. In the end, though Turkmenistan is definitely an important winner with this new pipeline, China can be seen as the ultimate winner by having not only secured a very valuable route for its gas supply, but also by having reinforced its image as a regional player that managed to get three Central Asian countries work towards a mutual beneficial goal, namely a new export route for their gas.

The additional bargaining power Turkmenistan, Uzbekistan and Kazakhstan gained from diversifying their energy export routes, thanks to the Chinese assistance, strengthens their political and economic independence and reinforces regional stability and security and that achievement deserves recognition.

This article was written by Philip H. de Leon for who focus on Fossil Fuels, Alternative Energy, Metals, Oil Prices and Geopolitics. To find out more visit their website at:

$IRX Breaks Out (by Gary Tanashian)

By -

The counter-trend reset of human spirits has dragged on longer than
I thought likely. Much longer, actually. Perhaps I was a bit naive last
winter projecting a rally that might retrace 38% of the crash and last
a few short months.

But it is notable that I am now so bearish I
can taste it and it should also be notable that I was so bullish I
could taste it a year ago. The big question revolves not around some
blogger/newsletter writer. The big question is what was the mainstream
media doing when the turn toward bullishness came about?

Come on
now, I don't really need to address that again, right? The MSM scared
the hell out of the public and aided a grand theft of the public trust,
bolstering the coffers of a massive financial services apparatus that
now collects mega bonuses, touts equities and attempts to lure the
final holdouts – who capitulated in March – back into the water.

meat of the rally has however, been to the benefit of the corporate
welfare state, organized labor and the financial services industry,
which tells the public "move along,
nothing to see here… forget about what you saw behind the curtain
last year… and by the way, would you like to see some of our new
income products to help you make back your losses?"

The dollar is rising (as this blog has anticipated again and again, as did NFTRH
as part of an ongoing thesis), interest rates are rising on the long
end and now… may I present to you the yield on the 3 month t-bill?
The chart has finally made a move. As you know, I have dragged out a
chart of the $IRX quite often on FOMC day as the Fed pretended they had
a decision to make, all the while 0% t-bill rates told them there is no
decision. Well now, we have a change as the short end begins to respond
to the lack of confidence going on in the long end.


The MSM and
the troubadours on Wall Street spin this as positive. "THE" recovery is
in process and the Fed will raise rates sooner than the sponsors of the
euro-junk that ran with the anti-dollar inflation rally. It's all good.
A strong dollar, whodda thunk it could be good for the US recovery.
It's a solid one after all, right?

Well, it had better be. It
had better be real or else the spendaholic ways of the Obama
administration and the easy money policies of the Bernanke Fed are not
going to be able to come to the rescue. That is because the treasury
market is posturing through all maturity time frames as if it wants to
return sensible practices to a treasury market that tells the macro
inflators whether or not they can continue creating debt to spur

I guess what I am saying is that if the bond market
does indeed signal recovery, the recovery is on its own. No more spoon
feeding of liquidity. So it will be interesting to watch. Gold has
taken the hit (again, as anticipated on this blog
and in NFTRH) and with strong support at around the $1000 level, it
will be an important sign post in determining the authenticity of what
the Wizard is asking you to believe.

The pablum quoted below
tells you that liquidity is flowing, "THE" recovery is in full swing
and oh yes, we will need more spending and stimulus. You can't have it
both ways. The stance here remains that the inflators need a downside
event or else the inflationary monster they created is going to
preclude their ability to continue manufacturing liquidity (treasury
rates rising). Now, I look at NFTRH's biggest picture chart of the
S&P 500 and that thing is bullish. So again, there will come a
point where I stand aside from the moderate bearish stance (as opposed
to my current full bearish personal sentiment).

But with Santa
in play, Wall Street on full tout and the utterly useless (to real
traders) MSM on the job, this mess is going to have to prove itself for
more than a couple pumpy weeks in January. Gold is taking an oh so
healthy correction, purging the momo's and players. When the correction
concludes, we will find out the nature of many things.

Right now, on with silly season!

From Reuters & Bloomberg this morning:

This fanned expectations that the Federal Reserve could raise interest rates sooner than its counterparts in the euro zone and Japan,
sending the dollar higher and pushing U.S. Treasury yields to
four-month peaks. MSCI world equity index (.MIWD00000PUS) rose 0.3
percent, on track to scoring one of the biggest annual gains in the
past 20 years.
— Reuters

and the Obama administration are taking a bigger role in the rescue of
the economy from the Federal Reserve, shifting the strategy to stimulus
spending from central bank lending… "It may be tough for elected
officials to quit spending, prolonging the bailout and adding to the
federal budget deficit. “There’s a danger of getting addicted to fiscal
stimulus programs,” said David Wyss, chief economist with New
York-based Standard & Poor’s, in an interview. “The Fed can print
money. Government has to raise taxes or borrow more."

consumer spending probably rose in November for the sixth time in seven
months as households took advantage of holiday discounting, economists
said before reports today. China’s growth may surge to as much as 12
percent next year, according to Citic Securities Co., the nation’s
biggest listed brokerage. Consumer confidence in Italy unexpectedly
rose in December to the highest in more than seven years after Europe’s
fourth-biggest economy emerged from a recession.

path of least resistance will continue to be to the upside,” Robert
Doll, who helps oversee about $3.2 trillion as chief investment officer
for global equities at New York-based BlackRock Inc., said in a
Bloomberg Television interview. The economic recovery “means earnings
should be somewhat better and liquidity should still be plentiful.
That’s a recipe for equities moving higher,” Doll said.

TEVA (by Jeff Patterson)

By -

A quick observation, I thought I would point out that TEVA is breaking out to new all time highs. I did a post a few weeks back mentioning TEVA was on the cusp of a breakout to new all time highs. I believe TEVA merits close attention for possible entry.

I have been holding a core position in TEVA for a long time, so I personally sold some that I bought for a breakout and some of my long term holdings in it. I have a trading plan for TEVA that I have been following for some time and my selling is part of that plan. If the action is positive in TEVA over the next few weeks I will be adding another position in TEVA for a intermediate time frame trade.