China, Russia sign landmark $400 billion gas deal

May 21, 2014 | Asia, Budget & Investment, LNG & LPG

Shanghai, China | — China and Russia on Wednesday inked a historic 30-year gas deal valued at USD 400 billion, ending the decade-long natural gas supply talks between the two neighbours, Chinese and Russian state media reported.

Russian President Vladimir Putin and China's President Xi Jinping at a ceremony in Shanghai to sign a long-awaited historic $400 billion gas deal. Photo: Reuters

Russian President Vladimir Putin and China’s President Xi Jinping at a ceremony in Shanghai to sign a long-awaited historic $400 billion gas deal. Photo: Reuters

Announced after meetings between Chinese President Xi Jinping and Russian President Vladmir Putin at an Asia security conference, the 30-year gas deal gives China a new energy source and Russia a diplomatic boost in the face of sanctions and condemnation for its annexation of Crimea and aggressive actions in Ukraine.

On a symbolic level, the deal also provided China and Russia a chance to reaffirm their strategic alliance against the United States, their shared global rival.

The agreement allows Russia to diversify its gas exports just as Europe is trying to taper off its consumption of Russian gas in response to the country’s role in the Ukrainian crisis.

“This is Gazprom’s biggest contract. We don’t have a contract like this with any other company,” Miller said at the meeting in Shanghai, according to Russia’s Interfax news agency.

Putin said that the implementation of the deal would start “tomorrow.”

According to a news bulletin on the website of China National Petroleum Corporation (CNPC), the contract will see the east route pipeline providing China with 38 billion cubic meters of natural gas annually from 2018.

In March 2013, CNPC signed a framework gas supply agreement with Russia’s Gazprom, the world’s largest gas company. “The deal fully embodied the principle of mutual trust and mutual benefit of China and Russia,” CNPC said in the bulletin. It added that the agreement will accelerate the economic and social development in Russia’s far east region, and also diversify the export of the major oil and natural gas exporter.

The gas supply deal was signed on the sidelines of the fourth Summit of the Conference on Interaction and Confidence Building Measures in Asia, a regional security summit which Xi and Putin are attending. According to Russian news agency Itar-Tass, Gazprom CEO Alexei Miller reported that the contract has been concluded for USD 400 billion for 30 years.

As regards the western route, there is one fundamental difference concerning the resource base: this is the same base, from which we are making gas supplies to Europe, Miller was quoted as saying. Gazprom expected to get USD 400 as a starting price for 1,000 cu. m. of gas for China, while the Chinese side wanted to buy gas for USD 350-360, Itar-Tass added.

The final price for gas negotiated for the deal was not announced and it is unclear, given the vague nature of the announcement, whether there are other aspects to the deal still to be worked out.

Analysts who have tracked the progress of the deal, almost 10 years in the making — said they believe the final agreed price was “closer to what Russian wanted than what China was initially prepared to pay.”

The long-anticipated agreement met with approval and pride from many Russians, in an atmosphere of rising nationalism and anti-Western rhetoric over the crisis in Ukraine.

One caller to the Echo of Moscow radio station declared the gas deal “another victory for Putin because he managed to sell gas for European prices,” while another listener suggested the new level in Russian-Chinese cooperation must be a “nightmare for America.”

Miller, the Gazprom CEO, had earlier called the price a “commercial secret.” And Putin, without naming an amount, told journalists in Shanghai on Wednesday that the price was “pegged to the price of oil and petroleum products,” the Interfax news agency reported.

 

  • Bermuda

    President Putin really has a leg in the past and the revival of Russian power and influence after the demise of USSR seem to top his agenda in his second coming to the Kremlin. Anyway, America and its allies needs a call to order. They all should sort themselves out on their soils but not in Africa. America, EU, China and Russia leave Africa and Africans alone. You do not like them and do not want them to ever develop and be treated as human beings. Africa is not poor but you made them poor. They are peaceful people, you nurtured conflict through your arbitrar adjustment of boundaries and creation of so-called colonies now countries. You deprived them and stole their resources for decades if not centuries. Now you are back under another deceitful campaign. Leave Africa alone.