Russia's Putin Eyes Gas Deal on Visit to China

Energy | May 20, 2014, Tuesday // 12:16|  views

Russian President Vladimir Putin (L) and Chinese President Xi Jingping (R). Photo by EPA/BGNES

Russia and China have marked "substantial progress" in talks over a deal which would secure one-fourth of China's gas supplies, Kremlin officials told Russian media.

Negotiations come as Russian President Vladimir Putin is on a visit to China for an international forum, but is also meeting Xi Jingping and explore ways to boost cooperation.

Putin is to attend the Conference of Interaction and Confidence Building Measures in Asia (CICA), in which delegations from nearly 40 countries and organizations will take part. The United Nations Secretary-General Ban Ki-moon will also be at the forum. 

Putin and Xi are also to announce the start of a joint naval exercise. Arms deals and ways to boost other aspects of commercial relations are reported to be on the agenda of their talks.

A long-negotiated gas agreement will however top their meeting. During his visit to Beijing, President Putin will be eyeing a long-term gas deal which could pump 1.14 trillion cubic meters of gas into China and USD 400 B into Russia over the next thirty years.

The Chinese National Petroleum Corporation (CNPC) earlier stated it had agreed "in principle" to sign a gas deal with the Russian energy giant.

Pricing still seems to be a contentious issue, even though a Gazprom source reportedly told the Russian daily Izvestiya there was already a rough agreement between the two countries.

Izvestiya argues that the financial side of the matter will be smoothed out during Tuesday's talks between the two Presidents in Beijing.

Gazprom's chief Alexei Miller earlier said for Russia's Rossiya 24 TV channel that the company was "one digit away" from finalizing the three-decade deal for yearly 38 bcm deliveries to China from the east of Siberia.

The volume of gas envisaged under the agreement corresponds to one-fourth of the Chinese economy's consumption.

Beijing also estimates it would need some 400 bcm a year in 2020 to meet its energy needs.

Tough negotiations are expected on Tuesday and also on Wednesday, when the official Russian visit will come to an end, as the Moscow Times quoted the Kremlin's spokesman Dmitry Peskov as saying on Tuesday morning (afternoon in China, which is 4 hours ahead of Moscow) that the gas price is still being discussed.

Russia has vowed it would turn east if sanctions or prolonged escalation in Ukraine disrupt the usual gas flow to Europe.

The harsh tone left aside, Gazprom's business in Europe accounts for 80% of its revenues, and the company hopes to diversify its activities by gaining a more prominent presence in the Asia-Pacific region.

Bilateral documents on the events in Ukraine are also part of Putin and Xi's meeting. In a joint declaration, the two opposed interference in any country's domestic affairs.

In a silent reference to the developments in Ukraine, which Moscow says are instigated by the US, the two leaders declared that activity aimed at changing constitutional regimes.

China has nevertheless shown reluctance to fully support Russia in its activities regarding the Ukraine crisis, trying cautiously to maneuver among Moscow, Kiev and the West in order not to harm trade relations.

It is also wary of triggering Tibet's breakaway if it approves the secession of the Crimean Peninsula and its incorporation into Russia following a local referendum on March 16.

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Tags: Russia, China, Vladimir Putin, Xi Jingping, gas, Alexei Miller, Kremlin, Gazprom, Dmitry Peskov, CICA, CNPC


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