China, Russia sign 30-year gas deal

China, Russia sign 30-year gas deal

May 21st, 2014 by Associated Press in Local - Breaking News

Russia's President Vladimir Putin, left, and China's President Xi Jinping shake hands before posing for a photo during the fourth Conference on Interaction and Confidence Building Measures in Asia (CICA) summit, in Shanghai, China, on Wednesday, May 21, 2014.

Russia's President Vladimir Putin, left, and China's President...

Photo by Associated Press /Times Free Press.


Associated Press

SHANGHAI - China signed a long-awaited, 30-year deal Wednesday to buy Russian natural gas worth $400 billion in a financial and diplomatic boost to diplomatically isolated President Vladimir Putin.

Negotiations on the price for the gas had continued into the final hours of a two-day visit by Putin to China, during which the two sides had said they hoped to sign a deal.

The agreement calls for Russia's government-controlled Gazprom to supply state-owned China National Petroleum Corp. with 38 billion cubic meters of gas annually, Gazprom spokesman Sergey Kupriyanov told The Associated Press. Gazprom CEO Alexei Miller told Russian news agencies the contract was worth a total of $400 billion.

CNPC announced it had signed a deal but it gave no details.

Putin, shunned by the West over Ukraine, met Tuesday with Chinese President Xi Jinping while negotiations on the gas deal continued in private. Putin wants to expand Russia's dealings with Asia and diversify markets for its gas, which now goes mostly to Europe.

The Ukraine crisis and sanctions imposed by Washington and the European Union on Russia had raised expectations Moscow would compromise in order to secure the gas deal.

China gets supplies that could help to ease gas shortages in the world's second-largest economy and curb reliance on coal.

The price appears to be closer to the level Russia wanted, according to analyst Xizhou Zhou of IHS Energy. In exchange, the two sides dropped a requirement for prepayment that was a feature of Chinese purchases of Russian oil, he said.

"This higher price level reflects China's willingness to pay more for cleaner fuel," said Zhou in a report.

China and Russia have been negotiating the deal for more than a decade but had been hung up over the gas price.

"Gazprom is under increasing geopolitical and competitive pressure to diversify its market toward the East, while China's gas market remains supply constrained as demand continues to surge," said Zhou.

The U.S. treasury secretary, Jacob Lew, appealed to China during a visit last week to avoid taking steps that might offset sanctions. However, American officials have acknowledged China's pressing need for energy.

Plans call for building a pipeline to link China's northeast to a line that carries gas from western Siberia to the Pacific port of Vladivostok.

Putin was in Shanghai for an Asian security conference.

AP Writer Vladimir Isachenkov in Moscow contributed.