Financial News

  • 22 May 2014, 14:10

China Signs Russian Gas Deal 'Worth $400bn'

China and Russia have agreed a massive gas delivery deal scheduled to last for three decades - and valued at up to $400bn (235bn).

The agreement, 10 years in the making, was signed after last-minute negotiations during a visit by Russian President Vladimir Putin to Shanghai.

Chinese President Xi Jinping and Mr Putin witnessed the signing, according to a statement by China's state energy giant CNPC.

"This is another major milestone achievement in China-Russia energy strategic cooperation," it said, adding it was "facilitated and greatly supported personally by the leaders of China and Russia".

Moscow media cited Alexei Miller, the chief of Russia's energy giant Gazprom, as saying the gas deal was worth $400bn over its 30-year contract life.

Analysts IHS Energy said: "The final agreed price is believed to be closer to what Russia wanted than what China was initially prepared to pay.

"This higher price level reflects China's willingness to pay more for cleaner fuel, consistent with its efforts on domestic gas price reform to accommodate rising supply costs."

Russia is the world's largest net energy exporter, with vast reserves, and China is the second largest net energy importer.

The two former Cold War companions also share a long land border, allowing deliveries to the world's most populous nation that avoid maritime choke points.

The deal comes amid increasing tension between the United States and China, along with souring relations between the Asian country and its neighbours over territorial disputes.

China and Russia are also currently holding week-long maritime exercises in the East China Sea.

US President Barack Obama previously announced a reconfiguration of American national interests from the Middle East towards the Asian region.

And on Monday, US officials indicted five Chinese military officers over alleged cyber espionage attacks on American companies.

The same day Mr Putin said "China is our reliable friend" and added that "to expand co-operation with China is undoubtedly Russia's diplomatic priority".

The warming relations come as Western states impose sanctions on Russian companies and key personnel over the annexation of the Ukrainian Crimea region.

Russia has felt increasing political heat from the EU, its current major gas customer, over the Ukraine issue.

Earlier this week, Russian Prime Minister Dmitry Medvedev criticised the sanctions and said: "We are slowly but surely moving toward a second Cold War, which no one needs."

He blamed Mr Obama for having a lack of "political tact".

The gas deal gives Mr Putin a further fillip after his Ukrainian activities, according to a leading think-tank.

Royal United Services Institute for Defence and Security Studies senior research fellow Raffaello Pantucci said: "Putin gets a big win and can go back home showing that he has also managed to finally conclude a discussion that had been going on for over a decade."

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