By Good News Today Staff
(Shanghai) China and Russia signed a $400 billion gas deal on May 22nd, giving Moscow a megamarket for its leading export and linking two major powers that, despite a rocky history of alliances and rivalries, have drawn closer to counter the clout of the United States and Europe.
The timing is almost flawless as Russia is looking to shield itself from Western sanctions by pivoting towards Asia, and China desperately needs to switch from dirty coal to more environmentally friendly natural gas.
Mr. Putin, on a two-day visit to Shanghai, and the Chinese leader, Xi Jinping, oversaw the signing of the contract between Gazprom and the China National Petroleum Corporation, the biggest natural gas deal Russia has sealed since the collapse of the Soviet Union. The contract runs for 30 years and calls for the construction of pipelines and other infrastructure that will require tens of billions of dollars in investment.
“The arrangements on export of Russian natural gas to China have nearly been finalized. Their implementation will help Russia to diversify pipeline routes for natural gas supply, and our Chinese partners to alleviate the concerns related to energy deficit and environmental security through the use of ‘clean’ fuel,” President Vladimir Putin said.
The deal has been on the table for over 10 years, as Moscow and Beijing have negotiated back and forth over price, the gas pipeline route, and possible Chinese stakes in Russian projects. The price China will pay for Russian gas remains a “commercial secret” according to Gazprom CEO Aleksey Miller. Gas will be delivered to China via the eastern ‘Power of Siberia’ pipeline.
“Of course Russia wants to sell gas and resources at the highest possible prices. But because of the sanctions from European partners, we need to find a partner that can buy our gas long-term, which is why at the moment China looks very attractive to us,” Aleksandr Prosviryakov, a partner at Lakeshore International, a Moscow-based asset management firm, told RT at a Confederation of Asia Pacific Chambers of Commerce and Industry (CACCI) in Moscow ahead of the big meeting.
China, the superpower
Home to nearly 1.5 billion people, China’s demand for energy is rising faster than ever. In 2014, the country expects to increase natural gas imports by 20 percent, and import 186 billion cubic meters annually.
“This deal with Gazprom and cooperation with Russia shows that China is expanding, becoming bigger and bigger, and that this part of the world is dominated by China, India, and Russia, the US role is shrinking,” said Aleksandr Prosviryakov.
“China is the fastest growing economy. China is the biggest market in terms of volume and value. China is the next superpower and number one economy in the world,” Peter Panov, Chairman of Triotoni, a Singapore-based investment firm, told RT at the CACCI conference in Moscow.
Europe remains Russia’s largest energy importer, having bought more than 160 billion cubic meters of natural gas in 2013. However, recent tensions over Russia’s actions in Ukraine have forced European ministers to rethink their dependence on Russian gas, a sentiment that has been openly voiced throughout the continent
“Now is the time for Russia to compromise a little bit so that they can lessen their dependence on Western Europe as a buyer of Russian gas. Diversification is a strategy for Russia to have good long-term business relationships with both Europe and China,” Benedicto Yujuico, president of the Confederation of Asia-Pacific Chambers of Commerce and Industry, told RT at an Asian business gathering in Moscow recently.
“Needless to say, China is a very wise nation and will try and get the best out of both parties, and maneuver: give a little bit to Russia, and a little to the West,” Panov said.
Gas was an important element of the talks in Shanghai, but the leaders also discussed many aspects of Russia-China relations, including payment systems, military cooperation, and upcoming infrastructure projects.
Caption: A memorandum of understanding was signed in the presence of Russian President Vladimir Putin and President of China Xi Jinping on the second day of Putin’s two-day state visit to Shanghai.