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  • Dec 24, 2014
  • Updated: 9:02am
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ENERGY

China, Russia sign historic natural gas supply deal worth US$400b after decade of talks

Xi and Putin witness conclusion of long-awaited agreement under which Moscow will supply 38 billion cubic metres of gas annually for 30 years

PUBLISHED : Wednesday, 21 May, 2014, 5:51pm
UPDATED : Thursday, 22 May, 2014, 5:20pm
 

China and Russia signed a long-awaited natural gas supply deal worth US$400 billion in a diplomatic boost to show the unity of the two nations.

The signing, witnessed by President Xi Jinping and his Russian counterpart Vladimir Putin, was made on the sidelines of a regional forum at which Xi warned against the establishment of military alliances in Asia and called for a new regional security co-operation mechanism.

Under the agreement, Russia's Gazprom will supply China National Petroleum Corporation with 38 billion cubic metres of gas annually for 30 years.

Gazprom CEO Aleksey Miller told Russian news network RT that the contract was worth a total of US$400 billion, but the price of gas stipulated in the deal remained a "commercial secret".

Hopes of a deal were running high when Putin kicked off his two-day Shanghai tour on Tuesday. But it could not be signed after talks between Putin and Xi that day, and representatives from the two sides continued negotiations until yesterday.

Watch: China and Russia sign huge gas deal

Observers said the signing of the deal after negotiations lasting more than a decade because of pricing differences was a boost to both nations, especially for Russia amid Western sanctions over its intervention in Ukraine.

The signing was a "tangible result" for Putin that he could get things done despite his difficulties with the West, said Rafaello Pantucci, a senior research fellow with the Royal United Services Institute, a defence and security think tank in Britain.

Industry estimates showed that the price of the agreement may have come in at around US$350 per thousand cubic metres, Reuters reported. The western European average is US$380.

Li Lifan, an expert in Russian affairs at the Shanghai Academy of Social Sciences, reckoned the gas price would be higher than original Chinese estimate. "China wants to show unity with Russia, and hopes to secure its support when making a larger presence in Asia," he said.

The deal was clinched shortly before Xi wrapped up the Conference on Interaction and Confidence Building Measures in Asia.

The previously little-known 26-member forum, established in 1992, was given added weight this year as Beijing tries to extend its regional influence. Russia, Vietnam, India and Iran are among the members, while the United States, Japan and the Philippines are observers.

Without naming any nation, Xi said: "Beefing up military alliances targeting a third party is not conducive to maintaining common regional security." Last month Beijing warned Washington against creating an "Asian Nato" by stepping up security alliances with China's neighbours.

Xi called for the forum's scope to be expanded to cover the whole of Asia, and for the establishment of a defence dialogue among member states to be explored.

"It is for the Asian people to uphold Asia's security," he said.

Observers said Xi's remarks were aimed at Washington, even though Beijing will not set up a bloc against the US.

"Beijing is saying that Asia is no longer the realm for US leadership," said Benjamin Herscovitch, a research fellow at Australian think tank The Centre for Independent Studies.

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This article is now closed to comments

A Kuro
The China-Russia historic natural gas deal will lay a solid foundation between the economies of China and Russia. It will also stimulate trade between the two giant neighbours and deepen strategic cooperation. Looks like the US pivot to Asia is pivoting nowhere. Obama and Shinzo Abe must be eating their hearts out. This is really a spectacular diplomatic and economic coup for President Putin. President Putin's look east and pivot east is already more successful than the US's which is based on divide and rule, confrontation and the stinking cold war mentality. The 21st century is looking more like the Sino-Russian century.
Jonathan Smith
Russia is a great country. Putin is a great man. China is a great country. Xi is a great man.
Daniel Lee
China and Russia builds new partnerships and strengthens peace between each other. The US and her allies especially Japan lives in the past of zero sum games, unending wars, devil worship, unequal and unfair relationships, confrontation and war. These scums still live in the era of military alliances and war-mongering.
grosvenor2007
Who are you to kid? Desperation is what you hope. "Out of fear of being isolated from the majority of the world"? What majority? I see you still carry this ex-colonial imperial mindset. US/UK and their jokers?
This gas deal has long been under negotiation for the past 10 years, the timing now cannot be more perfect for the deal to have a favorable outcome.
The reinforced China-Russia tie is a step-up effort to warn the rogue nations, led by the US/UK, that they cannot go about bullying around as they wish and use democracy as a weapon to split-up nations. No more excuses for the rogue nations to leverage on wars for boosting their own economies, cause they will have their sorry asses kicked next time they pull this stunt.
For the first time in 20+ years do I finally find world peace is near.
5365ed60-39c4-4bfa-a8b8-35040a320969
They would make a great team. Exchange ideas how to suppress people who speaks ill of their country/leaders, lock them up and throw away the key. Chinese leaders will brag about their innovative science of how to be a control freak and Putin, with a bottle of vodka in one hand, would tell of his nostalgia of the great Soviet Union and his dreams of reviving a once great country again. (Have you read Time recently?)
-----
Since they have not-so-subtly declared war against most nations of the world, they will need each other's consolation as well as cooperation militarily to pull this one off in shaping a new world order. All the facades in economic treaties are all theatrics and propagandas to show the world that you better think twice before challenging this dynamic dual, one having the economic might and one having the military strength.
----
Their trump cards against the west: Both could unleash their pit bulls without having to get their hands dirty. If the situation gets dire, China could always press the red button to open the gate of hell (North Korea) and off they go mauling down all the fleets stationed in S Korea and Japan. The Russian could always help speed up Iran's nuclear capability, since the rogue country once exerted that "Jerusalem will cease to exist on the face of the earth". Destroying the Holy City of Jerusalem would cripple their faith and demoralize them since many NATO countries are believers of God. A push from Russians and Jihad all the way.LOL
sino.capitals@gmail.com
russia is a historical enemy not a friend
5359337f-85d8-4858-a065-34fa0a320969
Your Chinese translation does not make any sense, stupid kid. Your economic and political senses are so childish that I suggest MI6 to retrain you. What makes you think the transaction will be conducted in USD? Even if it will be conducted in USD, what makes you think USD can be strengthened at will? Are you aware the US is in a critical deficit position that they are already pulling back on QE?
Ihre Chinesisch-Übersetzung macht keinen Sinn, dummer Junge. Ihre wirtschaftlichen und politischen Sinne sind so kindisch, dass ich vorschlagen, MI6, Sie umzuschulen. Was macht Sie glauben, die Transaktion wird in USD durchgeführt werden? Auch wenn es in USD durchgeführt werden, was Sie denken USD kann beliebig verstärkt werden? Sind Sie sich bewusst die USA in einer kritischen Position Defizit, dass sie bereits wieder auf QE ziehen?
Ваш китайський переклад не має ніякого сенсу, дурне дитина. Ваші економічні та політичні почуття так по-дитячому, що я пропоную, МІ-6 переучувати вас. Що змушує вас думати угода буде проводитися в доларах США? Навіть якщо це буде проводитися в доларах США, що змушує вас думати USD може бути посилена за бажанням? Чи знаєте ви, що США знаходиться в критичному положенні дефіциту, що вони вже відходили на QE?
Camel
Still black and white painting. The world is grey! the sooner you realize this the better.
Camel
Refering to the sanctions the Western powers pressed on Russia and Putin because of the Krim and Eastern Ukraine. They thought, with their threats and sanctions they had Putin cornered and were waiting for him to lift the white flag while putting pressure on him. They were relying on Putins gas and thought Putin were relying on their USDs. Instead, Putin reached his hands out to China and closed a deal negotiated for 10 years now. And the deal will be paid in RMB and Rubel, so also a sign that the USD will get some pressure in the future.
tpdchow
This is a great deal for Sino-Russian cooperation.

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