News Column

Russia hopes China will protect its gas

May 20, 2014

By Anna Arutunyan, Special for USA TODAY



Russian President Vladimir Putin is banking on signing a 30-year gas export deal with China during his visit to Shanghai in a bid to take his business east amid mounting sanctions from the West.

Talks for the deal, which would see Russia export up to 38 billion cubic meters of gas per year for 30 years starting in 2018, have been going on for more than a decade. The nearly $400 billion export deal would diversify the market for Russia's gas away from Europe, which has threatened sanctions over Russia's incursion into Ukraine.

"Russia always has and always will have other options to develop relations elsewhere. The threat of isolation coming from the West will not be complete," said Sergei Utkin, political expert at the Russian Academy of Sciences.

The need to curb Russia's dependence on exports to Europe in light of the political crisis over its interference in Ukraine gave new impetus to the gas talks.

"Negotiations are ongoing; the deal could be signed at any moment," said Putin's spokesperson, Dmitry Peskov, according to the RIA Novosti news agency. Russia and China signed a number of bilateral deals Tuesday, but the gas deal was not among them.

Some experts were skeptical about the deal, expecting China to insist on a lower price for Russian gas than the rate of export to Europe, which was $380.5 per thousand cubic meters last year.

"My understanding is that the deal has not been signed today by the Russian and Chinese presidents, which is disappointing," said Jonathan Stern, chairman of the Natural Gas Research Program at the Oxford Institute for Energy Studies. "The suggestion that it will be signed any minute as soon as they work out pricing is what the Russian side has been saying for three years."

Joint statements issued by Putin and his counterpart, Xi Jinping, suggested Russia was not going to be globally isolated.

"Both sides underline the need to respect the historical heritage of countries to resist interference in their internal affairs, to reject the language of unilateral sanctions," a joint statement on the official Kremlin website said.

Utkin said the gas deal would be a concrete step toward diversification.

It could also impact the global energy market. "The impact on the global market is that if China gets 38 billion cubic meters from Russia, it will not need to import so much (liquefied natural gas)," Stern said. "If the pipeline deal is not signed by the end of this year, China will need to sign for more LNG immediately."


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Source: USA Today


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