Another Accord Between China, Russia, After a Major Gas Deal

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Another Accord Between China, Russia, After a Major Gas Deal

Russia and China inked a framework accord on Sunday for a major gas supply agreement, a couple of months after the two countries closed a $400 billion gas deal in line with President Vladimir Putin’s plans to boost ties with China.

Putin has ordered a reorientation of Russia’s economy towards the east as a way around isolation after the country suffered sanctions by the West over the Ukraine crisis.

Last month, Russia and China sealed deals bordering on energy, trade and finance, including the 150 billion yuan ($25 billion) currency exchange meant to trim the influence of the US dollar.

The new gas agreement under negotiation will permit Russia to sell an extra 30 billion cubic meters of gas to China for the three decades from deposits in West Siberia and ship it through the Altai pipeline, Reuters reported.  That is in addition to the deal in May for Russian state-owned firm Gazprom to ship 38 bcm per year to Beijing through gas deposits from East Siberia.

On the completion of the Altai pipeline, China will become biggest Russian gas buyer, handing the world’s top energy user a substantial source of cleaner fuel and offering Moscow a new market for its gas as it faces loss of European buyers over the Ukraine conflict.

The framework agreement was signed between Gazprom and state-controlled China National Petroleum Corporation (CNPC), a statement by the Russian government said, after discussions between Putin and Chinese President Xi Jinping in Beijing.

The original deal “will make Russia rely more on China both economically and politically. China is probably the only country in the world that has both the financial ability and the market capacity to consume Russia’s huge energy exports on a sustainable basis over a long period of time,” Lin Boqiang of Xiamen University told Bloomberg by phone.

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To contact the reporter of this story; Jonathan Millet at john@forexminute.com