Russia Seen Agreeing to Gas Exports to China

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Russia Seen Agreeing to Gas Exports to China

There is a higher possibility that Vladimir Putin will close a 30-year deal with China next month to supply pipeline gas to the country after failing to do so severally in the past decade. The crisis in Ukraine is forcing Russia to explore alternative markets outside Europe.

A manager at dominant gas exporter OAO Gazprom and a government official said that as Putin and Xi Jinping of China make the ultimate decision in Beijing in May, Russia’s need for a new market means the country is working harder to finalize a deal that was first suggested in 1997. Russia’s deputy prime minister said on Wednesday while in China that he hoped the deal would be rubber –stamped in May, according to Bloomberg.

The events in Ukraine have enhanced the significance of Russia’s relationship with China. The Asian country is Russia’s biggest trading partner beyond the European Union and is the only one in the United Nations Security Council that failed to condemn the recent aggression in Ukraine.

Russia will have to lay down a gas pipeline to China, because the country exports its gas to few markets outside Europe, leaving it more susceptible to economic sanctions and competition from US gas supplies.

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“This time, Russia really may close the China gas supply deal considering that it’ll be more flexible on the price. China, too, needs this contract because the further use of coal is becoming unbearable in most developed parts of the country,” said analyst Ildar Davletshin of Renaissance Capital.

Today, Gazprom boss Alexey Miller met with Zhou Jiping, chairman of China National Petroleum Corp to negotiate terms of the deal. Gazprom stated that the two will meet again later this month before Russian president travels to China on the 20th of May7.

As reported by SCMP, China’s bargaining position in the gas talks has been bolstered by the Western sanctions Russia continues to face.

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