Historic times, indeed.
Russia-China to form strategic energy alliance: Putin
The Sino-Russian partnership has reached “the highest level in all its centuries-long history”, said President Vladimir Putin on the eve of his visit to China.
Putin was speaking to Chinese media ahead of his trip to Shanghai where he will hold discussions with his Chinese counterpart Xi Jinping and sign a record number of cooperations agreements.
The two countries are “steadily moving towards the establishment of a strategic energy alliance”, said Putin.
“A large-scale project worth over $60 billion is underway to supply China with crude oil via the Skovorodino-Mohe pipeline. The arrangements on export of Russian natural gas to China have been nearly finalised. 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,” he said.
Russia and China will implement a list of joint projects in 40 priority areas with total investments of about $20 billion.
The two nations have also reached an agreement on joint design of a wide-body long-range aircraft and on developing a heavy helicopter.
“Establishing closer ties with the People’s Republic of China, our trusted friend, is Russia’s unconditional foreign policy priority,” claimed Putin.
The two sides are also eyeing “deeper coordination in the international arena”, said Putin.
“Russia and China successfully cooperate in the international arena and closely coordinate their steps to address international challenges and crises. Our positions on the main global and regional issues are similar or even identical,” he said.
Significantly, the Russian President said an upcoming Asian Summit will try to establish a new security architecture in the Asia Pacific.
“Russia and China have actively advocated establishing a new security and sustainable development architecture in the Asia-Pacific. It should be based on the principles of equality, respect for international law, indivisibility of security, non-use of force or threat of force. Today this task is becoming increasingly important,” he said.
Putin’s statements assume importance in the backdrop of the Obama administration’s thrust on the much-hyped Asia Pivot and what Beijing alleges is it’s “China containment” policy.
Meanwhile, alluding to a currency swap agreement, Putin said the two nations will also look to guard against fluctuations of foreign currencies affecting bilateral trade.
“We must also strengthen financial cooperation and protect ourselves from exchange-rate fluctuations among the world’s major currencies. Therefore, we are now considering how to increase mutual settlements in national currencies,” he said.
In 2013, the volume of bilateral trade was close to $90 billion. The two sides are targeting $100 billion by 2015 and up to $200 billion by 2020 in bilateral trade.
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Gazprom to sign monumental gas deal with China
Russia and China are due to sign a long-awaited gas contract on Tuesday, in which Beijing could pay up to $456 billion for Russian gas over the next 30 years.
While Russian President Vladimir Putin visits Shanghai on May 20-21, Gazprom and the China National Petroleum Corporation (CNPC) are
due to sign a deal for 38 billion cubic meters of natural gas to power China's growing economy, starting in 2018.
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.
“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 gas price is expected to be agreed at between $350-400 per thousand cubic meters. In January Gazprom gave an estimate between $360-$400 per 1,000 cubic meters but now Russian newspaper Izvestia has cited a Gazprom employee forecasting a lower range between $350-$380 per 1,000 cubic meters.
“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 on Tuesday.
On Sunday, Gazprom chief Aleksey Miller sat down with his CNPC counterpart, Zhou Jiping, in Beijing to discuss final details, including price formulas.
Siberian pipeline to China
But the sticking point is how to finish the pipeline from Russia to China.
Currently there is one complete gas pipeline that runs throughout Russia to the Chinese border, “Siberian Power” which Gazprom broke ground on in 2007, three years after Gazprom and CNPC signed a strategic cooperation agreement in 2004.
The pipeline stretches across Russia’s Far East and after extension to China, it will deliver gas to the country’s populous north, near Beijing.
Gas could be delivered via Vladivostok, Russia’s eastern port city on the Sea of Japan, or through the city of Blagoveshchensk, an landlocked city in the Amur region.
However, to finish the project for 2018 delivery, Gazprom and CNPC need to come to an agreement on how to finish the proposed portion of the pipeline into China, which could cost between $22-30 billion, according to various estimates. Russia wants China to either pay or issue a loan for the project, which has been a delaying factor in talks.
In 2009, Beijing and Moscow signed a deal that Gazprom would supply China with 30 billion cubic meters of gas a year by 2015, but via the Altai pipeline, which would deliver gas to China’s Western Xinjiang province. Russia stopped work on this project in 2013 and prioritized the ‘Power of Siberia’ line. If and when both pipelines are activated, Russia could be pumping 68 billion cubic meters of gas annually to the world’s second largest economy.
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.
Russia’s Deputy Energy Minister Anatoly Yanovsky has said the deal is 98 percent ready. China has kept quiet on the subject.
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 on Wednesday.
“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 is an important element of the upcoming talks, but the leaders will discuss many aspects of Russia-China relations, including payments systems, military cooperation, and upcoming infrastructure projects.
A record amount of agreements are expected to be signed at the working meeting between Russia and China. Already 30 out of the 43 prepared agreements are expected to be inked, according to presidential aide Yury Ushakov, as reported by RIA Novosti.