China and Russia signed a framework agreement yesterday that could see a steady flow of natural gas to energy-hungry China from its resource-rich neighbor.
It was one of numerous trade and military agreements signed during a state visit by Russian Prime Minister Vladimir Putin as the countries overcome traditional mistrust to push ahead mutual economic interests. Even so, there has been a growing imbalance in their ties with Russia’s economy lagging behind its booming neighbor.
Russia and China earlier yesterday signed agreements worth US$3.5 billion. Russian Deputy Prime Minister Alexander Zhukov told reporters that Russian and Chinese businessmen and officials signed the agreements, including US$500 million loans each from the China Development Bank (國家開發銀行) to its Russian equivalent VEB, and from the Agricultural Bank of China (中國農業銀行) to the state-controlled VTB bank.
Other deals included Chinese companies making investments in construction industry facilities in Russia, Zhukov said.
“Naturally, the Chinese are interested in getting [ownership] stakes,” he said, without giving any details.
The two sides also signed an agreement on advance notification for planned ballistic missile launches by either country.
The deal between Russia’s state-run natural gas monopoly Gazprom and China National Petroleum Corp (中國石油天然氣) calls for the supply of about 70 billion cubic meters of gas a year, but a price had not been set and no contract signed, Gazprom chief executive Alexei Miller said.
Chinese media reports have said the agreement was expected to be a gas-for-loans deal similar to a US$25 billion oil-for-loans deal completed earlier this year.
Russia’s cash-strapped energy companies need Chinese funding, while Beijing has welcomed the chance to further diversify sources of energy. The global economic crisis and changing market conditions have further spurred cooperation as lower demand from Europe has led Russia to diversify markets for its oil and gas.
The gas framework agreement was formally signed in the presence of Putin and Chinese Premier Wen Jiabao (溫家寶).
Putin said Russian-Chinese cooperation was one of the most important elements to ensure global stability.
“Our consolidated view on certain issues, our ability to coordinate our stance on key international developments often help calm the situation and play a stabilizing role,” he earlier told a group of Chinese reporters.
Miller said the gas contract would include a price formula and principles of setting the price based on Gazprom’s experience in gas exports and principles of international trade.
“Gazprom will independently build gas transportation facilities on the Russian territory,” he said when asked if China could invest in building gas pipelines.
He added Gazprom may welcome Chinese investments in building gas-processing facilities.
He also said an agreement was possible on supplying liquefied natural gas to China from Sakhalin Island in Russia’s far east but did not elaborate.
“We also have agreed to conduct talks on possible deliveries of LNG to China. We are looking into the possibility of starting LNG supplies to China already next year,” he said.
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