Beijing set to seal Russian natural gas deal amid Ukraine crisis

Beijing’s refusal to stand against Moscow over the crisis in Ukraine could result in a lucrative natural gas deal with Russia next month, reports the Hong Kong-based Ta Kung Pao.

Following more than a decade of false starts, sources say Chinese president Xi Jinping and his Russian counterpart Vladimir Putin will make a final decision next month on the multibillion dollar deal that will see Russia supply pipeline gas to China for 30 years. The deal is expected to come into effect by the end of the year.

During a visit to China last week, Russian deputy prime minister Arkady Dvorkovich said his country’s natural gas export monopoly Gazprom has been in negotiations with Chinese officials and that the parties are nearing an agreement that includes the construction of a new pipeline capable of transporting 38 billion cubic meters of natural gas a year.

“We hope to conclude the contract in May,” Dvorkovich said. “The base price is the only problem to be solved.”

Analysts say the crisis in Ukraine, which began in February after Russia invaded the peninsula of Crimea in response to the ousting of Moscow-backed president Viktor Yanukovych, has forced Russia to look for energy markets outside Europe and particularly to China, its largest trade partner outside the European Union and the only country in the United Nations Security Council not to censure its actions.

Sources say the Russian side is willing to reduce its asking price — a pre-payment of several billion US dollars. Russia is allegedly offering at a price of US$10-11 per unit, though China is seeking a price of US$9 to match what it pays for natural gas from Turkmenistan.

Asia currently accounts for 16% of Russia’s natural resource exports, with natural gas taking up only a small proportion. Russia’s plan is to double its petroleum exports and increase its natural gas exports to Asia to a third of its total export volume by 2035, though a lack of base infrastructure is said to have placed the goals in jeopardy.