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Published On: Wed, May 21st, 2014

China – Russia Ink 30 Year, 38bn Cubic Meters Per Year Gas Deal

nsnbc : China and Russia, on Wednesday, after ten-year-long negotiations, a world-record, 38 billion cubic meters per year, 30 year contract between the two neighbors. The record deal comes against the backdrop of deteriorating relations between Russia, the EU and US, tensions over Ukraine, and tensions over energy-security in Europe.

Image: Xinhua

Image: Xinhua

Before leaving for Shanghai, Russian President Putin informed media that he and Xi would make a “substantial announcement together”. The announcement that the long-awaited contract has been inked fits, indeed, the word “substantial”.

The term “gas giant”, something as colossal and with a gravitational pull as Saturn and Jupiter comes to mind.

The papers were inked one day after Russian President Vladimir Putin arrived and announced that the two sides had made significant progress with regard to the price. The Xinhua news agency reports that two documents, the China – Russia Purchase and Sales Contract on the Eastern Gas Route Project and a memorandum, were signed at a ceremony attended by Chinese President Xi Jinping and Russian President Vladimir Putin.

The ten-year-long talks repeatedly stalled over pricing issues. Xinhua reports that the agreed price is unknown. A news bulletin on the website of the China National Petroleum Corporation (CNPC), states that the contract will see the eastern route pipeline starting to provide China with 38 billion cubic meters of natural gas annually from 2018.

In 2013, CNPC signed a framework gas supply agreement with Russia’s Gazprom, the world’s largest gas company, reports the bulletin, adding that “The deal…fully embodies the principle of mutual trust and mutual benefit of China and Russia.” It is said that the agreement will accelerate economic and social development in Russia’s far east region, reports Xinhua.

Pipelines1The gas will be delivered from the Kovyktin and Chayandin gas fields in eastern Siberia and will be transferred to China’s northeastern coastal metropolitan triangle between Beijing, Tijanbin and Hebei in the North and the Yangze river delta in the East.

The two Asian neighbors also vowed to strengthen cooperation in energy infrastructure in Russia and agreed on the establishment of what Xinhua describes as “a comprehensive energy cooperation partnership”. 

It is noteworthy that the agreement comes as relations between Russia and the EU become increasingly stressed over Syria and Ukraine. Analyst and nsnbc editor-in-chief Christof Lehmann stressed repeatedly, since 2012, that the energy-security aspects of the situation in Syria would lead to a crisis over Ukraine. In early 2013, after the EU’s signing of the third EU Energy Package, Lehmann wrote that a war in Ukraine had become as good as unavoidable.

In September 2013, Igor Alexeev, independent consultant, editor of Route Magazine and nsnbc contributor wrote about the eastern pipeline project and the EU Energy Package:

At the sidelines of the G20, BRICS members decided to capitalize the new Development Bank with 100 billion USD. Photo courtesy of RIA NOVOSTI, Igor Russak

At the sidelines of the 2013 G20 summit in St Petersburg, BRICS members decided to capitalize the new BRICS Development Bank with 100 billion USD. Photo courtesy of RIA NOVOSTI, Igor Russak

“Since the adoption of “third energy package” in 2009 Moscow has been deeply disappointed by European red tape in the sphere of energy policy. Step by step Brussels introduced bureaucratic hurdles for Russian energy companies on the EU market in order to revise downwards existing contracts on natural gas supply with fixed delivery volume. …

At the same time leaders of some EU member states are daydreaming of mythic “shale opportunities” on the densely populated continent with limited drinking water resources. …. Russia remains the only stable energy source. “

Nord Stream” and “South Stream” projects are making impressive progress in Serbia and Bulgaria. EU and Russia have agreed a deal on the use of Germany’s OPAL link to Gazprom’s Nord Stream gas pipeline, a Russian energy ministry spokeswoman confirmed on September 16. However, attempts of EU Directorate-General for Energy to create non-competitive advantage haven’t gone unnoticed in Moscow.”

Asia Times Online correspondent Pepe Escobar responded to the development in an op-ed on the Russia Today website, headlining the development ” The birth of a Eurasian century”, speculating over the wider geopolitical implications.

It is noteworthy that Russia, China, and other BRICS members, during the G20 summit in St. Petersburg, Russia, in February 2013, announced the capitalization of the BRICS Development Bank with 100 billion dollars, announcing that the bank would commence operations by 2015.

Ch/L – nsnbc 21.05.2014

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