Xi, Putin seek to energise bilateral ties with ‘historic’ gas alliance

Russia is close to inking a major natural gas deal with its ‘reliable friend’ China, President Vladimir Putin has said as Moscow sought to diversify its export routes amid tension in ties with the West over Ukraine. On the eve of his visit to the gleaming east Chinese city of Shanghai to participate in a regional summit, Putin said preparation for agreements concerning Russia’s natural gas export to China has entered the ‘final phase’.

‘For Russia, implementing these agreements means diversifying gas supply destinations, while for our Chinese partners ... it could be a remedy for energy shortage and helps ecological security,’ Putin said. He said the deal would allow Russia to diversify its export routes and let China meet its growing demand for energy.

Russia, which sends the bulk of its gas exports to the European Union, has been locked for years in difficult talks on a new gas contract with China in which price has been the main obstacle.

Europe’s plans to reduce its dependence on Russian energy supplies may have forced Moscow to finalise the gas deal with China, media reports said. Putin, 61, said that Russia sees relations with China as a top priority. ‘China is our reliable friend. To expand cooperation with China is undoubtedly Russia’s diplomatic priority,’ the Russian President told Chinese media in an interview on the eve of his visit to Shanghai to attend the two-day Conference on Interaction and Confidence-Building Measures in Asia (CICA) slated from Tuesday.

Putin, who will also pay a state visit to China, said he and Chinese President Xi Jinping will review the implementation of already-signed agreements.

‘I believe the upcoming talks will inject strong impetus to various bilateral cooperation projects, as well as to the deepening of coordination between the two countries in the international arena,’ he said.
Against the backdrop of global economic turbulence, it was of crucial significance for the two countries to strengthen mutually beneficial economic and trade relations and boost mutual investment, he said.
China is currently Russia’s largest trading partner, with the trade volume between the two countries nearing USD 90 billion in 2013. The two countries aim to raise the trade volume to USD 100 billion in 2015 and to USD 200 billion in 2020.

Russia and China were working on ways to expand settlement in local currencies in a bid to protect bilateral trade from exchange fluctuations of major foreign currencies. The United States, which along with other Western countries has sanctioned Russia for its disputed takeover of Crimea, has threatened additional punishment for Russia if it fails to pull its troops back from Ukraine’s border.

For Russia, the deal to supply China with 38 billion cubic meters (bcm) of gas a year would help cut its dependence on Europe as the major market for its gas and create a strategic shift to Asia, as political pressure piles up over Ukraine.

Russian state-run Gazprom (GAZP.MM) said at the weekend it was still ‘one digit’ away from finalizing a 30-year gas supply deal with Beijing which is expected to crown Putin’s visit to China next week.
Earlier this month, state China National Petroleum Corp (CNPC) CNPET.UL said that it and Gazprom had reached an agreement to sign a contract during Putin’s visit but that the two sides had yet to iron out price differences.

At 38 bcm per year, Russian supplies would be equal to nearly a quarter of current consumption and make up nearly a tenth of China’s estimated total gas demand by 2020. China is fast-tracking gas use, which is set to grow about 2.5 fold between 2014 and 2020, to curb use of the dominant but dirtier coal.
The country’s state planning agency forecast last month that China would raise its total natural gas supply capacity to 400 billion cubic meters (bcm) per year by 2020.
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