Gas deal elusive as Hu visits Russia

16th June 2011, Comments 0 comments

Chinese President Hu Jintao and President Dmitry Medvedev on Thursday talked up a deal to pump Russian gas to China for the next three decades but failed to clinch agreement on a final contract.

The mega-deal between Russian gas giant Gazprom and China National Petroleum Company (CNPC) did not materialise after talks at the Kremlin but Medvedev indicated it would eventually be signed.

"This is in the interests of our countries and our peoples," he said.

"What does gas cooperation give to China? To China, it gives stability and an ability to plan the development of its big country for decades to come," he said, adding Russia was eyeing the same benefits.

"Stability, an increasing market and long-term contracts in accordance with stable prices that are beneficial to our state," he said, while Hu noted that gas cooperation should be guided by principles of "mutual benefit."

Vladimir Putin, Russia's powerful prime minister, was later in the day to host Hu at Gazprom's headquarters in southern Moscow where the two will continue the discussion of gas supplies, his spokesman Dmitry Peskov said.

Russia and China had hoped for an agreement so the contract could be triumphantly signed during Hu's visit, which will also see him attend the Saint Petersburg Economic Forum, but the talks have bogged down over pricing.

Russia's energy supremo, Deputy Prime Minister Igor Sechin, said that even though the two delegations have moved forward "significantly" over the past few days, negotiations are continuing.

"In principle there is an understanding," he added, saying that both sides needed to be patient, given the magnitude of the deal.

Gazprom and CNPC signed a framework agreement in 2009 which could eventually see almost 70 billion cubic metres of Russian gas sent to China annually for the next 30 years but then the talks became mired in differences over pricing.

Russia has in recent years sought to align itself more closely with China as it seeks to unlock new energy markets in Asia.

It said last year it hoped to clinch the gas deal with China by mid-2011, with first deliveries through Siberian pipelines to start in 2015.

Some analysts believe that Russian and Chinese officials will not sign a firm contract during Hu's stay in the country, instead opting for a face-saving general agreement.

Beijing has a stronger negotiating position as it has many potential suppliers and can afford to wring out the lowest possible price during talks with Moscow, analysts say.

Moscow speaks of Beijing as its strategic partner even though it has watched its neighbour's rapid economic growth with a combination of jealousy and unease.

The Kremlin said economic ties had successfully weathered the global crisis. Trade grew by 34.5 percent to more than $59 billion last year, with China for the first time becoming Russia's top economic partner.

Medvedev and Hu said their countries would seek to ramp up trade to $100 billion by 2015 and to $200 billion by 2020. Energy accounts for the bulk of trade, with the two leaders pledging to diversify economic ties in the coming years and overseeing the signing of a raft of deals.

Billionaire Vladimir Yevtushenkov told reporters his Sistema holding company had agreed with Chinese telecom equipment maker ZTE to set up a joint venture in China to make hi-tech products, calling the cooperation unprecedented.

"Before, our cooperation with China amounted to sales of energy. If everything falls into place, it will be an absolutely new phase."

Under another deal, the Export-Import Bank of China agreed to provide up to $5 billion to billionaire Oleg Deripaska's En+ Grop to pursue mining and power projects in Eastern Siberia.

The two presidents issued an unusually detailed joint statement on the global situation, warning against outside interference in the crises shaking the Arab world.

"Outside forces should not interfere in internal processes in the countries of the region," they said, in a clear hint that Moscow and Beijing would not support a UN resolution on Syria.

Mindful of accusations of human rights violations at home, Russia and China traditionally caution the West against interfering in what they say are the domestic affairs of sovereign nations.

© 2011 AFP

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