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Energy pact a boost for Russian leader in face of US sanction threats over Ukraine crisis

Russia and China have signed a 30-year, $400bn deal for Gazprom to deliver Russian gas to China, a move that will come as a blow to US efforts to isolate the Kremlin. The contract to provide 38bn cubic metres of gas each year was signed by the state-owned gas companies Gazprom and CNPC (China National Petroleum Corporation) in the presence of the countries' leaders, Vladimir Putin and Xi Jinping, at the end of Putin's two-day visit to Beijing.

After almost a decade of negotiations, it seems that the Chinese managed to achieve a lower price than the Russians had wanted. Yet, Vladimir Putin called the agreement the largest in the gas sector during the era of the USSR and Russia.

”A new pipeline linking Siberia's gas fields to China's main coastal cities will be built as part of the agreement and Russia plans to invest $55bn in exploration and pipeline construction. However, energy experts warn that the move could drive up prices for European gas consumers who are becoming increasingly dependent on Russia and now face competition for supplies."

Aled Jones, director of the Global Sustainability Institute at Anglia Ruskin University, said: “Russia's new pipeline to China will increase competition for natural gasfrom 2018 and will most likely increase the cost we pay for natural gas here in the EU. It will certainly increase the pressure on European countries to find alternative gas supplies.”

According to Vladimir Milov, a former deputy energy minister who is director of the Moscow-based Institute of Energy Policy, as the US prepares to begin exporting gas to Europe- currently Russia's main market - the Russian government wants to open new markets in reaction to increasingly hostile relations with the west over the Ukraine crisis.

China needs to find new sources of natural gas to meet its future energy needs and to reduce its dependence on coal as its main fuel for power generation and even before the Ukraine crisis, Russia was looking east to diversify its energy customers since Europe, which gets 24% of its gas from Russia, is expected to reduce its dependence.


The gLAWcal Team

Wednesday, 21 May 2014

(Source: The Guardian)