China’s Xi may reach gas deal with Putin

Xi Jinping, who assumed the presidency of China on 14 March, has selected Moscow as his first foreign capital to visit as president. Xi talked with Russian President Vladimir Putin by phone on 14 March, with both sides pledging to strengthen ties. The Kremlin leader said Russia was making active efforts to prepare for Xi‘s upcoming visit to Russia.

Xi may finally reach a much-delayed agreement with Putin on Russian gas supplies to China. “This spring, Xi Jinping will visit Moscow and for him psychologically maybe it’s very good to start with a serious breakthrough,” Konstantin Simonov, director of Russia’s National Energy Security Fund in Moscow, told New Europe on 15 March. “Maybe he is more ready to sign this agreement with Gazprom because he can show to the world that he is a real good negotiator and he finally signed this historic agreement,” he added.

Russian gas monopoly Gazprom has shifted the focus of its negotiations with China from the Altai Pipeline to a more realistic eastern route, the so-called Power of Siberia gas pipeline. On 13 March, Gazprom Chairman Alexei Miller led a delegation to Beijing to meet the board of directors at the China National Petroleum Corp (CNPC). “Gazprom and CNPC agreed to intensify the talks on Russian natural gas supply via the eastern route with the aim of signing a purchase and sale contract by the end of 2013,” Gazprom said.

The Russian gas giant added that it was interested in working with CNPC on liquefied natural gas (LNG) from the Vladivostok project on Russia‘s Far East.

Russia has for years sought to reach a gas agreement with China, but talks have been hobbled by disagreements over price and potential routes, until now!

“I was sceptical about possibility of signing our gas contract with China during the last five years, but now I’m really thinking it’s possible to sign this deal,” Simonov said.

In the past, Moscow pledged to export Russian gas to western China via the Altai pipeline. The director of Russia’s National Energy Security Fund argued that Gazprom has used the Altai Pipeline to blackmail the EU since the project’s resource base - the fields in Yamal, including Urengoy and Yamburg - already supply Europe with gas. He noted that in the western part of China there is no big need for Russian gas since consumption is not so high and the region already gets cheap gas from Turkmenistan.

“Only now Gazprom forgot about Altai Pipeline and begun to speak about so-called Siberian Power. It’s a new pipeline which must connect Yakutia’s Chayanda field with China. It’s an eastern pipeline and in this case it’s a more real plan. It’s not only to blackmail of Europe because Chayanda is further away from Europe than Urengoi and Yamburg and, of course, now it’s impossible to export gas from Chayanda to Europe,” Simonov said, adding that the price of transportation from Yakutia to Europe will be extremely high. “We see the real change of this situation and now our negotiations with China are more logical. It doesn’t mean that we will sign this agreement. There are still a lot of contradictions and the main contradiction is still the price of Russian gas,” Simonov said.

By Kostis Geropoulos

New Europe, March 17, 2013