Russia, China numbers missing

Moscow and Beijing have hailed what they describe as a bilateral strategic partnership, but Russian and Chinese state-run energy companies struggle to agree to a compromise on energy prices.

Both sides insisted that the visit by China’s President Hu Jintao to Russia on June 16-18 was aimed at further deepening the bilateral strategic partnership and developing energy cooperation.
On June 17, Russian President Dmitry Medvedev announced that he had clinched a deal totaling US$100 billion and described it as “the largest ever” in Sino-Russian relations. “It became possible due to the use of the mechanism we agreed with the Chinese president one year ago,” he said. Medvedev also suggested using

this positive experience in other areas of energy cooperation, including natural gas and the coal sectors.

By praising the $100 billion deal, Medvedev was apparently talking about a long-term crude oil supply agreement concluded earlier this year, and the jointly formed “mechanism” he referred to meant Chinese loans granted in exchange for future oil supplies. On April 21, the Chinese and Russian governments finalized an inter-governmental deal, agreed upon in October 2008, under which Russia will supply China with 300 million tons of oil over 20 years, in exchange for a $25 billion loan to Russian state-run companies. The deal also involves the construction of the 67-kilometer pipeline spur of the Eastern Siberia Pacific Oil Pipeline (ESPO) to connect Skovorodino with China’s border. Russian officials pledged to finish the construction ahead of schedule or before the end of 2010 and eventually raise the spur’s capacity to above 15 million tons annually.

However, Chinese officials apparently remain skeptical about these official pledges to finish the construction ahead of schedule. Following his talks with Medvedev, Hu told a joint press conference that both sides should aim to finish the construction of the ESPO spur on time. It took Russian and Chinese companies more than three years to finalize the ESPO spur deal, first announced when then president Vladimir Putin visited China in March 2006. Putin also promised to export up to 40 billion cubic meters (bcm) of Russian gas to China via the 6,700-kilometer $10 billion Altai pipeline. In March 2006, Gazprom and CNPC signed a memorandum on the delivery of Russian natural gas to China from 2011, which was a follow-up to their partnership deal signed in October 2004.

Russian media outlets noted that energy deals with China frequently take longer than expected to materialize. Russia and China remain divided on some major joint projects, including the Tianwan nuclear project and gas supplies to China, the Kommersant business daily noted on June 18. Moscow and Beijing are yet to resume discussions on gas prices, the daily commented.

Asia Times