Warmer Ties for Russia, China with Big Gas Deals

Source: Associated Press  (10/14/09)

"I don't buy this idea that China is Russia's future."


Russia and China are closing in on a mammoth energy deal, which could insure that Beijing has the fuel to run its factories and cities and Moscow has a vast new market for its natural gas empire.

Russian Prime Minister Vladimir Putin on Wednesday wrapped up a three-day visit to the Chinese capital, during which Russia signed dozens of commercial pacts worth $3.5 billion and set the framework for a separate, multibillion-dollar agreement to build two natural gas pipelines to China from gas fields in Russia's Far East.

Together, those pipelines would be capable of supplying China with 68 billion cubic meters (2.4 trillion cubic feet) of natural gas annually, representing a whopping 85% of the gas China currently consumes.

Once the energy partners agree on a final price and the pipelines are built, China could become Russia's single biggest customer for natural gas.

The agreement highlights the determination of both nations to diversify their economies and seek new customers and vendors. It also reflects a political desire by both to steer a course independent of Western powers and especially the U.S.

But many experts say the deal doesn't necessarily signal that China and Russia are preparing to forge a major new strategic alliance.

"I don't buy this idea that China is Russia's future," said Chris Weafer, chief analyst at the Moscow-based Uralsib bank. "The key relationship always has been and will be Europe."

Lilit Gevorgyan, an analyst for London-based IHS Global Insight, said the Sino-Russian relationship remains primarily based on economic needs.

"Russia is reeling from the recession's impact. It's cash-strapped. Siberia has a very scarce population and lots of natural resources—something that's reversed in China. So it's only a logical marriage of two economic powers," she said.