Russia Herald
22 May 2014, 06:45 GMT+10
SHANGHAI, China - In a move that is likely to boost diplomatic confidence of an isolated President Vladimir Putin, China Wednesday signed a landmark deal to buy Russian natural gas worth about $400 billion.
The deal was signed by Russian energy giant Gazprom and China National Petroleum Corporation (CNPC). The pact commits gas deliveries to China via an eastern route, the companies said.
"The contract was signed on mutually beneficial conditions, and includes such basic conditions as the price formula pegged to the oil basket and a 'take-or-pay' provision," Gazprom said in a press release.
As per the pact, Russian will supply gas to China at a volume of 38 billion cubic meters per year with delivery along the eastern route.
The deal, finalized during a two-day visit by Putin to China, is estimated to be worth $400 billion.
Media reports said that price negotiations on the 30-year deal continued into the final hours before being signed.
"The document was under discussion for several years with the main stumbling block being the gas price, which the parties finally agreed on during a two-day visit of Putin to China," official RIA Novosti news said.
Putin said that Russia was planning to invest $55 billion and China around $22 billion in the gas deal.
"Without any overstatement, it will be the world's biggest construction project for the next four years," Putin said.
The first gas deliveries to China from Russia may begin in the next four to six years, with an advance for the supplies optionally possible at a cost of $25 billion, said Russian Energy Minister Alexander Novak.
The Associated Press said that the gas deal gives Moscow an "economic boost" as Russia is battling Western sanctions over its actions in Ukraine.
Washington and the European Union have imposed visa bans and asset freezes on dozens of Russian officials and several companies over Ukraine.
Putin met Tuesday with Chinese President Xi Jinping. The Russian president's visit is a "major step toward a strategic partnership of the two nations," said Mikhail Margelov, head of the foreign affairs committee in the upper house of the Russian parliament, according to RIA Novosti.
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