China: Natural gas deal with Russia to move forward

Chinese officials announced yesterday that they will buy new natural gas reserves piped in from Western Siberia, another move suggesting Russia’s pivot to the east in reaction to sanctions that cut its economy off from Western capital and retail markets. The agreement specifically is between Gazprom and CNPC (both state-owned oil and gas entities) to supply some 30 billion cubic meters of gas per year from the Altai region into the Chinese market. However, prices for this agreement have not been set. Beijing announced it is expecting the deal to be finalized later this year.

For Russia’s part, it has made a commitment to sell gas from this region to China, which is the only real customer that is close enough for the LNG to be economical. Last May, President Vladimir Putin’s state visit to Beijing ended with the announcement of a $400 billion agreement to sell 38bn cubic meters to China. It is unclear if this is a revision of the previous deal, or a separate one altogether.

The official title of the joint project is the “Power of Siberia” pipeline but this falls under China’s larger strategy of “One belt, One road” as well that aims to create a new Silk Road that would seek to recreate the economic dominance of China during the Middle Ages.

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News Briefs:

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  • Iranian President Hassan Rouhani will be paying another official visit to Ashgabat, Turkmenistan tomorrow. This visit is at the request of Turkmen dictator Gurbanguly Berdimuhamedow, where the official plan is to sign more bilateral cooperation agreements and appear in a joint press conference. Likely, these agreements on the subject of trade will portend internal Iranian government expectations of a nuclear deal which will lift international sanctions – with Turkmenistan as one of Iran’s largest current trade partners.
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