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Russia's Gas Pact With China Not About Ukraine

Published: May 27, 2014 (Issue # 1812)



  • Gazprom's Chayandinskoye site, which will supply Russian gas to China.
    Photo: Gazprom

After a decade of delays, on May 21 Russia and China clinched a $400 billion 30-year deal on the delivery of 38 billion cubic meters of gas per year starting in 2018. In Shanghai, President Vladimir Putin called the deal an "epic event."

Although at the eve of the summit a cohort of skeptics argued that another impasse was likely, the deal was inevitable. While the crisis in Ukraine may have spurred the deal's signing, China's attractive terms and Europe's long-planned pivot away from restrictive Russian gas contracts, in addition to long-term geopolitical concerns, made the deal a foregone conclusion.

In the past, observers had largely focused on the pricing impasse, which indeed proved to be the main stumbling block. Gazprom was hoping for a price of $10 to $11 per mmBtu from China, which is higher than what China is believed to pay for gas from Turkmenistan.

Price has not been the only impediment, however. Russia's resistance to China's equity investments, disagreements over the preferred route, the meager presence of natural gas in the Chinese energy mix and enduring mistrust on both sides have all contributed to the deal's delay.

It is the resolution of these other domestic conditions and energy realities on both sides rather than the price per se that determined the deal's breakthrough.

China offered a loan of about $50 billion to finance both the pipeline and Russia's eastern gas fields as part of the Chinese "investment package" in eastern Siberia and the Far East. Like in other parts of the world, the Chinese "going abroad" strategy includes not only energy infrastructure, but also investment in roads, bridges and other projects in exchange for a long-term stable commitment on part of the receiving country.

In Moscow observers also emphatically point out Russia has gained much by the agreement, with the final price set at about $350 per thousand cubic meters, or roughly comparable to the price Gazprom charges its European customers.

Gazprom also forged ahead with the deal due to the fact that it has been on shaky grounds in Europe, its most lucrative export market. In the midst of greater liquidity on European Union gas hubs and of the European Commission's push for greater liberalization of the EU's gas markets, European buyers have challenged Gazprom's traditional pricing mechanisms, thereby forcing it to turn decidedly eastwards.

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ALL ABOUT TOWN

Wednesday, Oct. 1


The St. Petersburg International Innovation Forum 2014 kicks off today at Lenexpo, where it will be presenting the latest and greatest ideas until Oct. 3. Focusing on economic development and the decisions and measures necessary to encourage development in Russias most important industries, the event is a possibility to discuss the innovations currently available in a variety of fields.


Representatives of the Russian and international media industries arrive in St. Petersburg for the first ever International Media Forum being hosted by the city until Oct. 10. With a variety of events on tap, including workshops, lectures and film screenings, the event plans to reemphasize the citys reputation as the countrys culture capital and as an emerging market and location for the visual arts.



Thursday, Oct. 2


The celebration of the bicentennial of the birth of Mikhail Lermontov continues with todays free exhibition in the citys Lermontov Library at 19 Liteiny Prospekt. Titled Under the Rustling Wings, the temporary exhibition will feature the costumes and scenery used in the 1917 production of Lermontovs play The Masquerade, which he wrote in 1835 when he was only 21 years old.



Friday, Oct. 3


Learn more about how to manage and evaluate employee performance during SPIBAs Human Resources Committee meeting this morning on Employee Assessment: Global and Local Trends. Starting at 9:30 a.m., the discussion will touch on such topics as the partnership between HR and business, reliable assessment strategies and more, with Tatiana Andrianova, the head of the SHL Russia and CIS branch in St. Petersburg, as the featured guest. Confirm your participation by Oct. 2 by emailing office@spiba.ru or calling 325 9091.


AmChams Procurement Committee Meeting is at 9 a.m. this morning in their office in the New St. Isaac Office Center on Ulitsa Yakubovicha.



Saturday, Oct. 4


Wine and cheese lovers will get their chance to revel during Scandinavia Country Club and Spas Wine Market Weekend. Going on today and tomorrow, wining diners can listen to live music, take part in culinary classes and, of course, sample a variety of fine wines from around the world. The cost of admission is 400 rubles ($10.30) for adults and 200 rubles ($5.15) for children.



Sunday, Oct. 5


Look for the latest fall fashions at the Autumn Market today in Freedom Anticafe at 7 Kazanskaya Ulitsa. The minimarket plans to offer clothes more flattering than the puffy jackets that are a staple of the citys cold-weather fashion, while offering the same amount of protection from the biting winds blowing off of the Baltic.



Monday, Oct. 6


SKA St. Petersburg, the citys KHL affiliate, welcomes Slovakian club HC Slovan in a match-up tonight at the Ice Palace near the Prospekt Bolshevikov metro station. The puck drops at 7:30 p.m. and tickets can be purchased on the clubs website or in person at either the arenas box office or the clubs merchandise store on Nevsky Prospekt.



Tuesday, Oct. 7


Learn more about Russias energy industry at the St. Petersburg Energy Forum that begins today and runs through Oct. 10. Attracting industry experts and political and business representatives, the forum plans to welcome more than 350 plus companies and their representatives to discuss the future of Russias largest economic sector.



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