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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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Thursday, Nov. 27


The Customs and Transportation Committee for AmCham meets this morning at 9 a.m. in their office on Ulitsa Yakubovicha.


Tickets are still available for local KHL team SKA St. Petersburg’s showdown with Siberian club Metallurg Novokuznetsk tonight at 7:30 p.m. in the Ice Palace outside the Prospekt Bolshevikov metro station. Tickets can be purchased on the team’s website, at the arena box office or in their merchandise store on Nevsky Prospekt.


Celebrate one of Russian literature’s most tragic figures during Blok Days, a two-day celebration of the 134th anniversary of the poet’s birthday. The tragic tenor’s work, which led to writer Maxim Gorky to hail him as Russia’s greatest living poet before his death in 1921, will be recited and meetings and discussions about his contributions to the Silver Age of literature in St. Petersburg will be discussed in the confines of his former residence.



Friday, Nov. 28


Join table game aficionados at the British Book Center’s Board Game Evening. Held every Friday at 5 p.m., aficionados and amateurs alike can come take part in a variety of different games that test one’s intellect and cunning.



Saturday, Nov. 29


Cats, dogs, birds, rodents and reptiles are just some of the things that will walk and crawl at Lenexpo convention center this weekend as part of Zooshow, a two-day exhibition featuring not only man’s best friends but a four-legged fashion show, as well as a food fair that will help pet owners find out more about which kibbles are best for their hungry pets.



Sunday, Nov. 30


Remember the 75th anniversary of the beginning of the Russo-Finnish war in 1939 during today’s reenactment titled “Winter War: How it Was.” More than 200 people will take part in recreating the opening salvoes of the battle for the north in Kamenka, a small village situated between Vyborg and St. Petersburg, using authentic equipment and vintage vehicles from the era. The faux battle begins at 2 p.m.



Monday, Dec. 1


Serbia filmmaker Emir Kusturica is the featured guest this evening at the Lensovet Palace of Culture the Petrograd Side. Fans of the director will get the chance to watch his movie “Black Cat, White Cat,” as well as ask questions about his award-winning filmography. Tickets for the event, which starts at 7 p.m., start at 2,000 rubles ($42.50).



Tuesday, Dec. 2


Today is the final day of “Takoy Festival,” a three-week program of plays based on the works of Dostoevsky, Remarque and other famed European writers, whose work is transcribed for theatrical performances. Tonight’s festival finale is “Fathers and Sons,” a two-act drama staged by the Novosibirsk Academic Drama Theater based on Turgenev’s classic about familial relations.



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