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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

Thursday, July 31


Develop your leadership abilities during a lecture by famous Russian author and coach Radislav Gandapas. The event starts at 9 a.m. at 5 Lodeinopolskaya Ulitsa. The price for entry is 20,500 rubles ($570).


Relax and enjoy a Parisian atmosphere with some romantic and laidback jazz tunes during the Night of French Music at Lenny Jam Cafe, 63 Ligovsky Prospekt. The entrance fee is 250 rubles ($7).


The Women’s Business Club is hosting a Beauty Brunch where participants are invited to discuss the latest news in the beauty industry and listen to lectures by professional stylists in the business.



Friday, Aug. 1


Bikers from all around the world will gather to take part in a parade, extreme shows and rock concerts during the International Biker Festival that revs its engines today and runs through Aug. 3 near Olgino Hotel, 4/2 Primorskogo Shosse.


The Peter and Paul Fortress will be turned into an open-air cinema today and tomorrow as part of the 5th International Short and Animation Film Festival. A huge screen across the fortress walls will air short films non-stop with board games, photo sessions and other activities also on offer for visitors. For more information, visit www.opencinemafest.ru



Saturday, Aug. 2


Gatchina Palace Park Museum will host its second annual Night of Light, an impressive audio-visual show across the night sky. Tickets are 600 rubles ($16).


If graphic design is more your thing then check out Illustration Day, where you will be able to visit an exhibition, attend lectures by professionals and even show experts some of your own work. The event starts at noon at Zona Deystvia, 73 Ligovsky Prospekt. The entrance fee is 350 rubles ($10).



Sunday, Aug. 3


History lovers shouldn’t miss the chance to see reenactments of World War I battles in Pushkin at noon. Besides exciting war scenes, visitors can enjoy live music, historical costumes, an equestrian show and a fancy-dress parade starting from the Moscow gates.


Garage Sale, the popular and growing flea market where nothing is priced over 500 rubles ($14.11), starts today at noon in Loft-Project Etagi, 74 Ligovsky Prospekt. Be sure to get in early to score a bargain. Entry costs 50 rubles ($1.40)



Monday, Aug. 4


Continue the working week with a calm and steady mind with a free yoga lesson at 7 p.m. in the Bukvoyed store at 23A Vladimirsky Prospekt.



Tuesday, Aug. 5


Visit The Romanov Dynasty doll exhibition today, where more than fifty porcelain dolls depicting Russian rulers, and made by Olina Ventzel, will be on show. The exhibition continues through Aug. 31 in Sheremetyev Palace, 34 Fontanka Naberezhnaya.



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