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Updated Friday, October 16, 2009 10:59 am TWN, By Vladimir Isachenkov and Tini Tran, AP

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Warmer ties for Russia, China with big gas deals

“There's more than pragmatism here,” said Gilbert Rozman, a Princeton University professor who has studied Sino-Russian relations. “There's national identity. They both want to change the world order ... They have strong views about how they can pressure the U.S. and the West so I think there are very important motives driving the two together.”

The energy agreement signed Tuesday between Russia's Gazprom and China National Petroleum Company sets a framework for final price negotiations. Russian officials have predicted they could sign a final pact next June, with the first gas deliveries possibly starting around 2014 or 2015.

China, however, may not be in a hurry to close the deal.

Alexander Nazarov, oil and gas analyst at the Metropol investment bank in Moscow, said there could be a lot more haggling ahead. “So far it's just a love letter, not a marriage contract,” he said.

“Russia is keener to get on with this than China is,” said Weafer.

He noted that China already produces about 76 billion cubic meters of natural gas each year, and only consumes about 80 billion cubic meters, with most of the rest coming from Australia as liquefied natural gas. So there are no gas shortages.

But Beijing is gradually replacing coal and other energy sources with cleaner-burning gas, Weafer said, meaning China can afford to take its time in negotiating gas deals.

In addition, China is building a 4,000-mile (6,500-kilometer) pipeline to bring 30 billion cubic meters of gas annually from Turkmenistan in Central Asia, undercutting Russia's near-lock on gas supplies in that former Soviet region.

That pipeline will ensure that China has some leverage with Russia's Gazprom.

“China is playing the long game,” Weafer said.

Some experts say Moscow may feel pressure to lock up the Chinese market as long-term prospects for growth of Russian gas exports to the European Union nations look bleak, as the EU strives to diversify energy sources and supply routes.

Russian gas shipments to Europe have been interrupted several times in recent years due to financial disputes between Russia and Ukraine, which has pipelines that Russia needs to get its gas to Europe. Russia supplies about one quarter of the European Union's natural gas, and some officials have accused Moscow of using the threat of gas cutoffs as a diplomatic weapon. Last January, Russia ignited a Europe-wide uproar as it cut gas supplies for nearly two weeks.

With its economy hit hard by the global financial crisis and the government suffering from a liquidity crunch, Russia also badly needs Chinese investment to explore and develop prospective energy fields.

More than half of gas Russia has promised to supply to China is slated to come from yet-unexplored gas fields in eastern Siberia, which would require a multibillion dollar investment.

Russia, meanwhile, is not putting all its hopes into China. Moscow is also courting foreign energy companies from the U.S. and Europe as partners in development of the vast natural gas fields of the northern Yamal peninsula in Siberia.

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