Putin Negotiates Major Gas Deal With China

BEIJING – Russian Prime Minister Vladimir Putin on Tuesday negotiated a major new gas deal with China and said that ties between Moscow and Beijing help restrain other powers, a veiled allusion to the U.S.

U.S. Secretary of State Hillary Rodham Clinton, meanwhile, was in Moscow trying to press the Kremlin for a statement that it would commit to tougher sanctions against Iran if negotiations fail.

Russia and China have previously balked at such sanctions, and China has appeared content to allow Moscow to take the heat for supporting Tehran in the dispute over its nuclear program.

During Putin's visit, Russia's state-run natural gas monopoly Gazprom and China National Petroleum Corp. signed a framework agreement that calls for the supply of about 2.4 trillion cubic feet of gas a year. However, a price has not been set and no contract signed, Gazprom's chief executive Alexei Miller said.

Chinese media reports have said the agreement was expected to be a gas-for-loans deal similar to a $25 billion oil-for-loans deal completed earlier this year.

Russia's cash-strapped energy companies need Chinese funding, while Beijing has welcomed the chance to further diversify sources of energy needed to fuel its fast-growing economy. The global economic crisis and changing market conditions have further spurred cooperation as lower demand from Europe has pushed Russia to diversify markets for its oil and gas.

Putin described Russian-Chinese cooperation as "the most important" element of global stability.

"Our consolidated view on certain issues, our ability to coordinate our stance on key international developments often help calm the situation and play a stabilizing role," he earlier told a group of Chinese reporters. "A shared stance of Russia and China on certain issues helps restrain some of our more hotheaded colleagues."

Putin didn't name any country, but Russia and China in the past have spoken against perceived U.S. global domination.

While Moscow and Beijing both have been eager to counter U.S. power, they have been jockeying for influence in the energy-rich former Soviet republics of Central Asia, and the Kremlin has found it increasingly hard to bargain with its booming neighbor.

Miller said the gas contract will include a price formula based on Gazprom's experience in gas exports and principles of international trade — a statement reflecting Gazprom's push for the same high price it charges its customers in Europe. China has bargained hard for a much lower price.

The Gazprom chief also said his company doesn't need the Chinese investment to build prospective pipelines.

"Gazprom will independently build gas transportation facilities on the Russian territory," Miller said. He added Gazprom may welcome Chinese investments in building gas-processing facilities.

Miller said the gas agreement envisages two possible routes for supplying China — one from fields in western Siberia and another from fields in eastern Siberia and Sakhalin.

The western route can be put in place "very quickly," as Gazprom has ready-to-tap gas fields and all the necessary infrastructure there, Miller said.

The eastern route would require the creation of gas-processing facilities since the gas in the region contains some chemicals that need to be extracted first, he said. That would require further negotiations on jointly creating the facilities and selling those products in other markets.

Putin's deputy, Igor Sechin, who helped negotiate the gas deal, said Moscow and Beijing are planning to reach an agreement on gas price by the year's end and sign a contract next June. Gas deliveries to China may start in 2014 or 2015, he said.

Sechin said another deal signed Tuesday envisaged a joint venture refinery in northeastern Tianjin, near Beijing. Under the deal, Russian and Chinese companies would jointly operate the plant and a network of 300-500 gas stations.

He also said China announced Tuesday it would award Russia a contract for building another two 1,600-megawatt reactors at a plant in eastern Jiangsu province, where there are already two Russian-built reactors.

Russia and China earlier Tuesday signed agreements worth $3.5 billion.

Russian Deputy Prime Minister Alexander Zhukov told reporters that they included a $500 million loan from the China Development Bank to its Russian equivalent, VEB. Other deals included Chinese companies making investments in construction industry facilities and infrastructure projects in Russia, Zhukov said.

Both sides also signed an agreement on advance notification for planned ballistic missile launches by either country, which Putin hailed as an important confidence-building step.