Putin welcomes $ 117.5 billion deal with China as Russia breaks with the West

Russian President Vladimir Putin attends meeting with Chinese President Xi Jinping in Beijing, China, February 4, 2022. Sputnik / Aleksey Druzhinin / Kremlin via REUTERS

MOSCOW / SINGAPORE, Feb 4 (Reuters) – President Vladimir Putin unveiled new Russian oil and gas deals with China worth $ 117.5 billion on Friday, pledging to boost Russian exports to the Far East. European customers for Ukraine.

Russia, already Beijing’s No. 3 gas supplier, is strengthening its ties with China, the world’s largest energy consumer, by reducing its dependence on traditional European energy customers.

“Our oil companies have prepared very good new solutions for the supply of hydrocarbons in the People’s Republic of China,” Putin said in a meeting with Chinese President Xi Jinping to discuss closer cooperation.

“And it took a step forward in the gas industry,” he added, referring to a new contract to supply 10 billion cubic meters (bcm) a year to China from Russia’s Far East. Putin is in Beijing to attend the Winter Olympics.

Gas sales alone could generate about $ 37.5 billion in 25 years, according to Reuters estimates, assuming an average gas price of $ 150 per 1,000 cubic meters, according to Russian gas giant Gazprom. for its current agreement with China.

Kremlin spokesman Dmitry Peshkov said the deal was for 25 years, while a Chinese industry source said it was for 30. Read more

Separately, Russian oil giant Rosneft (ROSN.MM), led by Putin’s longtime ally Igor Sechin, has signed an agreement with China’s CNPC to supply 100 million tonnes of oil through Kazakhstan over a 10-year period. .

Rosneft said the new deal was worth $ 80 billion.

The deals strengthened the ruble and the Russian stock market, including shares in Rosneft and Gazprom. read more

Putin has accused the United States of sparking tensions over Russia’s neighbor Ukraine, which has angered Moscow with its desire to join NATO. More than 100,000 Russian troops have gathered near the border with Ukraine. Western countries accuse Moscow of plotting an invasion, which it denies.

Russia is Europe’s largest gas supplier, and Western countries are worried that already strained supplies could be cut off in the event of a conflict. However, the new agreement with Beijing would not allow Moscow to divert gas to Europe, as it includes gas from the Pacific island of Sakhalin, which is not connected to Russia’s European pipeline network.

Gazprom said in a statement that it plans to increase gas exports to China to 48 bcm per year, including through a recently agreed pipeline that will deliver 10 bcm per year from Russia’s Far East.

According to previous plans, Russia aimed to supply China with 38 bcm by 2025. The announcement did not specify when it would reach the new 48 bcm target.

Gazprom, with foreign partners including Shell (SHEL.L), already produces more than 10 million tons of liquefied natural gas (LNG) annually in Sakhalin.

“The supply of natural gas to the northeastern tip of China makes this project strategically attractive to China, as the only real alternative supply would be the more expensive LNG,” the Moscow-based BCS said in a note on the 10 bcm deal. .

An industry source told Reuters earlier Friday that Gazprom, which has a monopoly on Russian gas exports through pipelines, had agreed a 30-year contract with China’s CNPC, with the first gas flowing through the new pipeline in two or three years. .

The source said that the gas agreement will be settled in euros, as Moscow tries to differentiate itself from the US dollar and to compensate for any possible sanctions from Washington.

STRENGTH POWER

Russia is now sending gas to China via the Power of Siberia pipeline, which began pumping supplies in 2019, and with the transfer of LNG. It exported 16.5 bcm of gas to China in 2021, including 10.5 bcm through Power of Siberia, which is also separate from the pipelines that send gas to Europe. read more

Putin was accompanied by several Russian officials and business executives, including Sechin. Gazprom chief Alexei Miller was not in the delegation.

China is also lifting restrictions on imports of Russian wheat and barley.

Report by Vladimir Soldatkin, Oksana Kobzeva and Olesya Astakhova in Moscow, Chen Aizhu in Singapore Edited by Edmund Blair and Mark Potter

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