The Significance of the China-Russia Gas Deal

Russia’s efforts to get the deal signed suggest that events in Ukraine have had an impact. 

After more than a decade of negotiation, China and Russia finally have their gas deal. Although Russia’s overtures to China do not signify anything brand new in its foreign policy, the urgency for Moscow of finding alternative energy allies has risen significantly following the crisis in Ukraine.

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Although details are yet to be disclosed, it is highly likely that the deal offered more favorable pricing to China, given this has been the main sticking point historically. China now possesses greater leverage over Russia given the latter’s damaged international reputation after its actions over Ukraine and the reduced exclusivity of its energy offering. A need for Gazprom to move away from dependence on Europe as its key gas export market has strengthened as political relations have soured. The deal may cause alarm in Europe, but China cannot fully replace Europe given that Russia relies on the high prices and volumes the European market offers. The deal will, however, push Europe to identify alternative gas sources.

The project with China involves building a pipeline to supply natural gas from fields in Siberia to China for thirty years. Details on the deal’s agreed price have not officially been disclosed. Russia originally wanted China to pay the same price as Europe does for gas, at $380.50 per thousand cubic meters. China refused. Since discussions began with Russia, China has found alternative partners, most notably Turkmenistan. They supply China with gas at a much lower price.

By Sarah Lain,  May 24, 2014

Photo: Reuters


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