Russia & China Finalize Massive Gas Deal

Yesterday the New York Times, the Wall Street Journal and a plethora of western news outlets were excited to announce that Russia and China had failed to finalize a long awaited multi-billion dollar gas deal during Putin's two day visit to Shanghai. If you do a search for "China and Russia Fail to Reach Deal on Gas Plan" you'll see what I mean.

They spoke too soon.

The deal, which has been a decade in the making, was sealed on the second day of the visit. Russia will supply 38 billion cubic meters of natural gas to China each year, for thirty years. Though the official price for the gas remains secret the total agreement is estimated to be worth over $400 billion.

"The price is satisfactory for both sides." Putin said in a statement to the Russian news channel Rossiya.

The obvious assumption here is that Russia was motivated to finalize this arrangement quickly to provide a counter balance to threats of sanctions from the U.S. and western Europe. Europe relies on Russia for 30% of its gas imports, and some western politicians have been calling to reduce that dependence.

The joint statement issued by China and Russia yesterday openly condemned the use of unilateral sanctions. In that context, the timing of this deal may very well have been designed to send a message. Kremlin officials however deny this.

"Obviously what's happening in our relations with the West is an impetus to look for new partners, and strengthen our ties with people who are more trustworthy partners," said Andrei Klimov, deputy chair of the international affairs committee of the Russian Federation Council. "It's not about revenge or something. It's purely practical."

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