Russia, China sign key energy deal for new pipeline link

Business Materials 28 October 2008 17:42 (UTC +04:00)

Russia and China sealed a long-delayed energy deal Tuesday for a pipeline linking the two countries in an agreement reached as Chinese Premier Wen Jiabao visited Moscow, reported dpa.

Russian pipeline monopoly Transneft and China's National Petroleum Corporation reached agreement to build an extension to the Trans- Siberian pipeline to carry oil and gas from Siberian fields pumped by Rosneft.

The contract provides for 15 million tons of crude per year to be shipped to China over the next 20 years.

Russian business daily Kommersant reported Tuesday that China could offer 20 to 25 billion dollars in credit, three-fifths to Rosneft and the rest to Transneft, for the oil deliveries.

Russian Energy Minister Sergei Shmatko said the projected pipeline spur would not be ready before 2009.

Industry analysts believe the breakthrough energy deal became possible due to the dip in oil prices and global worry over long-term supplies.

The accord allows Moscow to diversify its reliance on energy clients in Europe - its largest consumer of oil and natural gas.

A raft of other trade deals were also reach at the Sino-Russian economic forum in Moscow on Tuesday, including in the banking sector, nuclear energy, transport and aviation industries.

Wen met with his Russian counterpart Vladimir Putin and President Dmitry Medvedev on Tuesday to discuss energy ties and the global financial crisis.

The two giant neighbours have repeatedly suspended energy talks since the early 1990s over tough pricing disputes.

Beijing has bargained hard for lower prices on Russian oil and gas exports before it opens its market, and while Moscow has balked at loosing its profit margins the drop in oil prices may have levelled the dialogue.

But the new energy market landscape and a diplomatic rapprochement in recent meetings between top officials of both nations paved the way for Tuesday's deal finally linking the world's second largest crude producer with China's energy-hungry market.

The two last week removed a symbolic diplomatic roadblock in resolving a Cold War-era border dispute.

Wen is due to head Wednesday to oil-rich Kazakhstan for a meeting of the Shanghai Cooperation Organization, a security grouping of Central Asian states.