Is the Russia-China Gas Deal for Real—or Just Fumes? - Businessweek

Is the Russia-China Gas Deal for Real—or Just Fumes? - Businessweek:



"After negotiating for 15 years, China and Russia appear to have finally struck a deal to get into the natural gas business together and build a pipeline linking the two countries. Under the terms of the 30-year pact, China will secure the natural gas it needs to fuel its economy (and help clean its air), while Russia gets to diversify away from its testy relationship with Europe. Chances are that Russia won’t ever have to worry about being sanctioned by China.



As it has been since the late 1990s, the major sticking point in the talks was the price China would pay to buy Russia’s gas. China was always willing to invest upfront cash in return for a cheaper price. Russia was always happy to take that cash, but it never wanted to give China too great a deal, lest its other customers expect similar prices. In the end, it looks as though China will commit as much as $25 billion in advance payments to help Russia build the pipeline and develop its gas fields in Siberia.



What about that price? In announcing the deal, Russia’s de facto gas czar, Alexey Miller, chief executive officer of the state-controlled gas giant Gazprom (GAZP:RM), declined to say exactly what Russia would charge China, referring to the final price as a “commercial secret.” Still, in laying out details of the deal, he offered some clues. Miller says that under the agreement, Gazprom will annually sell 38 billion cubic meters of natural gas to China for 30 years, for a total value of $400 billion."



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