News / Economy

China, Russia Vow to Quadruple Trade This Decade

Russia's President Dmitry Medvedev (R) and his Chinese counterpart Hu Jintao attend a signing ceremony in Moscow's Kremlin, June 16, 2011
Russia's President Dmitry Medvedev (R) and his Chinese counterpart Hu Jintao attend a signing ceremony in Moscow's Kremlin, June 16, 2011
James Brooke

A $1 trillion gas deal of the century was to be signed Friday in St. Petersburg, Russia.

Chinese President Hu Jintao, on a visit this day to St. Petersburg said that China and Russia set a goal of increasing trade fourfold during this decade.

As Russian President Dmitry Medvedev nodded approvingly, Hu told an international gathering of corporate executives that the two leaders have set a goal of $200 billion in bilateral trade by 2020.

Medvedev also spoke glowingly of the growing economic partnership between the two neighbors.

Last year, China displaced Germany as Russia’s largest trading partner. Twenty years after borders opened following the collapse of the Soviet Union, 3 million people from China and Russia now visit each other’s country each year.

Setting a bold trade goal served to distract attention from their failure to sign a massive gas deal. For one month, the leaders' aides had been predicting that Hu would sign the deal during his visit to Russia.

Asia analyst Bobo Lo said, “I was pretty surprised that they didn’t come up with some kind of face-saving gas agreement in time for Hu Jintao’s visit.”

In the deal, China would buy as much as $1 trillion worth of Siberian gas from Russia over the next 30 years, starting in 2015. The amount of gas would be equal to almost half the gas that Russia currently sells every year to Europe.

In a last-minute sales effort on Thursday night, Prime Minister Vladimir Putin, often considered Russia’s top negotiator, took the Chinese president on a personal tour of Gazprom, the Russian state gas company.

Talks started 10 years ago. The sticking point remains price.

China is developing shale gas at home, is buying pipeline gas from Turkmenistan and is importing liquefied natural gas from Australia.

Russia knows that Chinese gas consumption may grow to match all of Europe’s consumption by 2035. China will have no choice, the Russians say, but to turn to Siberia.

On the standoff, Lo said, "Both the Russians and the Chinese believe they are in a strong negotiating position.”

China already has announced plans to increase coal imports from Russia and to double its oil imports from Russia.

Russia’s excitement over the China’s leader's visit reflects reversed roles of the two neighboring giants.

Fifty years ago, Russia was the top foreign aid donor to China. Now, China’s economy is five times the size of Russia’s. In a recent survey by Price Waterhouse Coopers, Russian business leaders listed China as their number-one growth area. For Chinese business leaders, Russia did not figure among the top 10.

The conference goal was for Medvedev to tell the world that Russia is open for business. Addressing a hall filled with 1,000 international participants, he declared, "We are not building state capitalism.”

He went on to say, “My choice is different. Private entrepreneurship and private investors should reign in the Russian economy.”

Medvedev cited liberalizing steps - speeding up the selling of state companies, cutting bureaucratic demands for visas and construction permits, and joining the World Trade Organization by the end of this year.

Markets, he said, are like parachutes - they only work when they are open.

This liberalizing rhetoric was music to the ears of his business audience. But Russia has presidential elections in March.

When the next economic forum rolls around, this time next year, no one knows who will be sitting in the Kremlin as president of Russia.

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