China and Russia, who have been haggling for a decade over the price of Siberian gas, have suddenly reached an agreement.
Facing Western sanctions over Ukraine, Russia’s president on Wednesday trumpeted the signing of a huge contract to supply natural gas to China.
Vladimir Putin talked to reporters in Shanghai about the 30-year, $400 billion gas deal.
It is “the biggest contract in the history of the Soviet and Russian gas industry," he said.
In interviews timed to make Moscow’s evening news, Putin stressed that the deal includes a $75 billion project to build pipelines and other infrastructure that will give Russia’s economy an economic bounce.
He said it would be “the world’s biggest construction project in the next four years, creating thousands of jobs.”
The contract came after 10 years of negotiations, largely over the price of Russian gas. After Wednesday’s contract signing, Alexei Miller, the head of Gazprom, Russia's state-controlled natural gas company, declined to reveal this price, saying it was “a commercial secret.”
With Russia’s relations with the West at their worst since the collapse of the Soviet Union, this sudden breakthrough with China seemed political. As the deal was signed, Russian and Chinese warships rocked at anchor in Shanghai’s harbor, assembled for photographers prior to a joint training exercise.
During Putin’s visit, contracts were signed to build Russia’s first rail bridge over the Amur River to China, and to jointly construct a long haul, wide body passenger jet with China.
At a China-Russia conference in Moscow, Elena Safronova, a China expert, said Russia and China are not becoming military allies.
“It is not a military alliance," she said, "but a growing partnership between neighbors.”
China has tread carefully on Russia’s dispute with Ukraine, partly because Ukraine is a major supplier of corn to China. Still, a Chinese company is negotiating to build a 4 kilometer road bridge from Russia’s mainland to Crimea, the Ukrainian peninsula recently annexed by Russia.
That annexation prompted the United States and Western Europe to impose economic sanctions on Putin’s closest advisers.
On Wednesday, one adviser hit with sanctions, Alexei Pushkov, chairman of the foreign affairs committee of the State Duma, the lower house of Russia's parliament, fired off this tweet: "The 30-year gas contract with China is of strategic significance. B. Obama should give up his policy of isolating Russia: It won't work."
Bobo Lo, a Russia-Eurasia analyst at London’s Chatham House, says China historically benefits when Moscow has poor relations with the West.
“Russia becomes more China dependant," he said. "They become more China dependant as a potential energy market. But mainly they become more geopolitically dependent on China.”
Russian gas will help China meet its goal of tripling natural gas use by the end of this decade. But China now gets gas pipelined from both Turkmenistan and Burma, and is building 14 terminals to receive ships with liquefied natural gas from fields as far away as Australia, Mozambique and Qatar.
Russia’s pipeline gas is to flow at the end of this decade, supplying about 10 percent of China’s estimated needs. Lo says that Russia needs China more than China needs Russia.
“Russia still is a secondary priority for the Chinese," said Lo. "Number one priority for the Chinese: the United States. Number two priority, basically: the Asia Pacific region. Russia actually comes further down the list.”
But the Chinese gas deal is expected to give Russia’s president a psychological boost as he prepares to meet Western leaders in France on June 6 - the 70th anniversary of World War II's D-Day invasion