SHANGHAI – China signed a landmark deal Wednesday to buy Russian natural gas worth about $400 billion, giving a boost to diplomatically isolated President Vladimir Putin and expanding Moscow’s ties with Asia.
Price negotiations on the 30-year deal continued into the final hours of a two-day visit by Putin to China, during which both sides had said they hoped to sign an agreement.
Putin was in Shanghai for an Asian security conference where China’s president called for a new model of Asian security cooperation based on a regional group that includes Russia and Iran and excludes the United States.
The gas deal gives Moscow an economic boost at a time when Washington and the European Union have imposed visa bans and asset freezes on dozens of Russian officials and several companies over Ukraine. It allows Russia to diversify its markets for gas, which now goes mostly to Europe.
The agreement opened the door for Russia to enter into Asia’s gas market, said Keun-Wook Paik, senior research fellow at the Oxford Institute for Energy Studies.
Politically, the deal has provided a breathing space for Russia, Paik said. Russia, and Putin, can demonstrate it’s not completely isolated because of the Ukraine crisis. Russia has demonstrated that they have a very reliable strategic partnership with China.
Russia’s economy has been bruised by its dispute with the West over Ukraine’s tilt toward the European Union, a shift that inflamed Moscow’s insecurities about declining influence and sparked its annexation of Crimea in March. The supplies will help to ease gas shortages in China, the world’s second-largest economy, and curb reliance on coal.
The agreement calls for Russian government-controlled Gazprom to supply state-owned China National Petroleum Corp. with 38 billion cubic meters of gas annually, Gazprom spokesman Sergey Kupriyanov told The Associated Press. That would represent about a quarter of China’s current annual gas consumption of nearly 150 billion cubic meters.
The contract is worth a total of $400 billion, Gazprom CEO Alexei Miller told Russian news agencies. That figure is greater than the GDP of South Africa. Gas is due to begin flowing to China as early as 2018.
U.S. Treasury Secretary Jacob Lew appealed to China last week to avoid taking steps that might offset sanctions. However, U.S. officials have acknowledged China’s pressing need for energy.