China and Russia sign $400bn gas deal

Here you have it all. Historic, the day the US fell of a cliff.



Financial Times
By Lucy Hornby and Jamil Anderlini
in Beijing and Guy Chazan
21 May 2014

China and Russia have clinched a $400bn gas supply deal that provides Moscow with a crucial new export market and stronger ties with its eastern neighbour as Europe attempts to reduce its reliance on Russian supplies.

The agreement, struck in Shanghai on Wednesday by Russian president Vladimir Putin and his Chinese counter part comes after 10 years of negotiations and marks an important breakthrough for the Kremlin vilified by the west over its role in the crisis in Ukraine.

Under the deal, Russia’s Gazprom will supply China National Petroleum Corp, China’s largest oil company, with up to 38bn cubic metres of gas a year for 30 years, beginning in 2018. Mr Putin said it was the “largest contract in the history of the gas sector of the former USSR”.

Although Gazprom said there was an agreement on the base price, some of the conditions are yet to be agreed. Alexander Novak, Russia’s energy minister, said an intergovernmental deal, to be negotiated by the end of the year, would confirm that both countries would effectively subside the contract through tax exemptions.

Analysts said the implied price was $350-$390 per 1,000 cubic metres of gas – roughly comparable to the price Gazprom charges its European customers.

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