China and Russia Sign $400 Billion Gas Deal

After more than a decade of negotiations, a deal has been signed between the world’s largest consumer and biggest energy producer.

According to the deal, worth $400 billion, Russia will supply 38 billion cubic meters of natural gas annually to China over 30 years through a new pipeline. The deal was signed by Alexey Miller, Chief Executive Officer of Gazprom and Zhou Jiping, chairman of China National Petroleum Corp. Supplies will begin in 4 to 6 years.

The deal is the largest ever for Gazprom.

Russia is turning to China to boost its economy as its relations with European Union and the United States sour due to Ukrainian crisis.

Advance Payments

Under the agreement, China might make advance payments of $25 billion to invest in the necessary infrastructure. Russia will invest $55 billion in the Siberian fields and pipeline. China will invest more than $20 billion for a pipeline on its territory.

China and Russia will begin discussions for a second pipeline to the west of the initial route.

Before the deal Russian officials hinted that the gas-supply accord was closer. Talks, which began over 10 years back, repeatedly broke down on the issue of price.

Last year, average price of Gazprom in Europe was $380.5 per thousand cubic meters. The price in today’s deal is reported to be more than $350.