Russia, China sign energy deal for pipeline link

October 29th, 2008 - 6:00 am ICT by IANS  

Moscow, Oct 29 (DPA) Russia and China sealed a long-delayed energy deal Tuesday for a pipeline linking the two countries after talks concluded between Chinese Premier Wen Jiabao and Russian Prime Minister Vladimir Putin.The leaders watched as Russian pipeline monopoly Transneft and China’s National Petroleum Corporation signed the accord to build an extension to the East Siberia-Pacific Ocean (ESPO) pipeline to carry oil pumped by Rosneft from Siberian fields.

The contract provides for 15 million tonnes of crude per year to be shipped to China over the next 20 years.

Russian business daily Kommersant reported Tuesday that China could offer $20-25 billion in credit, three-fifths to Rosneft and the rest to Transneft, for the oil deliveries.

Russian Energy Minister Sergei Shmatko said the projected 64- km pipeline spur to northern China would not be ready before the end of 2009.

Industry analysts believe the breakthrough energy deal became possible as Chinese officials sought to take advantage of the dip in world oil prices. Worries over long-term supplies also played a role.

The accord will allow Moscow to diversify its client base. Currently it sells most of its oil to Europe.

Additionally, the Chinese credit is important to Rosneft. The company is in a precarious position amid slipping global prices and an expansion largely built on borrowing.

A host of other trade deals was also reached at the Sino-Russian economic forum in Moscow Tuesday, in industries including banking, nuclear power, transport and aviation.

Putin called for Chinese investment in Russian timber. He also called for joint projects in heavy machine building industries and in developing a new passenger jet.

Putin told Wen to move away from the US dollar for future trading. He advised the “broader use of national currencies” in the two nations’ bilateral transactions, expected to total $50 billion this year.

“Today, the whole world based on the dollar is suffering serious problems,” he said.

China and Russia have, respectively, the first and third largest currency reserves in the world. Russia has gradually sold off the dollars in its $515 billion reserves in recent years.

Russian President Dmitry Medvedev called for the rouble to become a regional reserve currency at his first foreign policy speech in Berlin in June.

Russian politicians have pressured state energy producers to start doing business in rubles, which has lost about 10 percent against the dollar this year.

Russia, the world second-largest producer of crude oil, is only China’s fifth largest supplier of oil. This is despite multiple energy dialogues since the early 1990s, all of which have stalled repeatedly over tough pricing disputes.

Beijing has bargained hard for lower prices on Russian oil and gas exports before it agrees to open its market. At the same time, Moscow has balked at shrinking profit margins.

Wen is due to head Wednesday to oil-rich Kazakhstan for a meeting of the Shanghai Cooperation Organization, a security grouping of Central Asian states.

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