China, Russia sign deals worth $3.5 billion

STEPPING ON THE GAS: Chinese Premier Wen Jiabao (right) and Russian Prime Minister Vladimir Putin after signing the joint communique of the 14th Prime Ministers' talks between China and Russia in Beijing on Tuesday.   | Photo Credit: - PHOTO: XINHUA

Ananth Krishnan

Agreement to supply gas from Siberia to China

BEIJING: China and Russia on Tuesday signed trade deals worth $3.5 billion during Russian Prime Minister Vladimir Putin’s three-day visit to Beijing on the back of energy-hungry China’s ever-growing demand for Russia’s vast oil and gas resources.

Among the 40 agreements struck between Russian and Chinese companies, Russia’s State-run natural gas monopoly firm Gazprom signed a “framework agreement” to supply China’s State-run China National Petroleum Corporation with gas from Siberia. Alexei Miller, head of Gazprom, told reporters here the agreement would eventually see Russia supplying 70 billion cubic metre of gas to China every year. The two companies however could not agree on a price, a persisting sticking point in negotiations, said Mr. Miller.

The trade relationship has increased in recent years largely driven by Chinese demand for oil and natural gas. But the relationship has been strained in recent months, with Moscow angering Beijing by accusing Chinese traders of smuggling goods and consequently shutting down a wholesale market near the Russian capital, home to some 60,000 Chinese traders.

The two countries have also had contrasting economic fortunes in recent months. Under the impact of the financial crisis, Russia’s growth rate plummeted from 7 per cent annual growth to an expected 8 per cent decline this year.

China, in contrast, has weathered the financial storm and is on tract to achieve its target of 8 per cent growth.

The current economic climate has seen Russian companies increasingly turning to China for investments. On Tuesday, the Agricultural Bank of China agreed a massive $ 500 million loan to Russia’s second largest lender VTB, reported China’s State-run China Daily newspaper. Earlier this year, the two countries signed a loan-for-oil deal through which China secured a 20-year supply of Russian oil in exchange for a $25-billion loan.

Mr. Putin and Chinese Premier Wen Jiabao also signed a missile deal on Tuesday, following which both countries will now notify each other on any ballistic missile launch plans, a deal analysts in Beijing said was a major step for the two countries to improve trust between their militaries.