China signs $25b crude deal with Russia

(China Daily)
Updated: 2009-02-18 09:23

Beijing signed a deal with Moscow Tuesday to lend $25 billion to two Russian oil firms, which in turn will sell 15 million tons of crude oil a year to China for the next 20 years.

The agreement will ensure the long-awaited extension of Russia's Siberia-Pacific coast pipeline to China, too. The pipeline project, agreed on late last year, will see the extension of the pipeline from the Siberian city of Skovorodino, 70 km north of the Sino-Russian border, to China.

Chinese Vice Premier Wang Qishan (R) shakes hands with his Russian counterpart Igor Sechin at the Great Hall of the People in Beijing, February 17, 2009. Senior Chinese and Russian officials headed by Wang and Sechin held a high-level energy negotiators' meeting in Beijing on Tuesday. [Xinhua]

China will lend $15 billion to Russia's state-owned oil firm Rosneft and $10 billion to pipeline monopoly Transneft. China Development Bank (CDB) provided the credit for the deal, according to the Associated Press (AP).

The Russian firms, on the other hand, will ensure China gets 300,000 barrels of crude a day for 20 years.

China and Russia signed seven agreements on energy cooperation package programs, Xinhua said, quoting a Foreign Ministry official.

The $25-billion deal is seen as a boost to Russian energy firms because the global financial crisis and a drastic drop in the crude prices have left them struggling to raise capital, AP said.

The agreement was signed by Vice-Premier Wang Qishan and Russian Deputy Prime Minister Igor Sechin in Beijing at the third round of energy talks between the two countries.

"We hope the two sides will give full play to the bilateral energy negotiation mechanism to promote bilateral energy cooperation," Wang told Sechin.

Sechin replied that the two countries should intensify cooperation in fields such as energy and finance, and make joint efforts to guarantee that the agreed projects are implemented on time.

Chinese Premier Wen Jiabao (R) meets with Russian Deputy Prime Minister Igor Sechin at Zhongnanhai in Beijing, February 17, 2009. [Xinhua]

Sechin also met Premier Wen Jiabao Tuesday.

A memorandum of cooperation in the energy sector signed in Moscow in October said Transneft and Rosneft could get loans from China in exchange for long-term oil sales to Beijing. But the talks were suspended on November 12 because of divergence of views on lending rates and loan guarantees, industry insiders said.

Russia, the largest oil exporter after Saudi Arabia, is seeking to shift its exports focus from the West, and eyeing China as the main new market. Last year, trade between Russia and China increased 18 percent to $56.8 billion.

And Premier Wen placed cooperation in resources development on top of his five proposals on economic cooperation when he visited Russia last year.

The two countries have agreed to work jointly in oil production and processing, natural gas production and in chemical industries. They have agreed to expand cooperation in nuclear energy, too, including the construction of nuclear power plant in Tianwan, Jiangsu province, uranium mining, and post-processing of spent fuel.

China Daily, Xinhua and agencies