Russia and China Hash Out a $400 Billion Energy Deal

by on May 21, 2014 7:04 pm BST

Russia and China have just hashed out an energy deal worth $400 billion dollars over the next 30 years. In order to get around sanctions issued by the United States and the European Union over the Ukraine tensions, Russian President Vladimir Putin has been working diligently to find opportunities that are not reliant on the Western world, including energy demand and the use of the US dollar.

The deal would create a pipeline from Russian to China that would deliver natural gas. This may further deteriorate relations with the sanctioning parties, but it is a milestone in regards to international trade. The deal will join the world’s leader in energy production with the world’s largest demand for energy.

Nationalized OAO Gazprom would invest $55 billion in order to develop large natural gas fields in Eastern Siberia, as well as building the pipeline. Putin was in Shanghai to finalized the energy deal and said this was an “epochal event.” The deal is set for 38 billion cubic meters of natural gas per year over the next 30 years, according to Alexey Miller, OAO Gazprom’s chief executive officer.

This is important for Russia because it covers any potential loss in demand from Europe, which is almost entirely dependent on Russia for its natural gas. “The price seems to be at the level of European exports,” said Anvar Gilyazitdinov, a Russian asset manager for Rye, Man and Gor Securities.