After almost a decade of negotiations, China and Russia inked a huge, 30-year natural gas deal, believed to be worth more than $400 billion. The deal gives the energy-hungry Chinese a vital new source of liquefied natural gas; it gives the Russians an important new market for its energy resources, an imperative made all the more urgent by renewed tensions with the West.
The deal had been in the works for years, delayed over Sino-Russian wrangling over the price of the gas. Reports suggest that Russian state company Gazprom obtained a price commensurate to what it charges customers in Europe — a market that is desperate to wean itself off its dependence on Russian natural gas. Russia now aims to pipe 38 billion cubic meters worth of gas to China annually. "This is the biggest contract in the history of the gas sector of the former USSR," trumpeted Russian President Vladimir Putin, who was on a visit to China this week. "Our Chinese friends are difficult, hard negotiators."
But what does this deal actually look like? Russia says it will begin delivering gas by 2018, though some experts suggest that there won't be enough transportable gas ready to pipe from Russia's eastern gas fields until 2020. Then there's the small matter of the pipelines that have yet to be constructed.
The Russians will have to invest some $55 billion in pipeline construction, according to Reuters. Gazprom's Chinese counterparts, China National Petroleum Corp., will provide for similar infrastructure within China. You can see what needs to be built in the map above.
For the Russians, the deal comes not a moment too soon. The Russians are keenly aware of growing competition, as both Australia and the U.S. begin to export gas to Asia. "I have no doubt that supplying energy to the Asia Pacific Region holds out a great promise in the future," said Russian Prime Minister Dmitri Medvedev in an interview with state channel RT this week.
Over the past decade, China has invested billions in Central Asia, establishing pipelines that bring gas from fields in Turkmenistan through Uzbekistan and Kazakhstan. Beijing's political clout in a region that was once solidly in Russia's sphere of influence has grown proportionally.
While an irritant perhaps to Moscow, it hardly stymied the deal. China is Russia's biggest trading partner and, given the current hostility of the West, Putin recognized the need to deepen ties with Beijing. "Politically, it is important for Putin to show that 'the Great Russia' is back on the international scene and that it has other, non-Western options to restore its rightful place," writes Harvard academic Morena Skalamera.
In a policy report, Skalamera goes on to unpack why this deal doesn't necessarily reflect a new Eurasian entente: China and Russia still eye each other warily over a host of issues, including budding naval tensions in the northern Pacific and Arctic, as well as Russia's unhindered supplying of arms to Chinese neighbors. While the optics may suggest a new challenge to the West, the deal ultimately boils down to cash and gas. This time for Moscow and Beijing, the numbers made sense.