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Russia to supply gas to China

BEIJING — China and Russia agreed to a 30-year natural gas deal Wednesday that would send gas by pipeline from Siberia to China, according to China National Petroleum Corp.

The announcement caps a decade of negotiations and helps bring Russia and China closer than they have been in many years. The contract was driven to a conclusion by the presence of President Xi Jinping of China and President Vladimir Putin of Russia in Shanghai for the last two days.

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A notice on China National Petroleum’s website said that beginning in 2018, Russia would supply 38 billion cubic meters of gas each year to China. China will build the pipeline within its borders, while Russia will be responsible for development of the fields and pipeline construction in its territory.

The notice did not mention price, but experts said hard bargaining by China for a lower price than European countries were paying was at the core of the negotiations.

The deal is expected to be worth about $400 billion, said James Henderson, a senior analyst at the Oxford Institute for Energy Studies.

Putin told reporters after a signing ceremony that the price was based on the market price of oil, just as it was for European countries.

“The gas price formula as in our other contracts is pegged to the market price of oil and oil products,” Itar-Tass quoted Putin as saying. The deal is the largest for the Russian natural gas industry, he said.

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Russia will invest $55 billion in infrastructure for transporting the gas to China, said Alexei B. Miller, the chief executive of Gazprom.

Putin has been eager to diversify Russia’s gas sales to Asia and away from the stagnant European markets. At the same time, he was anxious to demonstrate that Russia, in the face of sanctions over the annexation of Crimea, was not dependent on the West.

And Xi, who has met Putin seven times since assuming power, was willing to help the Russian leader, said Shi Yinhong, a professor of international relations at Renmin University in Beijing.

Expectations that the deal would be sealed when Xi and Putin met Tuesday were dashed when negotiators from China National Petroleum and Gazprom failed to reach a deal.

Political considerations, including Putin’s visit to Europe in early June — when he will meet with President Obama and Germany’s chancellor, Angela Merkel — were probably a vital impetus to getting the contract over the finish line, energy experts said.

Xi and Putin met on the sidelines of a conference of Asian nations. During his address to the gathering, Xi proposed a new Asian structure for security cooperation, based on a regional group that would include Russia and Iran but exclude the United States.

The proposal is another indication that Russia and China, though wary of each other, are interested in working together outside the confines of global and regional institutions dominated by the United States.

A central issue in the negotiations was how to bridge the difference between the premium prices Russia charges European countries and the lower prices China pays for natural gas from Central Asia, primarily Turkmenistan, said Kenneth S. Courtis, a founding partner of Thames Investment.

Gazprom had indicated it was not going to bend on the principle of a gas price based on oil prices, analysts said. But how to structure that price relationship had appeared to be a major stumbling block.

China National Petroleum asked for equity stakes in the two Gazprom gas fields, much as China had negotiated successfully with other Russian energy companies, Henderson said. It was not clear whether it succeeded this time.

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