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China, Russia sign 20-year deal swapping oil for loans
Source: Agencies/Shanghai Daily |
February 18, 2009, Wednesday
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Print Edition
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CHINA signed a US$25 billion energy deal in Beijing yesterday that will secure oil supplies from Russia for the next 20 years in return for loans, Russian state pipeline monopoly Transneft reported.
As part of the broad energy supply deal, China will lend US$15 billion to Rosneft, Russia's state-owned major oil company, and US$10 billion to Transneft, giving a vital boost to the energy companies as they struggle to raise capital amid tightened lending conditions and plunging oil prices.
In return, Russia promised to guarantee annual oil supply of 15 million tons, or 300,000 barrels per day, for 20 years to China.
The signing ceremony marked an end to months of talks between the two countries after negotiations broke down amid disagreements over interest rates and state guarantees.
Russian crude will be supplied through a long-delayed pipeline project agreed to late last year. The pipeline, extending from western Siberia to the Pacific coast, is to be linked to China from the Siberian city of Skovorodino.
China has abundant cash that Russia needs to access in the credit crunch as its government is running major deficits and some of its companies are finding it difficult to repay loans and borrow project finance on commercial markets.
Although China's industries face a severe slowdown in the export markets, the country is keen to ensure that energy does not constrain future growth and force up the prices it pays.
"Demand in the Chinese market by the time the crisis is over will be there ... The risk is that we'll have supply bottlenecks which will again push the prices up," Teymur Huseynov, head of the Eurasia department at risk consultancy Exclusive Analysis, said on the sidelines of International Petroleum week in London, according to Reuters.
Yesterday's signing ceremony was witnessed by Chinese Vice Premier Wang Qishan and visiting Russian Deputy Prime Minister Igor Sechin.
"We hope the two sides will give full play to the bilateral energy negotiation mechanism to promote energy cooperation and score substantial outcomes," Wang told Sechin, according to Xinhua news agency.
In a later meeting with Chinese Premier Wen Jiabao, Sechin said the achievements of this visit indicated a high level of strategic partnership.
He said the energy cooperation between the two nations is "long term, comprehensive and sustainable."
Trade between Russia and China posted rapid growth in the first half of last year but slowed in the second half, as the global downturn spread.
Trade between the two countries amounted to U$56.8 billion last year, a rise of 18 percent. But it was down sharply from the 44.3 percent growth rate in 2007, according to China's General Administration of Customs.
As part of the broad energy supply deal, China will lend US$15 billion to Rosneft, Russia's state-owned major oil company, and US$10 billion to Transneft, giving a vital boost to the energy companies as they struggle to raise capital amid tightened lending conditions and plunging oil prices.
In return, Russia promised to guarantee annual oil supply of 15 million tons, or 300,000 barrels per day, for 20 years to China.
The signing ceremony marked an end to months of talks between the two countries after negotiations broke down amid disagreements over interest rates and state guarantees.
Russian crude will be supplied through a long-delayed pipeline project agreed to late last year. The pipeline, extending from western Siberia to the Pacific coast, is to be linked to China from the Siberian city of Skovorodino.
China has abundant cash that Russia needs to access in the credit crunch as its government is running major deficits and some of its companies are finding it difficult to repay loans and borrow project finance on commercial markets.
Although China's industries face a severe slowdown in the export markets, the country is keen to ensure that energy does not constrain future growth and force up the prices it pays.
"Demand in the Chinese market by the time the crisis is over will be there ... The risk is that we'll have supply bottlenecks which will again push the prices up," Teymur Huseynov, head of the Eurasia department at risk consultancy Exclusive Analysis, said on the sidelines of International Petroleum week in London, according to Reuters.
Yesterday's signing ceremony was witnessed by Chinese Vice Premier Wang Qishan and visiting Russian Deputy Prime Minister Igor Sechin.
"We hope the two sides will give full play to the bilateral energy negotiation mechanism to promote energy cooperation and score substantial outcomes," Wang told Sechin, according to Xinhua news agency.
In a later meeting with Chinese Premier Wen Jiabao, Sechin said the achievements of this visit indicated a high level of strategic partnership.
He said the energy cooperation between the two nations is "long term, comprehensive and sustainable."
Trade between Russia and China posted rapid growth in the first half of last year but slowed in the second half, as the global downturn spread.
Trade between the two countries amounted to U$56.8 billion last year, a rise of 18 percent. But it was down sharply from the 44.3 percent growth rate in 2007, according to China's General Administration of Customs.
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