Date: 2016-08-12

Russia and China Sign Monumental Gas Deal

Lucas Blankenship

After 10 years of negotiations, Russia and China have finally reached a natural gas deal.  The 30-year agreement worth an estimated $400 billion will supply China with Russian natural gas, beginning in 2018.  China will make advance payments amounting to as much as $25 billion to Russia to develop the necessary infrastructure to effectively supply the gas.  With this deal signed, Russia may be in a better position to negotiate with the United States and European Union over imposed sanctions for Russia’s involvement in Ukraine.

The agreement will supply China with 38 billion cubic meters of natural gas per year, which may signal China’s effort to transition to more sustainable energy sources.  While negotiations have stalled over the last decade, China has looked to other countries for natural gas.  Turkmenistan is currently China’s largest foreign natural gas supplier, and last year China began importing gas from Myanmar.  This deal with Russia will allow China to have a long-term, predictable supply of natural gas that will help support its enormous economy.

Currently, China is Russia’s largest trading partner, with bilateral trade flows amounting to $90 billion in 2013.  Both countries have expressed interest in expanding trade with one another and aim to double their trade volume over the next decade.  This deal was monumental for Russia, as it is facing scrutiny and sanctions from Western Europe and the United States over its involvement in Ukraine’s recent political conflict.  The agreement has further solidified Russia’s diplomatic and trade relations with China, and could help hedge against any further economic sanctions imposed by the West.

It will be interesting to see how this trade agreement will affect further trade relations between Russia and China, and also the impact it will have on Russia’s relationship with countries that have condemned its interference in the Ukraine crisis.

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