Russia, China postpone major gas deal

Associated Press
Russian President Dmitry Medvedev,  right, and Chinese President Hu Jintao walk after their talks in the Moscow's Kremlin during the official visit, Russia, Thursday, June 16, 2011. The leader of China, the most populated country in the world, arrived in neighboring Russia, the largest country in the world, on Wednesday. The Chinese leader Hu Jintao flew to Moscow for talks with Russian leaders. (AP Photo/RIA-Novosti, Dmitry Astakhov, Presidential Press Service)
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MOSCOW (AP) — Russia and China on Thursday postponed the signing of a major deal to supply Siberian natural gas to energy-hungry coastal China after they failed to agree on a price.

In 2010, Russia's state-controlled Gazprom and China National Petroleum Company agreed to start the supplies via a yet-to-be-built Altai pipeline in 2015, but the talks stalled over pricing. Moscow wanted to link the price to oil prices the way it does in Europe, but China considers any European-level price too high.

Russian President Dmitry Medvedev announced the delay after his talks with China's President Hu Jintao in the Kremlin. "The documents are being agreed upon," Medvedev said. "They ... will give us a growing market and long-term contracts at the advantageous prices."

Gazprom's European customers buying gas on long-term contracts often pay significantly more than those purchasing it on the spot market.

China, which currently buys piped gas from ex-Soviet Turkmenistan and Kazakhstan and also gets liquefied natural gas from Australia and Yemen, wants a significantly lower price.

Gazprom said the construction of the Altai pipeline intended to supply China with natural gas will start in mid-2011 and will be completed by 2015. It will bring up to 70 billion cubic meters of gas to Shanghai annually.

Despite the failure to strike the deal, Medvedev and Hu hailed trade ties between the former Cold War-era rivals.

Medvedev said the bilateral trade approached $60 billion last year— making China Russia's biggest trading partner — and is expected to reach $200 billion by 2020.

Also Thursday, Deputy Prime Minister Igor Sechin said Rosneft, the country's largest oil company, will boost crude oil deliveries to northeast China via a 4,000-kilometer (2,500-mile) pipeline. The pipeline, which went into operation this year, can currently carry 15 million tons of oil a year, but its capacity can be eventually increased to 50 million tons a year.

Sechin also said that Russia will ship 12 million tons of coal to China this year, Interfax reported.

Russia is the world's biggest energy producer, while China has become the world's largest energy consumer, overtaking the U.S. in 2009.

Although Europe has remained Russia's largest export market for gas and oil, both Beijing and Moscow have been seeking to diversify their energy sources and markets, despite a long history of mutual suspicion and tensions.

Past energy negotiations between China and Russia often have snagged on disagreements over prices, loan terms and other issues, including Beijing's desire for equity stakes in Russian resources. Like China's own state-run companies, Russia balks at ceding any control over what it views as strategically vital assets.

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