Putin hails China oil and gas deals amid tensions with Europe

Russia agrees deal to supply gas to China via a new pipeline as tensions simmer with European customers over Ukraine.

An employee is seen walking past a part of Gazprom's Power Of Siberia gas pipeline in Svobodny, Russia.
Russia already exported 16.5 billion cubic metres of gas to China in 2021 via its Power of Siberia pipeline [File: Maxim Shemetov/Reuters]

President Vladimir Putin has unveiled new Russian oil and gas deals with China worth an estimated $117.5bn, promising to ramp up Russia’s Far East exports at a time of heightened tension with European customers over the Ukraine crisis.

Russia, already Beijing’s third-largest gas supplier, has been strengthening ties with China, the world’s biggest energy consumer, reducing its dependence on its traditional European energy customers.

“Our oilmen have prepared very good new solutions on hydrocarbon supplies to the People’s Republic of China,” Putin said at a meeting with Chinese President Xi Jinping to discuss closer cooperation.

“And a step forward was made in the gas industry,” he added, referring to a new contract to supply 10 billion cubic metres (bcm) per year to China from Russia’s Far East. Putin was in Beijing to attend the Winter Olympics.

Kremlin spokesman Dmitry Peskov said the deal was for 25 years, while a Chinese industry source said it was for 30.

Russian President Vladimir Putin attends a meeting with Chinese President Xi Jinping in Beijing
Russian President Vladimir Putin attends a meeting with Chinese President Xi Jinping in Beijing, China [Sputnik/Aleksey Druzhinin/Kremlin via Reuters]

Power of Siberia

Russia already sends gas to China via its Power of Siberia pipeline, which began pumping supplies in 2019, and by shipping liquefied natural gas (LNG). It exported 16.5 billion cubic metres (bcm) of gas to China in 2021.

The Power of Siberia network is not connected to pipelines that send gas to Europe, which has faced surging gas prices due to tight supplies, one of several points of tension with Moscow.

Under plans previously drawn up, Russia aimed to supply China with 38 bcm of gas by pipeline by 2025.

Separately, Russian oil giant Rosneft, headed by longstanding Putin ally Igor Sechin, signed a deal with China’s CNPC to supply 100 million tonnes of oil through Kazakhstan over 10 years, effectively extending an existing deal.

Rosneft said the new deal was worth $80bn.

The agreements bolstered the rouble and the Russian stock market, including shares in Rosneft and Gazprom.

Putin has accused the United States of stoking tensions over Russia’s neighbour Ukraine, which has angered Moscow by wanting to join NATO. More than 100,000 Russian troops have amassed near the border with Ukraine. Western countries accuse Moscow of planning an invasion, which it denies.

Russia is Europe’s biggest provider of natural gas, and Western countries are worried that already strained supplies could be interrupted in the event of a conflict.

However, the new deal with Beijing would not let Moscow divert gas otherwise bound for Europe, as it involves gas from the Pacific island of Sakhalin, not connected to Russia’s European pipeline network.

Gazprom said in a statement it planned to increase gas exports to China to 48 bcm per year, including via a newly agreed pipeline that will deliver 10 bcm annually from Russia’s Far East.

Under previous plans, Russia aimed to supply China with 38 bcm by 2025. The announcement did not specify when it would reach the new 48 bcm target.

Gazprom, with foreign partners including Shell, already produces more than 10 million tonnes of liquefied natural gas (LNG) per year in Sakhalin.

Source: Reuters