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Russia closes gas deal with China amid tensions with the West

Russia China

Russia has closed a superior gas deal with China for the delivery of up to 10 billion cubic feet of gas per year. The agreement comes as Russia increases tensions with the West over Ukraine and other issues.

Firstly, the gas will go through a new pipeline from Gazprom to the Chinese energy major CNPC. The pipeline will connect Far East region with northeast China. According to Reuters, the first flows of gas will happen in two or three years.

Moreover, the deal is not the first deal between Russia and China. In fact, Russia already sends gas to China through the Power of Siberia pipeline, which began pumping supplies in 2019. It also sends liquified natural gas (LNG) to the Asian country. In 2021 China received up to a 16.5billion cubic meters of LNG from its neighbor.

Furthermore, Moscow had previously drawn plans to supply China with 38 bcm of gas by pipeline by 2025. The deal coincided with a visit from President Vladimir Putin to the Beijing Winter Olympics. Considering the output from Power to Siberia, the new deal will add 10 billion cubic meters (bcm) of gas to China.

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Russia and China sign deal in euros

In addition, the gas will travel from the far east island of Sakhalin via pipeline, across the Japan Sea to northeast China’s Heilongjiang province. According to the sources in China, the 10 bcm marker will happen around 2026.

On the other hand, the deal between the countries will be down in euros, in line with efforts by the two states to diversify away from US dollars. Discussions between Gazprom and CNPC began several years ago after the start-up of Power of Siberia. However, talks accelerated more recently, due to Beijing setting its 2060 carbon-neutral goal.

Finally, the sources said that the pricing of the new gas deal will be similar to that of Power of Siberia. As a result, both parties are very satisfied with the outcome. The source concluded. “China’s coal shortage last year served as another wake-up call that natural gas has its special value, that’s why CNPC decided to top up with the new pipeline deal.”

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