Putin heralds huge gas deal with China

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The Independent Online

Russia is close to signing a huge gas-export deal with China, in what would be a landmark trade agreement between the long-wary neighbours.

An agreement to supply the world's second-biggest economy with up to 68 billion cubic metres of Russian gas a year over 30 years has long been delayed over pricing disagreements. "We are nearing the final stage of work on gas supplies," Russia's Prime Minister, Vladimir Putin, said after talks with the Chinese Premier, Wen Jiabao.

Mr Putin is hoping the two-day visit – his first trip abroad since announcing last month that he plans to reclaim Russia's presidency – will broaden trade with China, which he expects to grow to $200bn in 2020 from $59.3bn last year.

"Our goal is to diversify our economic ties," Mr Putin told reporters. "I think everyone will agree that compared with the known difficulties in the global economy, this aspect of the Russian-Chinese relationship [the growing trade] has a stabilising impact."

Differences over pricing have been a major stumbling block after an outline agreement was announced back in 2006. But there are plenty of obstacles.

"Russia wants to link the gas price to oil prices the way it does in Europe, but China considers that price too high," said Gordon Kwan, head of regional energy research for Mirae Asset Securities. China "has a very strong upper-hand in these negotiations and there's no reason why it needs to agree to an oil-linked price," Mr Kwan added.