PREVIEW-Gas, geopolitics in play on Medvedev's China trip

Published 09/24/2010, 08:54 AM
Updated 09/24/2010, 08:56 AM

* Russia struggles to pin down price for gas exports

* Medvedev to visit historic city, futuristic World Expo

* North Korea tension, Iran defiance likely issues

By Steve Gutterman

MOSCOW, Sept 24 (Reuters) - President Dmitry Medvedev heads to China on a tough sales call this weekend, as Russia seeks to pin down a deal for gas supplies to a huge neighbour that is hungry for energy but has expanding import options.

Medvedev, whose mandate is to make Russia's creaky, resource-reliant economy more competitive, may also seek commitments for broader Chinese investment that could fuel growth outside the energy sector.

Medvedev will mix business with geopolitics on his three-day trip, meeting with Chinese President Hu Jintao on Monday for talks that may touch on Korean peninsula tension and Iran's nuclear programme, in addition to trade and energy.

A Russian diplomat warned this week that conflict between North and South Korea could erupt soon amid "extreme" tension.

Medvedev, whose country has joined forces with China in the past to lower Western pressure on Iran, added punch to calls on Tehran to end defiance over its nuclear activity by this week banning a range of weapons supplies to its longtime customer.

Medvedev will start off with a journey into the past, visiting Dalian, a port city controlled and developed by imperial Russia at the turn of the 20th century and governed by the Soviet Union for five years after World War Two.

He will wrap up his trip with a look into the future at Shanghai's World Expo -- a showcase of the economic boom that has stoked China's appetite for energy supplies from its larger but far less populous and slower-growing northern neighbour.

ENERGY HOPES

In China to set the stage for Medvedev's visit, Russia's top energy official Igor Sechin laid the cornerstone on Tuesday for a 13-million-tonne per year oil refinery in the city Tianjin.

A spokesman for Sechin, a deputy prime minister, said Russia will supply 70 percent of the oil for the $5 billion refinery, which is to be built in two years.

Russia's Transneft pipeline company and China National Petroleum Corp are expected to sign an agreement on transporting oil from Skovorodino, where a pipeline from Siberia to the Pacific region ends, to the Chinese border city of Mohe.

But prospects for gas exports to China are clouded after years of price talks, and Russia's position has weakened as world prices have fallen and China's import options have grown.

China also has potential domestic reserves of shale gas, whose increasing development worldwide has been watched with chagrin by the Kremlin.

After talks in China this week, Russian gas giant Gazprom said it planned to sign documents with CNPC this month that would "form the basis of a future contract".

The sides agreed on conditions for future shipments that are scheduled to begin in 2015, it said. But Medvedev said the price, for years the main hurdle to a final deal, would not be determined until next year, Interfax news agency reported.

The volume of trade between Russia and China increased sharply in the first half of the year to $25.5 billion and was on pace to return to the $55.9 billion recorded in 2008, before the economic crisis, according to the Kremlin.

But Russia is eager for broader inflows of Chinese cash to help fuel growth.

Medvedev "will try to get a commitment from the government to encourage its major corporations to increase investment in the Russian economy, especially outside extractive industries," Uralsib bank's chief economist Chris Weafer said in a note.

Russia and China have long struck close positions on international issues, opposing U.S. global dominance and warily eyeing both U.S. influence and unrest in their neighbourhood ex-Soviet Central Asia.

Talks may touch on Kyrgyzstan, which holds parliamentary elections next month after months of political turmoil and ethnic clashes that killed at least 400 people in June. Kyrgyzstan borders China and hosts U.S. and Russian air bases.

(Additional reporting by Denis Dyomkin and Vladimir Soldatkin; Editing by Elizabeth Fullerton)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.