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13 Oct, 2009 17:37

Russia & China: economies moving closer

Russia’s Prime Minister Vladimir Putin, together with a Russian business delegation, has sealed over 3.5 billion dollars in deals with China on energy, infrastructure and space exploration.

The lucrative agreements are the outcome of talks with China’s leaders in Beijing.

Major gas deal

The foundation has been set for a future pipeline which, when built, will bring up to 70 billion cubic meters of gas a year from Russia to China, according to Aleksey Miller, CEO of Russian gas giant Gazprom. Preliminary agreements have already been signed.

“We have agreed on the initial framework for supplying China with natural gas,” Miller said.

“According to the agreements, the price of the gas will be determined by a special formula included into the future contract. It will be based on existing international practice.”

Putin expressed confidence that the talks on gas deliveries will end fruitfully.

“What type will these deliveries be like? Pipeline gas or liquefied gas?” Putin said. “These questions and problems should be settled at a corporate level, as well as price tags.”

“Another thing is important: there are requirements, and there are opportunities to work with each other,” the prime minister added. “In this sense, the Russian and Chinese economies complement each other. This work is planned for many decades.”

Russia, which is looking for alternative consumers besides Europe, can become the primary energy supplier for China, says Derek Scissors, a research fellow for Asia economic policy at The Heritage Foundation's Asian Studies Center. China has its interest in it as well.

“It makes perfect sense,” said Scissors. “China is the second-biggest energy-demanding country in the world, and Russia is on some measures the largest energy-supplying country in the world. And they happen to be next to each other.”

Russian Deputy Prime Minister Aleksandr Zhukov told reporters that Russian and Chinese businessmen and officials signed the agreements, including $500 million loans each, from the China Development Bank to its Russian counterpart VEB, and from the Agricultural Bank of China to the state-controlled VTB bank.

Other deals included Chinese companies making investments in construction industry facilities in Russia, Zhukov said.

Russia & China help stabilize world – Putin

In terms of security cooperation, the two countries agreed to notify one another of any launches of ballistic missiles and space launch vehicles. The Russian premier noted after the talks that cooperation between the two countries is “one of the most crucial elements of stability in the world” today.

Today’s world is neither safe nor balanced, and is facing a large number of threats in the economic, security, ecological and other spheres, Putin told the Chinese media on Tuesday.

He also noted that Russia and China have been pursuing a peace-oriented foreign policy.

“We [Russia and China] are not waging wars anywhere and have no forces abroad,” he said. “However, our position on a number of key international problems plays a significant role in their solution.”

Both Russia and China are permanent members of the UN Security Council and are big players when it comes to negotiations with Iran and North Korea, so talks on those issues took place on the sidelines of the major deals.

According to Putin, the two countries’ shared vision on international problems and their ability to coordinate their positions plays a stabilizing role.

“These are not just declarations. The joint positions of China and Russia on various issues help somewhat restrain our more emotional colleagues, or, on the other hand, help speed up work on some matters, for instance, in the sphere of global food security, in the sphere of economic development,” the prime minister said.

“Cultural ties meant to strengthen trust”

The Russian prime minister also noted the importance of cultural ties between the two countries.

“I think cultural cooperation between Russia and China is absolutely necessary to strengthen our economic, military and political ties,” Putin said. “It’s the basis for the most important thing: trust between the two sides. Without trust we cannot develop relations in any sphere.”

Read also Russia goes to Romania for major gas deal