Geopolitics Take Centre-Stage In Sino-Russian Gas Deal


BMI View : We believe Russia has made significant concessions to China in order to secure the geopolitical and diplomatic dividends of a Sino-Russian gas supply agreement. The gas agreement not only cements Russia's strategic pivot towards Asian energy markets, but also acts as a potent political symbol as Western powers increasingly seek to economically isolate Russia.

The USD400bn Sino-Russian gas deal agreed on May 21 is a symbolic diplomatic victory for Russia. In the midst of European threats to reduce Russian share in the continent's gas market, Russia has secured a new market that will be the second largest after Germany with China's agreement to take 38bcm of Russian gas for 30 years. It also reflects Russia's success in securing an energy ally in China as Europe threatens to use the energy card to weaken Russia's position in Ukraine.

It is also a commercially important deal for Russia's Gazprom, a major source of revenue for the Russian state budget. The long-term supply agreement with China will provide Gazprom with a steady stream of revenue as European contracts approach expiry.

A Good Bargain For China
China's Current Gas Import Prices And Russia Gas Price Possibility (USD/mnBTU)

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This article is tagged to:
Sector: Country Risk, Oil & Gas, Infrastructure, Power
Geography: Russia, China