Putin in China to Strengthen Energy, Political and Military Ties

BEIJING – Russian Prime Minister Vladimir Putin landed in China Monday in an effort to bolster energy, political and military ties between the former rival nations turned strategic partners.

Putin was met by Chinese Foreign Minister Yang Jiechi Monday evening when he arrived in Beijing for the start of his three-day trip, his first visit to China since becoming prime minister last May.

He is expected to hold talks with Chinese counterpart Premier Wen Jiabao, President Hu Jintao and other leaders.

Among the agreements expected during Putin's visit this week is a possible gas-for-loans deal similar to a $25 billion oil-for-loans deal that was finalized earlier this year, Chinese media reports and analysts said.

Russia's cash-strapped energy companies need Chinese funding, while Beijing has welcomed the chance to further diversify sources for energy needed to fuel its fast-growing economy. The global economic crisis and changing market conditions have further spurred cooperation as lower demand from Europe has spurred Russia to diversify markets for its oil and gas.

The official Xinhua News Agency said in a commentary Monday that the two countries should "further consolidate" ties against the backdrop of a "complicated and drastically changing international situation."

"Over the course of 2009 there's been quite a breakthrough. The oil-for-loans deal put in place earlier is serving as a basis for other deals that are starting to move forward," said Thomas Grieder, Asia Pacific energy analyst for IHS Global Insight in London.

The deal signed earlier this year calls for $25 billion in Chinese funding to support construction of a pipeline to supply oil from Russia's vast, untapped Siberian reserves to China — the world's second biggest oil and gas consumer.

In exchange, China was guaranteed a 20-year supply of crude oil — only part of the $100 billion in China-Russia energy-related deals agreed to this year.

A similar credit may be in the works for Russia's state-run natural gas monopoly, Gazprom, to get started on gas pipelines for its Kovykta project, reports said.

China is viewed as the main market for that project, one of the largest undeveloped gas fields in east Siberia with estimated reserves of 2 trillion cubic meters of gas and more than 83 million tons of gas condensate.

Earlier this year, Gazprom warned that slower demand due to the economic crisis might cause delays in the project.

"The fall in European demand for gas drove home to the Russian energy companies the demand security threat. Russia wants to diversify to get as much leverage as possible," Grieder said.

Past energy negotiations between China and Russia often have snagged on disagreements over prices, loan terms and other issues, including Beijing's desire for equity stakes in Russian resources. Like China's own state-run companies, Russia balks at ceding any control over what it views as strategically vital assets.

But Moscow's need for financing and markets, and China's huge appetite for resources appear to be propelling such projects ahead, despite such differences.

During Putin's visit, nearly three dozen contracts in energy, mining, transportation and infrastructure development, worth more than $5.5 billion in total, are due to be signed, Russian Deputy Prime Minister Alexander Zhukov told reporters in Moscow.

Over the weekend, Russian and Chinese negotiators met in Beijing to put the final touches on those agreements, Chinese reports said.

Chinese media reports said another agreement that might be signed is a contract to build a joint venture refinery in the northeastern city of Tianjin, near Beijing.

Preliminary research has ended for the project, which would be 51 percent-owned by state-run China National Petroleum Corp., and 49 percent by Russia's Rosneft. The plan is to finish building the 15 million ton annual capacity refinery by 2012, with total investment between $300 million and $400 million, the state-run newspaper 21st Century Business Herald reported.

Putin will also attend a summit of the member states of the Shanghai Cooperation Organization, a regional security grouping that includes China, Russia, and four Central Asian nations.

Rivals throughout much of the Cold War for allegiances in the communist world, Moscow and Beijing have forged closer political and military ties since the Soviet collapse, seeking in part to counter U.S. influence.