Russian President Vladimir Putin visiting Shanghai this week to make a gas deal between Russia and China. Agreement may be finalized despite pressure from the United States to avoid any undermining sanctions to Moscow because of the Ukraine crisis.
Negotiations for this deal began over a decade ago. They have been stalling because of the high price on gas. However, analysts believe that Moscow has been completely isolated over the crisis in Ukraine. Thus, it faces tremendous amount of pressure to make certain concessions for a political and economic boost.
Why Putin visits China?
Putin’s visit to Shanghai may also be able to highlight the diverging roles of these two powers. China is quickly moving forward to take the United States as the world’s largest economy in this decade. In addition to this, China is also very assertive in political relationships with the neighbors.
On the other hand, the Russian economy is suffering from a dispute with the West over the Ukraine crisis. The tilt towards the European Union has inflamed the country’s insecurities about its declining influence.
China Weighs Benefits
Before anything proceeds, China needs to weigh the numerous benefits against strained ties with the United States and European Union. According to analysts, Chinese leaders are more inclined towards a deal with Russia. It’s not a secret, that in recent years, China has faced chronic gas shortages.
Due to this, China is focusing on a proposed 30 year $400 billion contract between State-owned company, China National Petroleum Corp and Government-controlled Russian company, Gazprom. Talks about Russia’s and China’s gas deal started long before the current crisis in Ukraine. Chinese leaders are very eager to obtain Russian gas to curb air pollution by reducing the usage of coal.
Take a look at this video – how bad is situation with air pollution in China, they called it “Airpocolypse”.
Will Russia offer a cheaper gas deal for China?
The gas deal between Russia and China will be a very important strategic gain for both countries. It will happen at a time when the Ukraine crisis has been fraying Russia’s economic and political ties with the United States. In fact, the European Union and United States have imposed Visa bans and asset freezes on 61 people and many different companies linked to Vladimir Putin’s inner circle. Such restrictions have been imposed because of the annexation of Crimea from Ukraine.
The restrictions have added to the numerous economic and political problems for Russia. The country already faces capital flight and slowing growth as individuals and companies have started pulling money out of the country. Ex-Minister of Finance Alexei Kudrin said that this year Russia going to lose around 150 billion dollars because of the sanctions from the West.
According to financial experts, Russia can offer a big concession of the gas prices to China. The turmoil surrounding Russia will probably force Putin to go ahead and sign the deal with China. For some time, Russia has been looking east for many new customers, while the sanctions in Europe have encouraged countries to reduce the usage of Russian gas.
Although the Ukraine crisis is playing an important role, energy cooperation is turning out to be a long term strategy for both Russia and China.