Russia and China Prepare New 320 Billion Dollar Deal

Gazprom and China are preparing to sign a second major gas deal worth at least 320 billion dollars which may be signed as early as this Autumn. The so called "Western Route" would add an additional 30 billion cubic meters of gas annually on top of the 38 billion agreed in May through the "Eastern Route". 

Furthermore, Gazprom's CEO Alexei Miller said that over time exports to China will rise to 100 billion cubic meters of gas - inferring a combined trillion dollar deal based on the price terms used in May. 

Currently, China uses coal for about 70% of its energy needs and only 5% is derived from Natural Gas. But the environmental issues of using coal has plagued China with economic issues from widespread pollution. As a consequence, China has embarked on a strategy to make natural gas a very minimum of 10% of its supply by 2020. This means that China could be consuming as much as 420 billion cubic meters of gas a year by 2020. In short China desperately needs Russia.

The power of Siberia pipeline that was announced in May will add up to 0.4% to GDP growth every year from 2015 according to Finance Minister Siluanov. Consequently, if Russia meets China's demands for 100 billion cubic meters of supply which seems more than likely it will collectively add 1% to yearly GDP growth over the medium term. 

This deal also comes one year after China and Rosneft signed a 300 billion dollar oil deal and several months after China signed a separate 20 year gas contract with Novatek to import Russian Liquified Natural Gas from the Yamal Peninsula.