China And Russia Sign 30 Year Gas Deal

May 21, 2014
Originally published on May 21, 2014 2:51 pm

After 10 years of negotiations, China and Russia have made a major deal to import natural gas from Russia to China by pipeline.

The gas will be sent through a new eastern pipeline that has yet to be built.

As Joe Weisenthal, executive editor at Business Insider tells Here & Now’s Jeremy Hobson, this is a big deal for Russia, given European sanctions over its intervention in Ukraine.


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This is HERE AND NOW from NPR and WBUR Boston. I'm Jeremy Hobson.

China and Russia have signed a $400 billion natural gas deal. It's a 30-year agreement that will send natural gas from Russia by pipeline to China. Joe Weisenthal is executive editor at Business Insider. He's with us from NPR in New York. Joe, welcome to HERE AND NOW.

JOE WEISENTHAL: Thank you for having me.

HOBSON: So this is a deal that has been in the works for a long time, but it certainly comes at an interesting time, especially for Russia, given all that's going on in Ukraine.

WEISENTHAL: Yeah, absolutely. Putin had this trip scheduled to China for a while, and really wanted to get a deal locked down. They had been leaking for a while that it was going to happen. Then there were some leaks that maybe it wasn't going to happen.

But the fact of the matter is that both Europe and Russia are trying to show who has leverage over whom. Europe would like to show that it's not dependent on Russia for gas. Russia would like to show that it's not dependent on Europe for money or economic activity. And so locking this deal down with China is kind of something that Putin can say, you know, he still has economic opportunities that aren't in Europe. So this was good that he got it done.

HOBSON: And what about for China? What is in it for China?

WEISENTHAL: Well, China needs tons of energy. There's just no getting around that fact. It already imports quite a bit of its energy both natural gas and oil. And it's expected to increasingly depend on imports going forward in the future.

Now it used to be they would say that China was the driver of global oil prices, for example. It's probably less so because it's slowed down a bit. But the fact of the matter is that for both gas and oil China has a huge demand and it will keep growing.

HOBSON: And is likely that if China is getting oil or natural gas from Russia, that that means less for Europe, or is it a zero-sum game?

WEISENTHAL: I don't know if it's necessarily a zero-sum game. I mean, I think the issue is that Europe is going to continue to try and wean itself off of Russian gases. It's already done that to some extent. So I don't necessarily think it's a zero-sum game, but I do think it's about Putin continuing to have some leverage and some ability to, you know, withstand the economic pressure that's coming from the west.

HOBSON: Where, by the way, is China currently getting its energy from?

WEISENTHAL: Well, it's mostly Mid East, Saudi Arabia on the oil side is a huge provider of energy to China. Qatar on the natural gas side is the biggest supplier to China.

HOBSON: Now, the pipeline that we're talking about is in the east, right? It would go from Siberia into China.

WEISENTHAL: That's correct.

HOBSON: How long does it take for it to be up and running?

WEISENTHAL: That's the interesting thing. So they've said today that they want to have the first gas be flowing by 2018. That seems awfully soon, you know, four years from now.


WEISENTHAL: On the other hand, I think it's safe to say that the construction of a pipeline between Russia and China won't quite have the same level of regulatory hurdles as, say, building a pipeline in the United States would have. So obviously they can get it done faster than we would expect here. Still that does seem rather ambitious.

HOBSON: Now Joe, you're in New York. Is this moving markets here in the United States? Are energy companies watching what's going on?

WEISENTHAL: I don't think it has a huge effect. Part of the issue is that natural gas is not a commodity that's traded globally. With oil, there's basically one price all around the world. And, I mean, there's slight regional variations, but basically it's one price. With natural gas, the regional markets idiosyncrasies in each place and it doesn't have the same global ramifications the same way.

HOBSON: All right. Joe Weisenthal, executive editor at Business Insider talking with us about this big $400 billion deal signed today to get natural gas from Russia to China. Joe, thanks so much.

WEISENTHAL: Thank you.


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