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Major economic boom expected for Siberia in gas, construction and trade between Russia and China

22 May 2014

New rail bridge linking the two countries symbolizes closest-ever economic co-operation between neighbors. 

'This is Gazprom's biggest contract. We don't have a contract like this with any other company,' said the Russian giant's chief executive Alexei Miller. Picture: Gazprom

The $400 billion gas deal secured the main worldwide headlines along with 49 new agreements to emerge from President Vladimir Putin's meeting with President Xi Jinping.

China will receive gas from Siberia's Kovykta gas field in Irkutsk region and the Chayanda in the Sakha Republic. The supply deal is for 30 years, and agreement ends a decade of negotiations. Putin confounded pundits who predicted this week that the energy deal would fail and declared the exploitation of two gas fields plus tens of thousands of miles of pipelines mean ‘this contract will involve the largest construction project in the world in the next four years, without exaggeration’. 

'This is Gazprom's biggest contract. We don't have a contract like this with any other company,' said the Russian giant's chief executive Alexei Miller. China National Petroleum Corporation (CNPC) said that the contract will see the east route pipeline start providing China with 38 billion cubic meters of natural gas annually from 2018.

However, the deal opens the way of exploration the western route, through the Altai Mountains, which was previously criticized on environmental grounds. The gas will be piped to China's northeast, the Beijing-Tianjin-Hebei metropolitan area in the north and the Yangtze river delta in the east.

'The deal is a milestone,' said Liu Yijun, professor with China University of Petroleum. 'The east route pipeline explored natural gas import channels and guarantees energy security.' Sources said a $25 billion advance for gas supplies will enable Gazprom to lay the Power of Siberia pipeline which will carry the gas. 

Putin described the agreement as 'the biggest deal in the gas sector in Soviet and Russian history' adding that the two sides are now beginning work on a possible 'western' supply route, which envisages supplies from West Siberia to be shipped via the Altai pipeline for delivery to China's west.

Project of gas pipeline Power of Siberia


Gas pipeline in the Far East


General view on the places where pipeline Altai can go

Sources said a $25 billion advance for gas supplies will enable Gazprom to lay the Power of Siberia pipeline which will carry the gas. The deal opens the way of exploration the western route, through the Altai Mountains. Pictures: Gazprom

Work on the new bridge across the Amur River (known in China as the Heilongjiang River)  - the first connecting Russia and China - is due to start within months, and to be completed by 2016. It will allow for a major boost in trade, with Russia expected to boost its exports to China by 21 billion tons.

A Russian-Chinese investment fund created by RDIF (Russian Direct Investment Fund) and China Investment Corporation, and the Development Fund of the Far East and the Baikal region together with the partners, will invest around $400 million in this project. According to Russian Direct Investment Fund CEO Kirill Dmitriev: '20% will be equity financing, and 80% - debt financing.'

The 2,209 meter bridge will join the Jewish Autonomous Region (Russia) and the province of Heilongjiang (China). A new export corridor is planned to remove restrictions on the transportation of goods from fields developed in Eastern Siberia and the Far East. 

Dmitriev said: 'Given the development of new deposits and increase traffic in the next 10 years, the region could face a shortage of roads capacity. 'Construction of the first crossing of the Amur River on the Russian-Chinese border will be an important step in the modernization of the infrastructure of the Far East and will help prevent transport malfunctions.'

China Daily flagged up a 'record-breaking 49 agreements' apart from the gas deal 'covering political, trade and military areas in a move to further strengthen the Sino-Russian partnership', with many seen as directly beneficial to Siberia and the Far East of Russia, which are priority areas for growth. It came at the seventh meeting between Xi and Putin since they both became heads of state more than a year ago.

Map of the project of the bridge across Amur


Visualization of the bridge across Amur


Plan of the bridge across Amur river

The 2,209 meter bridge will join the Jewish Autonomous Region (Russia) and the province of Heilongjiang (China). A new export corridor is planned to remove restrictions on the transportation of goods from fields developed in Eastern Siberia and the Far East. Pictures: Gipromost

The two countries vowed to increase bilateral trade to $100 billion by 2015 and to $200 billion by 2020, from $90 billion last year. Russia's trade volume with China could surpass that with the European Union, said Alexander Lukin, vice-rector at the Russian Foreign Ministry's Diplomatic Academy. 'Russia's trade turnover with China is on the rise and is now considered just as important. The more sanctions Europe will impose, the closer Russia will move to Asia, in particular to China,' he said. 

Alexei Pushkov, head of the international affairs committee of the Russian parliament, said the agreement showed Washington could not bully Moscow. ‘The 30-year gas contract with China is of strategic significance. Obama should give up the policy of isolating Russia: It will not work,’ he said.

The economic boom expected from the gas and other deals are the most tangible yet of the Russian aim of boosting its eastern regions and tapping into Asian prosperity. 

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