Vremya Novostei: "Low Price for China"
Vera Kuznetsova
Russia, China negotiate market-style oil-delivery contracts
Although Russia and China are both committed to expanding bilateral cooperation, they are having trouble negotiating key economic issues. This was confirmed by the October 28 Russian-Chinese inter-governmental talks in Moscow.
Russian Prime Minister Vladimir Putin and Wen Jiabao, Premier of the State Council of the People's Republic of China, spent virtually the entire day together.
"It won't be an exaggeration to say that the border unites, rather than divides, our two nations," Putin said, opening the talks with the high-ranking Chinese visitor.
Putin did not doubt the fact that the 2008 bilateral trade turnover would "beat the record" and top the $50 billion mark. "We consider trade-turnover volumes and patterns equally important," Putin said.
"Yes, I have analysed all aspects of our relations and have decided that their political foundation hinges on trust," Wen Jiabao replied. "Summing up the results of our cooperation, I would like to note that they are based on trust, friendship and mutual benefits," Wen Jiabao said.
After that, he drew some historical parallels. "Next year, we will celebrate the 60th anniversary of Chinese-Russian relations. Russia became the first country to recognise the independence of the People's Republic of China," Wen Jiabao said. At that moment, everyone was free to think what they wanted, including the recognition of the independence of Abkhazia and South Ossetia. But the Chinese Premier simply anticipated two events, namely, the 2009 Year of the Russian Language in China and the 2010 Year of the Chinese Language in Russia.
After discussing social and cultural ties, the two Prime Ministers continued talks behind closed doors and focused on energy cooperation, a traditionally important issue. Russia's Deputy Prime Minister Igor Sechin, who oversees the national fuel and energy sector, moderated the talks behind the scenes.
One day before inter-governmental debates at expert level, Mr Sechin promised Mr Putin that he would try to translate projected Russian energy-resources deliveries (primarily crude oil) to China into commercial contracts. Moscow could also try and convince Chinese partners to open credit lines to Russian oil companies for financing such deliveries.
Rosneft, Russia's largest state-owned oil company now supplying the bulk of crude oil to China, could do with multi-billion-dollar Chinese loans at this time of the global financial crisis. Incidentally, Mr Sechin heads the Rosneft board of directors.
However, both sides had a hard time negotiating oil deliveries because China, which swears friendship to Russia and trusts Moscow, does not forget about its own profits either.
Beijing thinks that the price of Russian oil being supplied to China should not be the same as what the West pays.
On October 28, the Russian delegation signed an agreement "On the Principles for Building and Operating the Skovorodino - Chinese Border Oil Pipeline" between the China National Petroleum Corporation (CNPC) and Transneft, but did not give any clear reply on this issue.
It appears that in exchange for issuing loans China would like to get Russian oil at a significantly lower price.
Although the Chinese are skilled negotiators, Mr Sechin, who is considered the most secretive Russian politician to date, did not want to give up without a fight. He spoke with journalists and tried to satisfy their curiosity as regards crude-oil deliveries to China. Although he combined tact with straightforward talk, Mr Sechin managed to pass the test.
When asked why Moscow had failed to sign specific contracts with Beijing, Mr Sechin replied evasively that the parties had found a mutually acceptable algorithm of financial cooperation.
"Our companies, namely, Rosneft, pipeline monopoly Transneft, CNPC and Sinopec, would be expected to sign contracts by November 25. Before that deadline, they should inform us about their talks and projected contracts," Mr Sechin said. "They have 30 days to do this," he added.
Mr Sechin said oil prices would be determined through commercial negotiations. He assured that this would be a market price pegged to oil-exchange prices and would be calculated in line with a specific formula. "We are not divided on the issue," he said.
The deputy prime minister virtually asked everyone who had doubts to leave the hall. "You must be happy. We are entering new markets at a time when Western and US energy demand is stabilising and even dwindling. We must substitute other markets for them," Mr Sechin told journalists.
When asked about Russian-European contracts and whether there would be enough hydrocarbons for everyone, Mr Sechin replied that failure to fulfill even one contract would lead to bankruptcy. He added that no one was going to be affected.
Journalists also inquired about the volume of Chinese loans for Russian oil suppliers. Mr Sechin said the loans would depend on the price of corporate projects, but that they would be substantial.
Russian President Dmitry Medvedev, who also met with Wen Jiabao on October 28, said national leaders had met thrice in 2008. "Lima, the capital of Peru, will host another meeting in the near future," he added.
President Medvedev said it was essential for national leaders to exchange opinions at this time of numerous global problems and a snowballing financial economic crisis.
He stressed that the large package of documents signed after the talks between Vladimir Putin and Wen Jiabao highlighted dynamic Russian-Chinese ties.
Wen Jiabao noted the importance of Russian-Chinese friendship and cooperation in the current global political and economic situation. "The fundamental interests of our nations, as well as regional and global peace and stability, depend on this," Wen Jiabao said.
