China, Russia Fail to Agree on $400 Billion Gas Deal; Nations Expected to Continue Discussions
Russia and China were unable to reach a deal on a natural gas agreement Tuesday, despite both countries' mutual interest in facilitating the plan.
President Xi Jinping of China and Russian President Vladimir Putin could not reach a deal despite high expectations in both countries to begin the project, The New York Times reports.
The deal was halted due to a dispute over the price of gas, which Russia and China have been negotiating for over 10 years. Dmitri S. Peskov, Putin's spokesman, said the talks will continue despite the initial roadblock.
Putin arrived in Shanghai Tuesday, where he attended a conference of Asian countries that was hosted by President Xi.
After meeting President Xi in Shanghai, Putin said, "I'm glad to be informed that the two sides have made significant progress in the price negotiation of the east route of the natural gas project."
A statement from both countries said that Russian natural gas supplies will begin being transported into the country "as soon as possible," indicating that Gazprom and the China National Petroleum Corporation could not come to an agreed-upon price.
Russia aims to diversify Gazprom's natural gas sales into Asia, meaning the country may be willing to come to a final agreement soon. The two countries are also politically aligned, which could help facilitate a deal. China helped Russia during American and European Union sanctions due to the annexation of Crimea, and also sided with Russia during stressed relations between America and China.
James Henderson, a senior research fellow at the Oxford Institute for Energy Studies in the U.K., said that a failure to reach an agreement was a "surprising result for everyone and for Gazprom."
"There was an expectation that with Putin arriving in China and with the political issues with Europe -- that would be the trigger to get it over the line," Henderson added.
Putin was also expected to give into China because of Russia's lagging economy; Russia's economic growth is expected to be only 0.2 percent in 2014.
China has the upper hand, considering it already has a plentiful gas supply from Central Asia and Myanmar until the mid-2020s.
Putin has said in recent weeks that he sees Russia's economic future being closely aligned with China, as their economy is expected to surpass that of the United States. He also shares China's conservative nationalism, with an emphasis on family and country and a disdain for Western culture.
While China has been officially neutral in regard to the situation in Ukraine, the country is beginning to favor Moscow due to the strained relationship between China and the United States.