VZCZCXRO5563
PP RUEHCN RUEHGH RUEHVC
DE RUEHBJ #2917/01 2940846
ZNR UUUUU ZZH
P 210846Z OCT 09
FM AMEMBASSY BEIJING
TO RUEHC/SECSTATE WASHDC PRIORITY 6508
RHEBAAA/DEPT OF ENERGY WASHINGTON DC PRIORITY
RUEATRS/DEPT OF TREASURY WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
INFO RUEHOO/CHINA POSTS COLLECTIVE PRIORITY
RUEHMO/AMEMBASSY MOSCOW PRIORITY 9404
RHEHNSC/NSC WASHDC PRIORITY

UNCLAS SECTION 01 OF 02 BEIJING 002917 
 
SIPDIS 
 
USDOC FOR 4420 
STATE PASS USTR FOR STRATFORD 
 
E.O. 12958: N/A 
TAGS: ECON ENRG ETRD EFIN PREL RS CH
SUBJECT: China/Russia: Putin's Visit Leads to Energy 
and Trade Agreements, but No Breakthroughs 
 
SENSITIVE BUT UNCLASSIFIED: NOT INTENDED FOR 
INTERNET DISTRIBUTION 
 
¶1. (SBU) Summary: During Russian Prime Minister 
Vladimir Putin's October 13-15 visit to Beijing, the 
two sides agreed to a framework for continued 
negotiations on a natural gas purchase arrangement; 
formed a joint venture to explore for natural gas in 
Siberia; and reached agreement on a joint venture 
oil refinery in Tianjin.  The agreements fall short 
of pre-visit comments by Gazprom officials of a 
major breakthrough in Sino-Russian energy 
cooperation.  China also agreed to provide USD 1.7 
billion of loans to Russian banks while promising to 
improve bilateral financial and customs cooperation. 
There was no announcement on establishing a currency 
swap agreement to facilitate trade finance, similar 
to what China has signed with five other countries 
and Hong Kong since late-2008.  End Summary. 
 
Russian Gas to China 
-------------------- 
 
¶2. (SBU) China National Petroleum Corporation (CNPC) 
and Gazprom signed a framework agreement on natural 
gas deliveries on October 13 during the visit of 
Russian Prime Minister Putin, according to scholars 
at the Institute of Russian, Eastern European and 
Central Asian Studies, a research institute of the 
Chinese Academy of Social Sciences (CASS).  The 
agreement could lead to Russian gas exports through 
two pipelines with a total volume of 68 billion 
cubic meters of gas a year.  CASS researchers told 
Econoff, however, the two sides were still far apart 
on a pricing arrangement, with Gazprom insisting on 
a formula based on European natural gas prices and 
CNPC arguing for a lower price based on Chinese coal 
prices. 
 
¶3. (SBU) Negotiations over the natural gas deal have 
dragged for years.  The two sides originally signed in 
2006 a memorandum of understanding, with the aim of 
starting exports of Russian gas in 2011.  Even if the 
current framework leads to a final agreement on pricing 
next year, deliveries would not begin until 2014 or 2015, 
as the pipelines have not yet been developed.  Prior to 
Putin's visit, Gazprom CEO Alexei Miller had promised the 
agreement would be concluded soon. 
 
Gas Exploration Joint Venture 
----------------------------- 
 
¶4. (U) China and Russia agreed to establish the China- 
Russia Energy Investment Co. Ltd., the first oil and gas 
joint venture between the two countries, according to 
local media.  The new Hong Kong-registered company 
acquired 51 percent of Russian oil and gas company 
Suntarneftegaz, which holds exploration and development 
rights to the Berezovsky and South Cheredeisky gasfields 
in Eastern Siberia with total reserves of more than 60 
billion cubic meters.  The JV will spend approximately 
USD 300 million to develop the project and plans to 
export gas to China, Japan, Korea and Singapore. 
 
Joint Venture Oil Refinery 
-------------------------- 
 
¶5. (U) CNPC and Rosneft reportedly reached agreement 
on a joint venture oil refinery project in Tianjin 
with a 15 million ton capacity.  The total 
investment is between USD 3-4 billion.  The 
agreement also covers the construction of 300-500 
gasoline stations in China. 
 
Non-Energy Deals and Direction 
------------------------------ 
 
¶6. (U) China and Russia reportedly agreed to USD 3.5 
billion in trade deals.  It is unclear if this sum 
includes the USD 1.7 billion of loans from Chinese 
to Russian banks announced during Putin's visit. 
Vice Premier Zhang Dejiang, at the October 13 
opening ceremony of the China-Russia economic forum, 
 
BEIJING 00002917  002 OF 002 
 
 
said both countries needed to improve financial 
services and banking settlement cooperation, and 
both should encourage domestic banks to establish 
branches in the other country.  He also urged the 
two sides to strengthen investment, technology, and 
standards cooperation and improve bilateral market 
access.  Chinese and Russian customs agencies signed 
an MOU and established a customs cooperation sub- 
committee to fight gray market cross-border trade. 
In recent months, Chinese and foreign press also 
have reported that China and Russia are considering 
or negotiating a bilateral currency swap agreement 
to facilitate trade finance, similar to what China 
has signed with five other countries and Hong Kong 
since late-2008. 
 
HUNTSMAN