The American Interest

A Big Deal

“This is the biggest contract in the history of the gas sector of the former USSR,” Vladimir Putin said after the $400 billion agreement to supply Russian natural gas to China was signed in Shanghai on May 21.  It is much more than that, Putin went on: It is an “epochal event.”  China’s President Xi Jinping responded by saying that it is an “historical responsibility for both sides to safeguard, develop and consolidate China-Russia relations.”  The contract and a host of associated cooperation agreements marked a new phase in the geopolitical balancing game, the emergence of a de facto Moscow-Beijing axis.  Shanghai’s potential long-term significance may be compared with the fruits of Richard Nixon’s 1972 visit to China.

What is surprising is that it has taken them so long to reach the gas deal—over ten years of haggling—considering the two countries’ compatibilities: The world’s top energy user meets the world’s top supplier.  Last year’s $270 billion oil agreement, under which Russia will double her oil deliveries to China over the next 25 years (and for which Moscow received a $70 billion advance), was easier to reach because there exists a global market for oil—but not for gas, which is regionally traded.  This makes a mutually agreed price easier to fix for oil.  More importantly, until late...

Join now to access the full article and gain access to other exclusive features.

Get Started

Already a member? Sign in here