Gazprom Strikes Preliminary Gas Deal With China

China and Russia signed a framework agreement Tuesday that could see a steady flow of natural gas to energy-hungry China from its resource-rich neighbor.

Russian Prime Minister Vladimir Putin, right, accompanied by his Chinese counterpart Wen Jiabao,...

Russian Prime Minister Vladimir Putin, right, accompanied by his Chinese counterpart Wen Jiabao, left, reviews the honor guards during a welcome ceremony at the Great Hall of the People in Beijing on Tuesday Oct. 13, 2009. The head of Russia's Gazprom said Tuesday a preliminary deal had been reached to supply energy-hungry China with natural gas.

(Kota Kyogoku, Pool/AP Photo)

It was one of numerous trade and military agreements signed during a state visit by Prime Minister Vladimir Putin as the countries overcome traditional mistrust to push ahead mutual economic interests. Even so, there has been a growing imbalance in their ties with Russia's economy lagging behind its booming neighbor.

The deal between Russia's state-run natural gas monopoly Gazprom and China National Petroleum Corp. calls for the supply of about 70 billion cubic meters of gas a year, but a price had not been set and no contract signed, said Gazprom's chief executive Alexei Miller.

Chinese media reports have said the agreement was expected to be a gas-for-loans deal similar to a $25 billion oil-for-loans deal completed earlier this year.

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Russia's cash-strapped energy companies need Chinese funding, while Beijing has welcomed the chance to further diversify sources for energy needed to fuel its fast-growing economy. The global economic crisis and changing market conditions have further spurred cooperation as lower demand from Europe has pushed Russia to diversify markets for its oil and gas.

The gas framework agreement was formally signed in the presence of Putin and Chinese Premier Wen Jiabao.

Putin said Russian-Chinese cooperation was one of the most important elements to ensure global stability.

"Our consolidated view on certain issues, our ability to coordinate our stance on key international developments often help calm the situation and play a stabilizing role," he earlier told a group of Chinese reporters.

Miller said the gas contract will include a price formula based on Gazprom's experience in gas exports and principles of international trade.

"Gazprom will independently build gas transportation facilities on the Russian territory," he said when asked if China could invest in building gas pipelines. He added Gazprom may welcome Chinese investments in building gas-processing facilities.