Chinese President Arrives In Russia For Energy Talks

[WeThePeople]

Chinese President Arrives in Russia for Energy Talks (Update1)

By Henry Meyer

March 26 (Bloomberg) -- Chinese President Hu Jintao arrived in Moscow today, seeking access to Russian oil and natural gas to power the world's fastest-growing major economy.

Hu will hold talks with Russian President Vladimir Putin at the Kremlin later today. The Chinese leader is making his third state visit to Russia since he took office in 2003, underscoring China's intense interest in Russia's energy resources.

``Russia's future lies to the East and specifically China,'' said Roland Nash, head of research at Moscow-based brokerage Renaissance Capital. Growth in trade between Russia and China ``is going to be tremendous over the next few years,'' he said in an interview.

China and Russia in recent years have put behind them decades of rivalry. The two powers oppose U.S. global dominance. Russia, which is Europe's main energy supplier, is keen to find new markets in Asia.

Russia has not moved ahead with concrete projects to transport oil and gas to China via new pipelines, causing some frustration among government leaders in Beijing.

The two sides are to sign contracts worth more than $2 billion (1.5 billion euros), including a deal to increase imports of crude oil by rail from Russia, Chinese Assistant Foreign Minister Li Hui said March 21.

Hu said that relations between Russia and China were at ``an unprecedented level'' in an interview published March 21 in the Russian government daily Rossiiskaya Gazeta. He said that trade between the two countries could more than double to $80 billion by 2010. Hu arrived at Moscow's Vnukovo airport at about midday today, Russian state television reported.

Foreign Trade

China is Russia's second-largest trade partner though less than 10 percent of Russian trade is conducted with China, compared with over half with the European Union.

China needs to increase imports of oil and gas to meet demand in an economy that expanded 10.7 percent last year, the fastest rate of growth among the world's major economies.

In March last year during a visit to China by Putin, OAO Gazprom, Russia's state gas company, agreed to export as much as 80 billion cubic meters a year of natural gas to China through two new pipelines.

That project has not advanced because it depends on the development of gas fields to fill the pipelines, said Chris Weafer, chief strategist at Alfa Bank in Moscow.

China also has not obtained a firm Russian commitment to build a spur to its country from an oil pipeline between eastern Siberia and the Pacific port of Nakhodka that would supply Japan and other Asia-Pacific countries.

`Sense of Irritation'

``There is a growing sense of irritation'' in China, which currently imports 200,000 barrels of crude oil a day by rail from Russia, said Weafer.

Russia has the world's largest reserves of natural gas and is the second-biggest oil exporter after Saudi Arabia. Many of the nation's untapped fields lie in east Siberia and the far eastern regions near China.

Russia supplies 15 percent of China's oil imports, while the Middle East accounts for 40 percent.

Apart from energy ties, the two countries have common international interests. Hu and Putin are to discuss a possible solution to the Iranian nuclear standoff, in which China and Russia have used their veto-wielding permanent seats at the U.N Security Council to slow the imposition of sanctions against Iran.

Putin's spokesman Dmitry Peskov said in an interview that Russia was ``extremely pleased that for the past decade especially, our dialogue and our relationship with China, both politically-wise and economically-wise, are really booming.''

Short War

Russia and China fought a short border war in 1969 during Communist times, when relations were tense. In 2004, the two countries signed a treaty resolving their 4,300 kilometer-long (2,700-mile-long) border.

Russia is now a major arms supplier to China and the two neighbors, which argue for a ``multi-polar world'' in which the U.S. would not have such unrivalled power, held joint military exercises last year for the first time.

``Putin sees relations with China as a counterweight to the West,'' said Viktor Kremenyuk, deputy director of the Moscow- based USA-Canada Institute.

To contact the reporter on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net
Last Updated: March 26, 2007 05:14 EDT