China Wins From Russia Ukraine Conflict

A German proverb says: When two people are fighting, the third one wins. Observers believe this is the case with China as Russia is entangled in a conflict with the West over Ukraine.

The Ukrainian crisis has certainly strained Russia’s relations with the West. Sanctions have been imposed on Moscow, and the US and other European countries are planning to slap more on it. Western countries are also trying to reduce their dependence on Russian gas – at least for the long term.

As a result of the rapidly deteriorating relations between Russia and the West, the governmment in Moscow is moving closer towards Beijing.

Russia is close to signing a decades-long contract to supply natural gas to China at a price that would value the deal at about $400 billion, according to Prime Minister Dmitry Medvedev.

Medvedev’s boss Vladimir Putin arrives in Shanghai today to try and complete an agreement after more than 10 years of talks. The stumbling block has been price, but with Putin facing trade and financial sanctions from the U.S. and European Union after he annexed Crimea from Ukraine, a deal is seen as probable.

The fact is that Russia and China have been negotiating this deal for many years, but there hasn’t been any breakthrough due to Beijing’s objection to the gas price. But it seems that Russia is now willing to make concessions.

Russia is now forced to lower the gas price, estimates the Berlin-based expert.

According to media reports, China has the potential to become one of the largest importers of Russian gas in the coming years. By the end of the decade, China could cover up to one-third of its gas demand from Russia, allowing Moscow to compensate for any potential gas blockade to Western Europe.

Russia will have to pay to build the pipeline. The previous pipeline to Europe was paid for by the Europeans.

Gazprom plans to build a $22 billion pipeline to China able to carry as much as 38 billion cubic meters (1.34 trillion cubic feet) annually after years of false starts. The company may begin supplying China in 2019 to 2020.

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