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China, Russia Ink Oil Loan Agreement

02-18 15:19 Caijing

Months of tortured negotiations ended February 17 with the signing of seven agreements that guarantee oil for China and loans for two Russian firms.

By staff reporter Chen Zhu

From Caijing Online


After three long months, China and Russia signed seven agreements February 17 finalizing a loans-for-oil deal worth US$ 25 billion.


The package of agreements includes a pipeline to connect Russian fields to Chinese consumers, long-term crude oil trading deals and a loan from the China Development Bank to Russian oil firms.


China will lend US$ 15 billion to Russia's state-owned Rosneft and US$ 10 billion to Transneft, which has a monopoly on pipeline construction. In return, Russia agreed to supply 15 million metric tons of oil ever year for the next 20 years from its new fields in eastern Siberia.


The current deal first took shape in an energy memorandum signed in Moscow last October. Both countries expected to conclude the agreement by the end of 2008. However, negotiations ran into repeated disagreements on lending rates and loan guarantees, stalling several times.


According to a Chinese source close to the negotiations, the latest round of talks began February 13. The major dispute was the lending rate. The source would not disclose the final agreed upon rate, but said it was not within the desired range between 5.5 percent and 6 percent.


The contracts were signed in Beijing during a meeting between Russian Deputy Prime Minister Igor Sechin and Chinese Deputy Prime Minister Wang Qishan.


"We hope the two sides will promote bilateral energy cooperation," said Wang Qishan.


Sechin also called on China and Russia to extend the long-term cooperation on issues like energy and finance.


As the world’s second largest oil importer, China has been seeking a stable and diversified oil supply to feed its energy demand. Meanwhile, Russia has been working to shift its export market from Europe to East Asia.


Full article in Chinese: http://www.caijing.com.cn/2009-02-18/110070027.html

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