Russia says Gazprom, China close to gas agreement

MOSCOW (REUTERS) - Russia's Gazprom and China may sign a landmark gas deal next month, a Russian official said on Wednesday, marking some progress in a long-stalled agreement that would boost Moscow's efforts to turn eastwards away from Western sanctions.

The gas supply deal is the Holy Grail for Moscow after at least 10 years of talks, and if signed would mark a victory for President Vladimir Putin who has warned the West that attempts to isolate Russia over its annexation of Crimea would backfire.

Mr Arkady Dvorkovich, a deputy prime minister, was quoted as saying during a visit to China that Gazprom and China were close to reaching agreement, paving the way for the construction of a pipeline to carry 38 billion cubic metres (bcm) of gas a year.

"Regarding Gazprom's gas contract, the sides are close to agreement ... The only issue remaining is ... the price," he was quoted as saying by Itar-Tass news agency, adding that both sides planned to discuss contract details on Wednesday.

"We really hope that the contract will be signed in May."

Russia ships around 16 per cent of its total crude exports to Asia, while gas volumes are small, limited to those of super-cooled gas.

The gas deal would help Gazprom reduce its dependency on exports to Europe, which gets around a third of its gas needs from Russia with the bulk of transit coming via Ukraine.

Moscow is again at odds with Ukraine over gas payments after Gazprom hiked prices by 80 per cent earlier this month in what Ukraine said was a politically-motivated move to punish Kiev for pursuing closer ties to the European Union.

Bypassing Ukraine by using different pipelines or reorienting trade to the East have become priorities for the Kremlin, and could strengthen Beijing's negotiating position on price.

Gazprom has been in painstaking talks over the last 10 years about shipping gas to China and has been unable to agree on pricing. Putin plans to visit China in May.

Mr Putin will hold a meeting with his government on energy cooperation with Ukraine on Wednesday. Some local media have said he may suggest limiting gas supplies to Ukraine, with owes Gazprom US$2.2 billion (S$2.7 billion) in gas payments.

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