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Russia, China launch ‘historic’ gas pipeline

China's President Xi Jinping, shakes hands with Russia's President Vladimir Putin. (Mikhail Metzel/Tass/Abaca Press/TNS)

This article was originally published by Radio Free Europe/Radio Liberty and is reprinted with permission.

Russia and China have cemented their cooperation in the energy sphere with the launch of the first gas pipeline linking the world’s biggest natural-gas exporter and the second-largest economy.

“Today is remarkable, a truly historic event not only for the global energy market, [but for] Russia and China,” Russian President Vladimir Putin said on December 2 as he addressed a ceremony via a TV linkup that also featured Chinese leader Xi Jinping.

The 3,000-kilometer Power of Siberia pipeline began shipping gas from Russia’s enormous reserves in its Far East to the Chinese border, where it will link up with China’s own network to help satisfy its growing energy needs.

The pipeline “serves as a model of… mutually beneficial cooperation between our countries,” Xi said, adding that the development of Sino-Russian ties “is and will be a foreign-policy priority for both our nations.”

The project stems from a $400 billion deal that was struck in 2014 between Russia’s state-run Gazprom and the China National Petroleum Corporation (CNPC) to supply as much as 38 billion cubic meters (bcm) of gas annually for 30 years.

Neither CNPC nor Gazprom has revealed the gas-pricing terms, but it doesn’t have a “take-or-pay” clause in place domestically, thus leaving the marketing risk on the shoulders of the Chinese company.

The Power of Siberia pipeline is seen as part of Moscow’s efforts to mitigate the effects of financial sanctions imposed by the West over its actions in Ukraine.

Putin has said trade with China would reach a record $100 billion this year, up from $87 billion in 2018.

The new pipeline will bring bilateral trade to $200 billion by 2024 Xi said on December 2.

Russia has two more pipeline projects that soon will be launched to increase gas supplies to Europe while bypassing Ukraine.

TurkStream is scheduled to start operating on January 8 with one line flowing to Turkey and the other to southeastern Europe.

Each line has a yearly capacity of 15.75 bcm.

Meanwhile, Nord Stream 2 is scheduled to go online in the first quarter of next year and have an annual capacity of 55 bcm.

The pipeline will add to Europe’s supplies via an underwater line in the Baltic Sea and will double supplies of gas to Germany

According to the AFP news agency, half of the $10.6 billion project is financed by Gazprom, with the remainder covered by its European partners: Germany’s Wintershall and Uniper, Anglo-Dutch Shell, France’s Engie, and Austria’s OMV.

Both Western-oriented projects would render Ukraine’s vast gas transmission system mostly obsolete.

Ukraine in particular, as well as the United States and countries in Eastern and Central Europe, have criticized Nord Stream 2 for making Europe reliant on Russian energy supplies, which Moscow could then use to apply political pressure.

Ukraine’s gas-transit contract with Russia expires at the end of the year.