In exchange for a lower price, China offered a loan of about $50 billion that will finance development of the gas fields and the construction of the pipeline by Russia up to the Chinese border, Ms. Skalamera said. The Chinese would build the remaining pipeline, and gas is scheduled to start pumping in 2018, she said.
In remarks after the signing, Mr. Putin stressed that the price of the gas was based on the market price for oil, just as it was for Russia’s gas supplies to European countries. “The gas price formula, as in our other contracts, is pegged to the market of oil and oil products,” Itar-Tass quoted him as saying.
Without the oil price benchmark, Russia would be under pressure to renegotiate European prices, said Kenneth S. Courtis, a founding partner of Thames Investment. The price of Russian gas to Europe is based on fluctuations in oil prices, making it more expensive than gas that China buys from Central Asia, he said.
Even under the new agreement, Europe will remain Russia’s biggest market.
The production of American shale gas also gave Russia incentive to rapidly complete the deal with China and to seek other markets in Asia, Ms. Skalamera said. “The rapid rise of U.S. natural gas is giving Europeans genuine market options,” she said. “Many are opting out of the grip of Gazprom. The result? Russia is looking for a new cash cow, turning its gaze east.”
China was under no such pressure, having lined up substantial and cheaper flows of gas from Central Asia. Siberian natural gas does give China a cleaner substitute for the fossil fuels — coal and petroleum — that provide most of its energy needs, and cause much of the pollution smothering China’s cities.