(Transcript from SBS World News Radio)
Russia has struck a 30-year, multi-billion-dollar deal with China to supply China's burgeoning economy with natural gas from 2018.
It is a significant victory for Russia's President Vladimir Putin because his government's military action in Ukraine threatens Russia's hold over the market in Europe.
Marion Ives.
(Click on the audio tab above to hear the full report)
The $400 billion deal has been in the pipeline for over a decade.
It was sealed with the signatures of China's President Xi Jinping and his Russian counterpart Vladimir Putin before the cameras in Shanghai.
A resources analyst for the financial-services company Fat Prophets, David Lennox, says it is a significant boost for the Russian economy.
But he says China would have struck a hard bargain under the circumstances.
"We certainly think that the price that the Chinese have received is probably somewhere about where Russia is currently charging European customers for natural gas. And that's somewhere between 350 to 390 US dollars per thousand cubic metres."
The deal is expected to deliver 38 billion cubic metres of natural gas a year to China, starting in 2018.
David Lennox says the price is comparable with Australian exports.
"We would expect that the Chinese demand for natural gas will have grown, and, if our assumptions are right and we do see it reaching 400 million cubic metres of consumption by 2025, there's certainly going to be a lot of room for other players to deliver LNG, or natural gas and LNG, into the Chinese market."
But Russia has a geographic advantage.
It is far easier to transport natural gas over land.
Analysts say it will be important for Australia to remain competitive in price in the coming years.
Delegates from Russia's Gazprom and China's National Petroleum Corp reportedly worked until 4am to strike the agreement before Mr Putin ended his two day visit.
The timing is significant for Russia because it faces the possibility of European sanctions over Ukraine.
Far away at a media conference in Mexico, the United States' Secretary of State John Kerry was playing down that significance.
Asked during a visit there about potential repercussions, he said Russia was in a constructive phase, demonstrated by its decision to withdraw troops from the Ukrainian border.
"What's at stake here is whether or not Russia is going to decide to respect the right of Ukrainians to be able to decide their future. And I don't personally think that Russia signing a deal with China for gas, that they've been working on for 10 years, has any impact on what is about to happen in Ukraine, which is the people, hopefully, are going to have a chance to have an election. And we welcome President Putin's statement two days ago that he has instructed the troops that have been bivouacked along the border of Ukraine to move back to their home bases, to move away from there."
But others are taking a more sceptical view of Russia's intentions.
US Vice President Joe Biden has emphasised the need for the European continent to diminish its dependence on Russian gas.
"To ensure Russia can no longer continue to use its energy resources, and European dependence on those resources, as a weapon, a weapon against anyone in this region. And that's why I believe that the development of a secure, diverse and an interconnected energy market in Europe is the next big step for our European colleagues to initiate."
Speaking from Bucharest, Mr Biden says future supply could lie with nations like Romania.
He says, by expanding domestic production and upgrading infrastructure, Romania could be the linchpin that holds together European energy markets.
That would allow some countries in Europe to reduce their almost 100 per cent reliance on Russian supplies now.
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