Russia and China sign $100-billion deal of the century

Former Communist foes, Russia and China, have signed mega deals worth about $100 billion after their presidents met at the Kremlin in Moscow this week.

"It is the largest deal that has ever been signed between the two countries," Russian news agency Pravda quoted Russian president Dmitry Medvedev as saying after his meeting with his Chinese counterpart Hu Jintao.

The two presidents signed a large package of documents, including those in the oil and gas industry.

"It became possible owing to the use of the mechanism that we invented with the leader of the People's Republic of China a year ago," Medvedev said.

Medvedev and Hu conducted negotiations about the shipments of Russia's natural gas to China and  signed the memorandum of understanding in the field of natural gas, power, nuclear energy, coal and electricity.

It is an open secret that China suffers from the shortage of natural gas, and Russia is the largest producer of this commodity.

The countries have been in talks for the past several years about the deliveries of Russian gas to China. Moscow was not satisfied with the conditions, which Beijing proposed for cooperation: the prices in question are much lower than those, which Russia has with its gas contracts in Europe.

If China is willing to purchase large quantities of Russian gas, it will be necessary to build a new gas pipeline. Russia currently runs the Eastern Gas Programme in the Far East and in Siberia.

The two leaders also signed a series of agreements to broaden collaborations in trade, investment and mining, including the framework on a $700 million loan between Export-Import Bank of China and Russian Bank of Foreign Trade.

According to Russia's economy ministry, China overtook Germany and the Netherlands as Russia's biggest trading partner in the first four months of 2009.

"Deeper, practical cooperation has an especially important significance in overcoming the difficulties that face our countries," Chinese president said..

In a joint statement, the two leaders called for a greater role for emerging economies on the world financial stage and a bigger use of national currencies in bilateral trade.

"It is essential ... to move forward the work on the creation of favorable conditions for widening the sphere of settlement in rubles and yuan," a joint communique said. The statement also called for more active financing of trade deals by Russian and Chinese banks.

In February, China has signed a long-term deal to lend $25 billion to two Russian energy companies in exchange for an expanded supply of Russian oil (See: China, Russia sign $25-billion loan-for-oil deal).

The agreement, part of a broader Sino-Russian energy cooperation pact, follows several overseas resource deals in recent weeks that combined involve nearly $50 billion in Chinese capital.

A Chinese delegation of more than 300 representatives from some 200 enterprises attended the Russian-Chinese forum on trade and economic cooperation. The large delegation sent by China showed that it is taking concrete steps to promote bilateral economic cooperation and fight against protectionism under the current circumstances.

Jiang Yaoping, deputy Chinese commerce minister, said during a meeting in Moscow that the trade and economic cooperation between China and Russia has maintained healthy development in recent years thanks to the efforts of the leaders and entrepreneurs from both sides.

The two countries, which have huge market potentials, have expressed strong willingness to further cooperate on trade and economy amid the global financial crisis, Jiang said.

Russian deputy economic development minister Andrei Slepnyov said Russia and China are dedicated to develop the strategic partnership of cooperation. Although bilateral trade has been affected by the crisis, both sides have expanded their collaboration in the energy and high-tech sectors.

In the face of the global economic downturn, Russia and China should work together to confront the crisis, Slepnyov said.