* China-Russia gas contract signed during Putin visit
* 30-year deal took more than a decade to complete
* Political triumph for Putin, but terms vague
* China had upper hand in negotiations, experts said
(Adds U.S. comment in paragraphs 13-15)
By Alexei Anishchuk
SHANGHAI, May 21 China and Russia signed a $400
billion gas supply deal on Wednesday, securing the world's top
energy user a major source of cleaner fuel and opening up a new
market for Moscow as it risks losing European customers over the
The long-awaited agreement is a political triumph for
Russian President Vladimir Putin, who is courting partners in
Asia as those in Europe and the United States seek to isolate
him over Moscow's annexation of Ukraine's Crimea peninsula.
Commercially, much depends on the price and other terms of
the contract, which has been more than a decade in the making.
China had the upper hand as talks entered the home stretch,
aware of Putin's face-off with the West.
But both sides could take positives from a deal that will
directly link Russia's huge gas fields to Asia's booming market
for the first time - via thousands of miles of new pipeline
across Siberia that form part of the package.
"This is the biggest contract in the history of the gas
sector of the former USSR," said Putin, after the agreement was
signed in Shanghai between state-controlled entities Gazprom
and China National Petroleum Corp (CNPC).
"Our Chinese friends are difficult, hard negotiators," he
said, noting that talks went on until 4 a.m.
"Through mutual compromise we managed to reach not only
acceptable, but rather satisfactory, terms on this contract for
both sides. Both sides were in the end pleased by the compromise
reached on price and other terms," the president said.
Putin and Chinese counterpart Xi Jinping applauded as they
witnessed the deal being signed before the Russian leader was to
leave Shanghai at the end of a two-day visit.
The agreement came in time for a major economic summit in
St. Petersburg starting Thursday. About a dozen chief executives
and chairmen of major U.S. and European firms have withdrawn
from the forum over the Ukraine crisis.
Putin loyalist and senior parliamentarian Alexei Pushkov,
who was included on a U.S. list people placed under sanctions
imposed after the crisis in Ukraine, said the gas deal showed
Russia could not be isolated.
"B. Obama should abandon the policy of isolating Russia: it
will not work," he tweeted, referring to U.S. President Barack
Obama, who has pushed for greater Western punishment of Russia.
In Washington, State Department spokeswoman Jen Psaki said
the gas deal would not undermine efforts by the United States to
pressure Moscow not to meddle in Ukraine's affairs.
"Whether this specific deal, if there is a deal, would (have
an) impact, I don't think we're prepared to jump to that
conclusion," Psaki told reporters. "We still believe we have a
range of tools at our disposal," she added.
The United States and European countries have warned the
Kremlin that it will face broader sanctions, possibly involving
new investment in key areas of the Russian economy, if it
meddles in Ukraine's elections later this month.
Gazprom CEO Alexei Miller declined to say at what price the
deal was struck, but sources at the companies involved said
Gazprom refused to go below $350 per thousand cubic metres.
That compares to a price range of $350-$380 most European
utilities pay under discounted long-term contracts signed in the
last two years. Putin said the formula was similar to the
European price tied to the market value of oil and oil products.
For China, the implied price is crucially below the Asian
cost of importing liquefied natural gas (LNG), an alternative
energy source it is developing.
Increased gas imports will also help Beijing in its declared
"war on pollution" aimed at reducing its reliance on coal which
contributes to the harmful smog shrouding major cities.
Another potential sticking point in talks was whether China
would pay a lump sum up front to fund considerable
According to Putin, China will provide $20 billion for gas
development and infrastructure, but Miller said the two sides
were still in talks over any advance.
The gas will be transported along a new pipeline linking
Siberian gas fields to China's main consumption centres near its
coast. Russia will begin delivering from 2018, building up
gradually to 38 billion cubic metres (bcm) a year.
Russia plans to invest $55 billion in exploration and
pipeline construction up to China, and CNPC said it would build
the Chinese section of the pipeline.
EUROPE STILL CRUCIAL
The contract with CNPC does not mean Russia is giving up on
Europe. Last year, Gazprom supplied western Europe and Turkey
with over 160 bcm of gas, dwarfing intended deliveries to China.
And for their part, European consumers cannot easily switch
from Russian gas even if they want to.
Beyond supplying China with gas via a pipeline, the 30-year
deal opens up an opportunity for Gazprom to become a bigger
player in the booming Asian LNG market, a sector it has so far
not been involved in on a major scale.
Gazprom is planning to build a new LNG plant on Russia's
Pacific coast near Vladivostok, but so far lacks the
infrastructure to supply the facility with the amounts of gas
necessary to meet demand in the region.
The pipeline to China would change this, ideally positioning
Gazprom's Vladivostok terminal close to the leading LNG buyers
of Japan and South Korea as well as the rising market on China's
Shares in Gazprom rose about 2 percent after the deal was
announced, and closed up nearly 1 percent.
(Additional reporting by Fayen Wong and Chen Aizhu in Shanghai,
Florence Tan in Singapore, Henning Gloystein in London, Olesya
Astakhova, Vladimir Soldatkin and Alexander Winning in Moscow,
and Lesley Wroughton in Washington; Writing by Mike
Collett-White; Editing by Alastair Macdonald and Mohammad