* China, Russia discuss gas deal for at least a decade
* Russia sees progress on price at China talks
* Moscow hopes to sign gas deal with China in May
(Edits, adds talks on Ukraine crisis)
By Katya Golubkova and Vladimir Soldatkin
MOSCOW, April 9 Russia said on Wednesday it was
close to signing a deal to sell natural gas to China, a
long-sought agreement which President Vladimir Putin could use
to show Western sanctions over Crimea cannot isolate his
The deal is the Holy Grail for Russia after at least 10
years of talks and Moscow hopes it can be signed when Putin
visits China next month.
There was no immediate comment by China, whose negotiating
position has been strengthened by Western threats to impose more
sanctions on Russia if Moscow sends its armed forces into
eastern Ukraine following its annexation of Crimea.
As talks between state-controlled Gazprom and
Chinese officials continued in China, Arkady Dvorkovich, a
deputy prime minister, said the sides were close to sealing a
deal that would also involve construction of a pipeline to carry
38 billion cubic metres (bcm) of gas a year.
"Regarding Gazprom's gas contract, the sides are close to
agreement ... The only issue remaining is ... the price," he was
quoted as saying by Itar-Tass news agency in Beijing. "We really
hope that the contract will be signed in May."
Gazprom said separately that there had been progress at the
talks on the price China would pay for the Russian gas and that
it expected the contract to come into force by the end of 2014.
It gave no further details of the negotiations.
Industry sources said before the latest round of talks that
Gazprom could try to secure a deal by proposing a lower price
for the gas in exchange for China handing over billions of
dollars in upfront payments.
The sources said Gazprom was hoping for a price of $10-$11
per mmBtu (million British thermal units) from China. China is
believed to pay $9 per mmBtu to Turkmenistan, the former Soviet
state in Central Asia that beat Gazprom to the Chinese market.
The deal would help Gazprom reduce its dependency on exports
to Europe, which gets around a third of its gas needs from
Russia. Half of this amount comes via Ukraine, which is at odds
with Moscow over gas payments as well as being locked in a
political standoff over the Crimea region.
Ukraine owes Gazprom $2.2 billion for gas and failed to meet
a deadline this week for paying its March gas bill.
Russian Prime Minister Dmitry Medvedev told a government
meeting there were grounds to make Kiev pay in advance for its
gas, but Putin suggested holding off on such a move for now.
Gazprom has increased the gas price for Ukraine by 80
percent since the neighboring former Soviet republic ousted
Moscow-backed President Viktor Yanukovich on Feb. 22 and
installed a Westward-looking government.
Kiev said the price rise was a politically motivated move to
punish it for pursuing closer ties with the European Union.
RUSSIA LOOKS EAST
The crisis in relations with Kiev has made bypassing Ukraine
by using different pipelines, or reorienting trade to the East,
priorities for Putin, and Russia has been working hard to
develop relations with Asia.
Russia's desire to find new markets has also strengthened
Beijing's negotiating position on the price at talks involving
China National Petroleum Corp.
Gazprom has been in painstaking talks over the last 10 years
about shipping gas to China and has been unable to agree on
Russia ships around 16 percent of its crude exports to Asia,
while gas volumes are small, limited only to super-cooled
By 2035, Moscow plans to double the share of oil flows and
send a third of its gas exports eastwards, though its plans are
constrained by the lack of necessary infrastructure.
Russia, which extracted an average 10.56 million barrels of
oil per day last month, exports around 4.4 million bpd of oil in
total. It is gradually reducing west-bound flows in favour of
Sanctions imposed on Russia over its annexation of Crimea
are mainly limited to individuals but the EU has stepped up
discussion of options to reduce its dependence on Russian
Russian Energy Minister Alexander Novak said on Wednesday
that Moscow planned to expand its East Siberia-Pacific Ocean
pipeline to 80 million tonnes (1.6 million barrels per day) by
2020, as part of plans to diversify away from Europe.
(Editing by Elizabeth Piper, Timothy Heritage and Dale Hudson)