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    Bloomberg: Putin's China Energy Deals May Hide Paper Tigers as Growth Slows

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Summary

Vladimir Putin’s long-heralded visit to Beijing this week yielded five framework energy deals that bolster Russian hopes of strengthening ties with China as relations sour with the U.S. and Europe.

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Bloomberg: Putin's China Energy Deals May Hide Paper Tigers as Growth Slows

Vladimir Putin’s long-heralded visit to Beijing this week yielded five framework energy deals that bolster Russian hopes of strengthening ties with China as relations sour with the U.S. and Europe. Yet if history is any guide, most of the accords won’t bear fruit.

“Heads of agreements are multiplying at a furious pace,” Sergei Tsyplakov, head of theSberbank OJSC’s office in China, said by e-mail before the signing ceremonies in Beijing. “Practice shows that out of 10 agreements, we get one or at most two contracts.”

While Russia signed a $400 billion gas-supply contract with China in May 2014, after almost a decade of talks, and a $270 billion oil deal in 2013, the agreements initialed this week in Beijing by OAO Rosneft, Gazprom PJSC and Novatek OJSC are largely non-binding.

Putin is turning to China, the largest energy importer, as U.S. and European Union sanctions over the conflict in Ukraine limit the access of Russian oil companies to foreign financial markets and drilling technologies. While Russia’s need for credit and new markets increases as the country enters its first recession since 2009, Beijing is stalling on further deals as it grapples with industrial overcapacity, the fallout from a downturn in property investment and a volatile stock market. MORE

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