Securing China deal key for Gazprom

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For Gazprom, which claims to be the world’s largest company by operating profits, its long-anticipated deal with China has acquired an almost existential significance.

“Clinching the deal would send an important signal to the west that Russia is not isolated by existing sanctions and has considerable opportunities for partnerships with Asian companies,” says Leslie Palti-Guzman, analyst at Eurasia Group, a consultancy.

Europe, Gazprom’s main customer, is seeking alternative suppliers as the Ukraine crisis heaps pressure on governments to reduce their ties with Moscow. And within Russia, Gazprom faces pressure from domestic competitors such as state oil group Rosneft and independent producer Novatek, which are raising gas production and lobbying for increased freedom to trade and export.

“The stakes are really high right now,” says Tatiana Mitrova head of oil and gas research at the Energy Research Institute of the Russian Academy of Sciences. “They cannot afford to lose this deal. It’s too important.”

For its part, China has long pushed to be allowed to invest more in Russia’s upstream oil and gas sector. But Moscow is more interested in attracting Chinese capital for manufacturing investments, especially in Russia’s Far Eastern regions.

Separately, Dmitry Rogozin, Russia’s deputy prime minister in charge of the military-industrial complex, and Alexander Mikheev, who runs Russian Helicopters, were heading to China on Monday to prepare a deal on the development of a heavy helicopter for both military and civilian use.

A person familiar with the negotiations said there were also plans to form a joint venture between Russia’s United Aircraft Corporation and a Chinese partner which Moscow hopes would help create enough orders to make the wide-body long-haul aircraft UAC is developing viable.

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