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Russia Seeks to Diversify Trade With China During Putin's Trip

Russian Gas FacilityPrime Minister Vladimir Putin visits China for his first overseas trip since announcing plans to return to the presidency next year, seeking to diversify ties with the world's second-biggest economy.

Trade with China may exceed $70 billion by year-end from $59 billion in 2010, Yury Ushakov, Putin's deputy chief of staff, told reporters in Moscow today, adding that agreements may be signed on creating a joint investment fund and developing renewable sources of energy and electricity. "China has become our first trade partner, bypassing Germany, and this is quite symbolic," Ushakov said. "The task for the visit is not only to expand trade and economic contacts but also to diversify the structure of our relations as the structure itself does not satisfy us."

Putin, who will meet Chinese President Hu Jintao and counterpart Wen Jiabao on a two-day trip that starts tomorrow, will take full control of foreign policy again after four years in which outgoing President Dmitry Medvedev focused on improving relations with the U.S. While ties with the West are important, Putin wants to develop closer political and economic cooperation with fast-growing Asian economies such as China, Japan, Korea and India, he said at an investment forum in Moscow on Oct. 6.

Energy Dependence

Russia's two top politicians are seeking to wean the economy of the world's biggest energy exporter off its dependence on raw commodities. Natural resources account for 72 percent of total exports to China, Ushakov said. The countries will consider cooperation in the space industry, telecommunications and aircraft manufacturing, he said.

The nations will discuss "concrete ways of correcting" the structure of bilateral trade, Ushakov said, adding that an accord on modernizing the economy may also be signed.

A total of 17 agreements may be reached during Putin's visit including deals between state development bank VEB and the Russian Direct Investment Fund with China Investment Corp. ZAO Sibur Holding, eastern Europe's biggest petrochemical producer, will sign a cooperation accord with China Petrochemical Corp., the nation's biggest refiner, he said.

Russian Deputy Prime Minister Igor Sechin, who plans to hold energy talks in China, will be joined by Agriculture Minister Elena Skrynnik and Communications Minister Igor Shchegolev. Also attending are Sergei Kiriyenko, head of Russia's state-owned nuclear energy holding company Rosatom Corp. and Vladimir Dmitriev, chairman of VEB, Russia's state development bank.

Energy Sales

Russia wants to conclude long drawn-out negotiations on a Russian-Chinese natural-gas accord, which has been held up by wrangling over how much China needs to pay the world's largest energy exporter for the fuel.

There are no plans yet to sign a gas accord with China during this visit, Ushakov said.

Russia is pursuing energy sales to Asian countries, including China, South Korea and Japan. The government in Moscow pledged to supply China with all the natural gas it needs, Sechin said during Medvedev's visit to Beijing in September last year. China wants to triple its gas consumption by 2020 to keep pace with its economy, which expanded an annual 9.5 percent in the second quarter.

Russia, which supplies 25 percent of the European Union's gas needs, is under pressure to cut its European pricing formulas. Russian gas export monopoly OAO Gazprom's contracts are the focus of a European antitrust investigator's raids across central and eastern Europe.

Article ©2011 BLOOMBERG L.P. ALL RIGHTS RESERVED; article also appeared at www.bloomberg.com/news/2011-10-10/russia-seeks-to-diversify-trade-with-china-during-putin-s-trip.html

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