Russia signed 38 accords with China spanning energy, banking and technology during Premier Li Keqiang’s visit to Moscow as the country pivots to Asia to keep its economy growing amid sanctions over Ukraine.
Among the documents were an intergovernmental agreement backing OAO Gazprom’s $400billion contract to supply natural gas through a planned eastern pipeline and an accord on increasing cooperation between OAO Rosneft and China National Petroleum Corp.
Isolated over Ukraine by the US and European Union, Russia is turning to China as it seeks investment to avert a recession. This means granting China privileged access to raw materials and advanced weapons, said two people involved in policy planning, who asked not to be identified as discussing internal matters.
Russia and China also signed a double-taxation and anti-tax avoidance treaty as Russian companies, including Gazprom and oil producer OAO Lukoil, consider listing shares in Hong Kong, while their central banks inked an accord on currency swaps.
The government is encouraging companies to settle contracts in rubles to reduce a reliance on dollars after US and EU sanctions blocked some of Russia’s largest borrowers from capital markets. With the ruble near a record low and foreign investment disappearing, luring Chinese cash may deepen Russia’s reliance on natural resources and derail efforts to diversify the economy.
China’s Export-Import Bank signed framework accords with VTB Group and Vnesheconombank, Russia’s development bank, and a trade financing agreement with Russian Agricultural Bank, known as Rosselkhozbank. The Russian state-controlled banks are subject to sanctions.
China, which overtook Germany as Russia’s largest trading partner in 2011, has taken on more importance for Russia during the conflict in Ukraine after the US and the European Union closed their debt markets to Russia.