02/04/2005, 00.00
CHINA - RUSSIA
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Energy and military cooperation top talks between China and Russia

by Maurizio d'Orlando

Milan (AsiaNews) – Sino-Russian relations are bound to get closer as both countries seek greater cooperation in the energy and military fields. Such are the expectations from Chinese State Councillor Tang Jiaxuan's four-day visit to the Russian capital where he is scheduled to meet Russian President Vladimir Putin and Russian Security Council chairman Igor Ivanov

The Moscow visit is the latest in a string of high-level meetings between the two neighbours and follows mutual visits by Premier Wen Jiabao and Mr Putin last year.

It also coincides with a visit by a Russian military delegation to Beijing, reportedly to discuss arrangements for a joint military exercise—set for August or September—to be held in China.

Analysts believe the exercise is intended to build trust, especially as the mainland's military might grows—backed by Russian technology.

According to some Western analysts, the exercise is also intended to allay Russian concern that its military infrastructure is just a supply store for building the Chinese military with little in return.

Closer economic ties are somewhat more delicate. Vnesheconombank (VEB), Russia's state-owned Bank for Foreign Economic Affairs, and Chinese Foreign Ministry spokesman Kong Quan have recently denied claims that China is lending money to Russian state oil firm Rosneft for its purchase of ex-Yukos unit Yuganskneftegaz (Yugansk). The denial contradicts a statement made on February 1 by Russian Finance Minister Alexei Kudrin who, in a press conference, said that some Chinese banks were providing VEB with a US$ 6 billion loan to help Rosneft finance its takeover of Yuganskneftegaz.

The denials cannot however cancel the fact that Rosneft acquired the jewel in Yukos's crown.

In a January 18 article Russian financial daily Vedemosti reports that the China National Petroleum Corporation (CNPC) did not formally finance Rosneft's takeover but put a "down payment" on five-year oil supplies. Legally, therefore, the US$ 6 billion are just an advance payment on future oil sales; VEB did not receive any loan but just a down payment.

This unusual transaction seems to be intended to avoid legal claims that Yukos shareholders—its main shareholder, Mikhail Khodorkovsky, is currently in jail in Russia on charges of fraud, tax evasion and unlawful appropriation of state properties—might launch outside of Russia against buyers of Yukos assets sold by the Russian bankruptcy court.

In Texas, Yukos's attorneys were successful to get a Houston court to claim exclusive jurisdiction over the company's bankruptcy proceedings.

For this reasons, even though many oil companies around the world have shown interest in acquiring the assets of the former Russian giant, among them Indian companies, none has made any bid to avoid entanglement with the US courts.

The auction of Yukos assets was done on December 18, 2004; a single bidder, Baikal Finance Group, acquired offering US$ 9.35 billion.

Hitherto unknown, Baikal resold Yuganskneftegaz for 10,000 roubles (about € 270, US$ 350) to Rosneft which paid Baikal's US$ 9.35 billion auction bill on December 31.

Speculation was rife as to how a small company like Rosneft could raise the necessary capital to buy Yukos.

The answer, writes Vedemosti, lays in a visit by Viktor Khristenko, Russia's Energy Minister, and Sergei Bogdanchikov, Rosneft's chairman, to Beijing to work out a deal with CNPC that would see 48.2 million tonnes of oil shipped to China by 2010 in exchange for US$ 6 billion, a transaction that both the VEB and the Chinese Foreign Ministry deny.

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