The Chinese pay for Russian oil the way they want

The Chinese continue to underpay for the oil that they receive from Russia. The Russian companies, who supply oil to China, find themselves in a difficult situation because they have to pay the loan, which they had previously received from China. The Russian companies threaten China with international arbitration, although they continue to supply oil to the country.

Igor Demin, the press secretary of Transneft, told PRIME news agency that the Chinese do not hurry to pay fully for the oil that they purchase from Russia. "They previously underpaid one dollar for every ton. In May, they underpaid three dollars for each ton," he said.

The payment question about the Russian oil has surfaced before as well. In April of this year, it was said that China's CNPC was supposed to pay Russia $555.3 million for 1.25 million tons of oil delivered in January. The Chinese side single-handedly decreased its payments by seven percent, which made up $38.4 million.

The Chinese state-run oil corporation did not like one of the parameters which was used in the price calculation for the oil delivered to China along the Eastern Siberia - Pacific Ocean pipeline (ESPO). As a result, the Chinese partners of Russian oil companies single-handedly cut their payments under the contract.

"They actually went back to the level of negotiations, which we had prior to the signing of the contract. They started formulating one of the regulations of the contract in their own way. We believe that their formulation is incorrect," officials representing Russia's Transneft oil company said.

The Chinese side believes that they pay for the transportation of oil on the rate that is common for the entire pipeline. Chinese officials say that the oil, which Russia delivers from the settlement of Skovorodino, where the branch of the pipeline goes towards the Russian-Chinese border, is cheaper.

The agreement about the construction of the ESPO branch for China (Skovorodino-Daqing) with the capacity of 15 million tons of oil was concluded in October 2008. In accordance with the Russian-Chinese contract, the oil deliveries to China were supposed to be conducted for 20 years. The information about the terms of the agreement, including the price calculation formula, remained closed from the general public for a long time.

In February 2009, Rosneft and Transneft raised a 25-billion-dollar loan from China towards the deliveries of 15 million tons of oil annually. In accordance with the agreement, the loan was supposed to be paid with a share of the income received from the deliveries of Russian oil to China.

Negotiations with the Chinese side were supposed to take place in May. Judging from the publications in the Chinese media, the Celestial Empire believed that Russia would continue to deliver its oil under China's conditions.

China reminded Russia that Rosneft and Transneft received the loans of $15 billion and $10 billion respectively. The credit payment period was set for 20 years in equal installments, starting from the fifth year since the attraction of the loan. In addition, to receive the loan, the Russian companies undertook to guarantee uninterrupted oil supplies to China during the above-mentioned 20 years.

The Russian companies need the Chinese resources, so the Chinese believe that the Russians are bluffing and that they will not resort to international arbitration, Chinese news agencies said.

It appears that the Chinese are right.

Both Rosneft and Transneft export their oil to Russia. Transneft purchases raw materials from Rosneft and resells oil to China in the volumes proportionate with the volumes stipulated in the agreements for deliveries. The latter in its turn is connected with the volumes of attracted credit funds.

It was said at the end of May that the Chinese started to pay their debts. CNPC transferred $78 million to Transneft and $117 million - to Rosneft.

According to PRIME news agency, the Chinese pay for the Russian deliveries every month after the 20th. However, according to the payment results in May, Transneft received three dollars left from each of the delivered tons of oil. As a result, the company's debt to Transneft is growing.

Vladimir Shabanov.

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Author`s name Dmitry Sudakov