Russia, China Move Loan Talks to Moscow

By Tanya Mosolova, Reuters

Russia and China will continue in Moscow $25 billion loan talks, which are expected to intensify on Wednesday, Russia's oil pipeline monopoly Transneft said on Monday.

China is considering lending the money to Russian state-controlled oil major Rosneft and Transneft in exchange for securing oil supplies for 20 years.

But the talks, which have been previously held in China, have stumbled due to disagreements over interest rates and state guarantees, sources told Reuters last month.

"The talks with the Chinese side will enter more active stage on Wednesday, when representatives of the China Development Bank and (China top oil firm) CNPC will come to Moscow," Transneft's spokesman Igor Dyomin told Reuters.

Russian Energy Minister Sergei Shmatko said last month he hoped to finalise by the end of the year the deal, which is of crucial importance for both sides.

Rosneft desperately needs cash to refinance its heavy debt and Transneft has to fund its expensive pipeline projects, which is hard at a time of plunging oil prices, while Beijing is seeking direct access to some of Russia's biggest fields.

Transneft is building a 600,000 barrel-per-day oil pipeline from the resource-rich region of East Siberia to Asia -- its first oil pipeline to the region -- and is in talks with Beijing on constructing a spur to China.

Rosneft, which is expected to be the main oil exporter via the pipeline, is now supplying around 10 million tonnes of oil to China by railway under the $6 billion 2004 deal which helped Rosneft to buy the assets of banrkrupt former rival YUKOS.

The purchase made Rosneft Russia's largest oil producer and refiner, but the firm said it would not extend the deal beyond 2010 because it considered it poorly priced.

- Copyright 2008, Reuters. All rights reserved. 

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