China may be on the way to abandoning its age old ally, Russia, as its state-run oil refiner, Sinopec, is reported to have paused discussions with Russia about a petrochemical investment and a deal to market Russian gas in China.
Russia is China’s second-largest oil supplier and third-largest gas provider.
The Reuters sources said the reason for the pause in talks is due to China’s wariness over its own companies butting up against Western-levied Russian sanctions
According to Reuters, while the petrochemical deal wasn’t named, sources said it was in the site selection process and was supposed to be similar in size to the $10 billion Amur gas chemical complex in Siberia. Amur is a joint venture between Sinopec and Russian Sibur.
The new investment in question—which was also a deal with Sibur—was estimated at $500 million for a gas chemical plant.
China (Sinopec) reportedly paused the talks when it realized that one of Sibur’s minority shareholders and board members, Gennady Timchenko, had been sanctioned by the EU and Britain due to his ties with Russian President Vladimir Putin.
Timchenko was also on Novatek’s board until Monday, when he resigned. The Amur project is also in jeopardy, as funding sources in Russia, including from Russia’s state-run Sberbank, also find themselves limited due to sanctions, the Reuters report said.
Sibur has denied that a new project with Sinopec similar to Amur was in the works. It did say, however, that Sibur continues to work with Sinopec on the Amur project.
“Sinopec is actively participating in the issues of the project’s construction management, including equipment supplies, work with suppliers and contractors. We are also jointly working on the issues of project financing,” Sibur told Reuters.
China’s ministry of foreign affairs has recently met with Sinopec, CNPC, and CNOOC—its three energy giants—to review its ties to Russia. Reuter’s sources have suggested that those companies have been told to tread carefully in its dealings with Russia and to not make any rash moves in buying Russian assets.
By Chidi Ekpewerechi
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