The recent deal between Russia and China on the delivery of natural gas was precast by confusion and obfuscation. After a decade of tough negotiations, the meeting between Russian President Vladimir Putin and Chinese President Xi Jinping amid the stand-off between Russia and the US and the EU over Ukraine could not have come at a better moment, for Russia.

When initial reports filtered in that there was in fact no deal, policymakers in Brussels and Washington raised their glasses, only to wake up and find that the deal had in actuality been consummated.

Full contract terms have not been announced, and most likely will not. What we do know is that the total deal is worth $400 billion, and encompasses the annual delivery of 38 billion cubic meters of natural gas per year for a period of 30 years, starting in 2018. Analysts estimate that the price paid by China for delivery to its border is about $10-11 per million British thermal units (mmBtu). In comparison, European prices vary between $10-12/mmBtu. With a delivered price to Shanghai of around $12/mmBtu, the Chinese have locked in a price which is very competitive with Asian spot prices for liquefied natural gas (LNG) that currently stand at a 19-month low of $13.30/mmBtu.