After more than a decade of negotiations, China and Russia have agreed to a natural gas deal worth about $400 billion that represents a major step not only in global energy markets but also in geopolitics.
Despite the size and scope of the deal—it will last for 30 years and require Russia to eventually deliver 38 billion cubic meters of natural gas per year, according to a post China National Petroleum's website—it may not have a significant short-term financial effect, experts told CNBC.
Still, the deal signals changes for several key global issues, not just energy. And it will give Russian President Vladimir Putin immediate bragging rights in the face of recent Western sanctions against his country.
Although the exact pricing of the deal has not been disclosed, most analysts have been anticipating its details for some time. Some of those analysts have pegged the value of the deal at around $400 billion. Renaissance Capital analyst Ildar Davletshin wrote in a Wednesday note that he estimates "a limited financial impact" on the valuation of Russia's Gazprom. In fact, he writes that if total exports to China remain at 38 billion cubic meters, then construction on a natural gas pipeline to China may actually decrease the company's overall value.
Keith Crane, director of RAND Environment, Energy, and Economic Development Program, said he agrees that the deal doesn't change anything for either party in the short term, especially as the price remains undisclosed.
Some much needed investment capital
Still, Crane said that the ultimate legacy of the deal may be that it will give Gazprom a badly needed source of investment capital. While this will largely finance the pipeline to China—the company is responsible for all infrastructure on its side, and the Chinese will handle construction in their own country—Gazprom is also involved in other projects. Among them is the planned "South Stream" pipeline through the Black Sea, which he said could see some benefit from added liquidity.
Impact on natural gas markets
Once the natural gas pipeline to China is completed, Crane said, the global gas markets will become more integrated. According to economic theory, greater integration brings greater price efficiency, so the direct connection of East and West markets should theoretically herald better market conditions. Integration has been a trend in the market for some time through liquefied natural gas, he explained, but there is no better way than a direct pipeline to make this change.
Boost for Putin at "Russia's Davos," and a June meeting with Obama
Although Gazprom may not see short-term benefit from the deal, at least one man in Russia will reap immediate gains. At the St. Petersburg International Economic Forum, which began Thursday, Putin will be able to boast to his country's economic elite at "Russia's Davos" that their nation remains enticing for foreign investment, said Lauren Goodrich, senior Eurasia analyst at geopolitical intelligence firm Stratfor.
"It will be [Putin] riding high, not only this deal, but a string of very large deals with China," Goodrich said. "[He'll say] 'The West keeps on saying that we're bad for investment, but we have a lot of investment coming in.'"
When Putin meets with President Barack Obama and German Chancellor Angela Merkel at a World War II commemorative event on June 6, he'll also be able to flaunt this $400 billion deal as a sign that his country is not at the mercy of Western sanctions, Goodrich said. The ability to demonstrate financial security in the face of continued threat of sanctions was essential for the Russian leader, she said.
"Putin had to get this deal done today, period," Goodrich said.
Russian-European trade dynamic
In addition to allowing Putin to take a stronger stance against Merkel and Obama, the deal will also affect the nature of Russia and Europe's energy trade, experts say. In essence, Crane said, Gazprom was facing a monopsony, or a single buyer, in the European Union: It sent over 80 percent of its natural gas exports westward, according to Stratfor, while European consumers benefit from an increasing variety of gas options.
"It is important for Gazprom to get outlets for its gas, if it alienates Europe much more. Plus, it has a need for a bigger market," Malcolm Graham-Wood, founding partner at energy consultancy HydroCarbon Capital, told CNBC.
Goodrich said the deal will not only give Russia more options, but force its European customers to "at least keep decent relations with Russia on the energy front," lest Gazprom divert more of its supply to the East.
Russia's new approach to China
While "Russia has historically shunned China," this deal represents a turning point in Sino-Russian relations, Goodrich said—not necessarily making them political allies, but at least making them significant economic partners. She said that Russia has had a "historical nervousness of having China inside the country," but sanctions from the West have forced that to change in a "big, big way."
Now China will not only have an energy partnership with Russia, but Beijing is also in talks to acquire a stake in Gazprom's Vladivostok liquefied natural gas terminal and a 19 percent stake in Russian oil company Rosneft, according to Stratfor.
China's important stake in Russia
As Russia sees a new economic partner in China, Beijing has found an investment in the future of its neighbor. It is tough to make any firm predictions, but this new stake may give China some leverage inside of Russia, Goodrich said. Still, this will mostly be relegated to economic sway, not direct political clout, she added.
'So much more secure'
Perhaps more important for Beijing than a stake in Russia is the promise of greater energy security gained by the deal. The Chinese energy market is "incredibly vulnerable" to the situation at sea, Goodrich said. Recent tensions in the South China Sea, in which China unilaterally began drilling near islands claimed by Vietnam, only underscore how important it is for Beijing to secure more land import options, she said. China, she added, becomes "so much more secure" with the added diversification of its energy supply. But beyond the source of the gas, the Gazprom deal helps China address its rising energy consumption.
"It makes sense for China to sign up for as much reasonably priced gas it can," Graham-Wood said.
China's battle with pollution
China faces a significant uphill battle in terms of pollution, but an increase in natural gas can only help, Crane said. As Beijing seeks to close more coal power plants it hopes to meet the population's consumption needs with natural gas, he added, explaining that this switch "could have a pretty significant impact" on air quality.
Russia's entrance into East Asia
While modern Russia has long made overtures to East Asia, the construction of a Gazprom-connected pipeline into China will give Moscow a physical stake in the region, Goodrich said. And once the project is completed, Russia can begin to look to other countries for partners—or rivals.
"Russia can start playing these countries off each other," Goodrich said. "And this will create a fun new dynamic because this will be the first time we'll be able to see Russia play around again in East Asia."
—By CNBC's Everett Rosenfeld. CNBC's Katy Barnato contributed reporting