By the Blouin News Business staff

Argentina, Russia ink major energy deals

by in Americas, Europe.

Russian President Vladimir Putin (L) shakes hands with Argentinian president Cristina Fernandez de Kirchner during their official meeting at the Kremlin on April 23, 2015 in Moscow, Russia. Kommersant Photo/Kommersant via Getty Images

The Russian and Argentine presidents at the Kremlin on April 23, 2015. Kommersant Photo/Kommersant via Getty Images

On Thursday, Argentina and Russia signed several key energy agreements totaling nearly $5 billion. They come as Argentine President Cristina Fernández de Kirchner (commonly referred to as CFK in Argentine media) finishes a state visit to Moscow, strengthening the relationship of two countries with many shared interests, both economic and geopolitical.

To begin, increasing Argentina’s energy supplies is a major priority for CFK. Since 2011 the country has racked up annual energy deficits of several billion dollars apiece while its central bank reserves have dwindled. Argentina predicted that its energy trade deficit would decrease 16% this year, due to the slump in international oil prices and increased domestic output, but that still leaves an expected deficit of $5.6 billion for 2015.

Nuclear energy will play a larger role in the country’s future energy mix, and in the past year CFK has been on a buying spree of nuclear power plants. Last July, following Russian President Vladimir Putin’s state visit to Buenos Aires in June, an updated and expanded nuclear power agreement was reached between the two countries. With Russian guidance, Argentina will add another nuclear plant to its two existing ones. Then, during CFK’s February state visit to China, two deals were reached with state firm China National Nuclear to build Argentina’s fourth and fifth nuclear plants at a cost of $5.8 billion and $7 billion respectively, notes the Buenos Aires Herald. The latest agreement, signed on Thursday, is for Russia’s Rosatom to build Argentina’s sixth nuclear power plant. The state-owned firm, which is already one of five suppliers for Argentina’s nuclear supplies, also reached a new agreement to provide nuclear fuel for reactors currently producing energy in Argentina.

On Thursday, Russian state oil giant Gazprom signed a memorandum of understanding for $1 billion in joint gas exploration with its Argentine counterpart YPF at Argentina’s huge but still mostly-untapped Vaca Muerta field. YPF is seeking foreign partners and capital to develop Vaca Muerta, which is the key to Argentina’s goal of becoming a net energy exporter once again. Putin said Gazprom was considering the possibility of jointly developing hydrocarbon deposits in Argentina with YPF, and according to Reuters, Russian heavy machinery producer Uralmash planned to form a joint venture with Argentine partners to produce oil equipment in Argentina. Because Argentina is still cut off from international financial markets after its massive default in 2001-2, it needs major deals with capable and deep-pocketed partners to develop its resources.

Beleaguered by Western sanctions over its actions in Ukraine, Russia has turned elsewhere for trade and cooperation. Of particular focus are its fellow BRICS members, and more broadly the rest of Latin America. Although bilateral trade between Argentina and Russia was well under $2 billion in 2014, it was qualitatively important. Agricultural goods from Argentina and Brazil are important for Russia, which banned many such imports from European countries in retaliation for their sanctions.

Meanwhile, Argentina has supported Russia’s claim to Crimea, just as Russia supports Argentina’s claim to the Falkland Islands. “You can’t insist on the territorial integrity of Ukraine but not of Argentina,” CFK said earlier this year. On Thursday, Putin stated “Our countries share long-standing relations of friendship and mutually beneficial cooperation, which have reached the level of a comprehensive and strategic partnership.” At least for the remaining months of CFK’s term in office, the bilateral relationship will be a close one.