Chinese leader bolsters Russian ties on first foreign trip

By Alexei Anishchuk and Timothy Heritage

MOSCOW (Reuters) - Chinese leader Xi Jinping emphasized the importance of relations with Russia as a counterweight to U.S. influence by visiting Moscow on his first foreign trip as president, and secured more oil to fuel China's growing economy.

Although relations between Moscow and Beijing have rarely been smooth, they have improved in the past decade and Xi highlighted this by signing energy, trade and political deals on Friday to strengthen ties between them.

Russian President Vladimir Putin has long sought to blunt U.S. influence overseas, while China is grappling with the expanded military and economic interest the United States has displayed in Asia since 2011.

Xi became the first foreign guest to be met in the Kremlin by an honorary cavalry escort created by Putin in 2002, officials said, and looked at ease with the Russian leader in its glittering halls despite the formality of the occasion.

Putin, 60, greeted Xi with a firm handshake and a grin then ushered him down a red carpet past a long line of officials and into the Kremlin's gilded Green Room.

The meeting was carefully scripted and any disharmony was glossed over. But Putin looked more comfortable with Xi than with the French and German leaders, Francois Hollande and Angela Merkel, who raised human rights concerns during recent visits.

"I get the impression that you and I always treat each other with an open soul, our characters are alike. We always speak in a good manner, you and I are good friends," Xi, 59, told Putin as they began their talks, sitting in gold-trimmed chairs.

His remark recalled former U.S. President George Bush's declaration on meeting Putin in 2001 that he had looked him in the eye and "was able to get a sense of his soul".

The crowning point of the visit was an agreement between Russia's biggest oil producer, Rosneft, to gradually increase oil supplies to China to 45-50 million tonnes a year - three times the current level.

Rosneft, meanwhile, will be granted a $2 billion loan from the China Development Bank and a $2 billion deal was announced by Russian and Chinese companies to develop coal resources in eastern Siberia.

But they did not agree on a long-sought deal on supplies of pipeline gas to China, underlining the lingering mistrust that has dogged relations for decades.

Even so, Putin declared the visit a success.

"The new Chinese leader's decision to choose our country on his first foreign visit highlights the special nature of the strategic partnership between Russia and China," he said.

NEW PRESIDENT, NEW IMPULSE

Xi arrived in Moscow with first lady Peng Liyuan, a singer whose first step into the international limelight was an instant Internet sensation in China, where her glamorous appearance won her an immediate fan club.

There was no sign, however, of Putin's estranged wife, Lyudmila. She was last seen at a state event last May, when Putin was inaugurated for a six-year third term.

Putin has said he wants to "catch the Chinese wind in our economic sail". China's economy is the world's second largest and could outstrip the U.S. economy during Xi's 10-year term.

Mutual trade has more than doubled in five years to hit $87.5 billion in 2012. But the trade volume is still about five times smaller than Russia's with the European Union and far smaller than China's trade with the United States.

Relations between Russia and China were often uneasy during the Soviet era even though Moscow was also then under communist rule. But the two U.N. Security Council members' solidarity on important global issues has strengthened in recent years.

"China and Russia have similar or identical positions on key international and regional issues," Xi said, reading from a statement after talks and a document-signing ceremony, with Putin sitting beside him behind a large white desk.

"We intend to still more decisively defend the aims and principles of the U.N. Charter and the commonly accepted norms of international relations, to protect justice and equality in the world and provide for peace, stability and prosperity."

The two countries have three times blocked Western-backed measures on the conflict in Syria despite talk of grumbling in Beijing, and Russia has followed China's lead on North Korea. They gave no details of their plans for reinforced cooperation and reporters were not allowed to put questions to them.

(Additional reporting by Thomas Grove and Steve Gutterman; Writing by Timothy Heritage; Editing by Erica Billingham)

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U.S. hopeful for strong Chinese action on North Korea

BEIJING (Reuters) - The United States is optimistic that China will take strong action against North Korea and has urged Beijing to increase scrutiny of financial institutions with links to Pyongyang, U.S. Treasury Undersecretary for Terrorism and Financial Intelligence David Cohen said on Friday.

Cohen said that the United States believes that China is looking at the threat by North Korea in a new and different way.

Dan Fried, the U.S. State Department's new coordinator of sanctions policy, also said Washington hopes ultimately to reach a diplomatic solution with North Korea.

(Reporting by Terril Yue Jones, Writing by Sui-Lee Wee; editing by Jonathan Standing)

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New U.S., Chinese officials reach out ahead of talks later this year

By Anna Yukhananov and Sui-Lee Wee

BEIJING/WASHINGTON (Reuters) - A fresh roster of U.S. and Chinese economic and diplomatic officials on Wednesday pledged to strengthen relations between the world's two largest economies, even as concerns persist over currency rates, cybersecurity and the Korean peninsula.

U.S. Treasury Secretary Jack Lew, in his first international trip since taking office last month, wrapped up a two-day visit to Beijing with a meeting with Chinese Premier Li Keqiang, having reopened dialogue on economic reforms but saying more action is needed on China's exchange rate.

"It was clear from the discussions that China has made a serious commitment to their reform agenda. The challenge will be to drive forward toward material progress," Lew told reporters shortly before heading back to Washington.

On economic reforms, Lew said the dominant theme "was what can be done to generate more domestic demand and more growth."

Li told Lew that Sino-U.S. relations should establish "a new form of thinking" and that both sides should use a "strategic, global and long-term vision to view each other," according to a Chinese government website.

Separately, Chinese Foreign Minister Wang Yi told U.S. Secretary of State John Kerry in a phone call on Wednesday that Sino-U.S. relations are "now at a new historical point, we have to forge ahead on the foundations set by the previous people," the Chinese government said.

A senior U.S. official said Kerry, congratulating Wang on his new post, spoke with him about the secretary of state's planned trip to China next month, as well as bilateral and regional issues, North Korea, and cybersecurity.

Like Kerry and Lew, Wang and Li are both newly appointed to their positions.

The exchanges this week offer a preview of deeper talks scheduled for later this year when both Kerry and Lew will host their Chinese counterparts in Washington for the U.S-China Strategic and Economic Dialogue, an annual high-level forum.

COMPETITION AND COOPERATION

Underscoring the continued economic friction between Washington and Beijing, a bipartisan group of U.S. lawmakers on Wednesday reintroduced legislation to pressure China to allow its currency to rise further against the dollar. Similar proposals in recent years have failed to make it into law.

Many lawmakers assert that China's yuan is undervalued, harming U.S. exporters.

The yuan has appreciated 16 percent in real terms against the dollar since June 2010. The currency hit an all-time high against the dollar on Wednesday, but Lew said China needs to make more progress reforming its foreign exchange regime.

"China's exchange rate should be market-determined. That's in our interest and China's interest. They recognize the need to do it for internal reasons as well," Lew told reporters.

Lew's visit with China's new leaders and senior economic officials as well as with U.S. business leaders in Beijing was aimed at improving economic cooperation and boosting growth.

The two sides also discussed growing tensions on the Korean peninsula, European debt, Internet security and climate change.

Li, who was chosen as premier on Friday, told Lew that China "is ready to work with the United States to promote Sino-U.S. relations and develop it in a cooperative, inclusive, healthy and stable way amid competition," the government said.

Lew also met with Chinese President Xi Jinping, Finance Minister Lou Jiwei and People's Bank of China Governor Zhou Xiaochuan.

During his talks, Lew raised the issue of computer hacking. U.S. President Barack Obama last week convened a meeting with CEOs at the White House on such digital attacks and later called Xi over the issue.

The concerns follow a recent assessment by U.S. intelligence leaders that for the first time said cyber attacks and cyber espionage had supplanted terrorism as the nation's top threat.

"It has to be recognized, as the president indicated, this is a very serious threat to our economic interests. There was no mistaking how seriously we take this issue," Lew told reporters.

On North Korea, which has made a series of provocative threats, Lew said the United States and China "will continue to pursue methods available to change the policy perspective in Pyongyang. We share a common objective of a denuclearized Korean peninsula and we will continue to discuss it."

(Corrects family name for Chinese premier to Li from Keqiang, paragraph 5)

(Reporting by Anna Yukhanov and Sui-Lee Wee in Beijing and Doug Palmer and Arshad Mohammed in Washington; Writing by Susan Heavey; Editing by Warren Strobel and Paul Simao)

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Chinese owners give Nexen oil unit freedom to run operations

CALGARY, Alberta (Reuters) - Chinese oil company CNOOC Ltd , its takeover of Canada's Nexen Inc now complete, is giving the leader of the Canadian unit freedom to get operations running smoothly after an exhaustive seven-month acquisition process, CNOOC's CEO said on Wednesday.

The deal, which boosts CNOOC's global oil and gas production by 20 percent and reserves by 30 percent, closed on Monday after clearing the final hurdle, sign-off by U.S. regulators.

"This is a big deal. Nexen is a big organization. We'll fully empower the management team here to get the operation right, to prioritize the strategy for the future," Li Fanrong, chief executive of CNOOC, told reporters at Nexen's Calgary head office.

CNOOC and Nexen executives refused to give details of what they had to do to satisfy the Committee on Foreign Investment in the United States following its extended review. The deal needed U.S. approval because of Nexen's Gulf of Mexico operations.

Kevin Reinhart, who was interim CEO of Nexen for the past year, is now heading up CNOOC's North and Central American operations, which adds about $8 billion of assets to Nexen's holdings. The transaction was China's biggest foreign takeover.

CNOOC will not initially look to add to Nexen's assets through further acquisitions, Li said.

With the contentious deal done, CNOOC gets control of Canadian oil sands and shale gas assets as well as exploration and production holdings in the Gulf of Mexico, North Sea and offshore West Africa.

It also takes on 3,000 employees, including 1,700 in Canada. As part of its undertakings to satisfy the Canadian government that the deal would have a net benefit to the country, it has pledged to keep all the staff.

Li and Reinhart hosted a town hall meeting for the employees on Wednesday, partly to calm nerves. They told the staff it will be business as usual, despite the months of uncertainty.

Reinhart said there had been little staff turnover since the announcement, which shook up Canada's oil patch and raised fears about foreign control over the oil sands. However, he said some incentive programs had been tied to the deal being closed, so it is not clear how many could still cash out and leave.

"It's possible that we're going to see some people make some of those decisions. That comes out of every transaction," he said. "But the whole intent is to go in with compensation programs that make it attractive for people to stay here ... you don't want them to go over to another job where they're going to be financially better off."

Ottawa approved the deal in December, saying that it would not be detrimental to the Canadian economy after CNOOC made commitments on employment, spending and other areas. In its wake, however, Prime Minister Stephen Harper essentially closed the door on future majority acquisitions of Canadian oil sands assets by foreign state-owned enterprises.

CNOOC's undertakings for Ottawa will only go so far as being beneficial to the company and economy, Reinhart said.

"CNOOC wasn't prepared to make uncommercial commitments and the government wasn't asking for uncommercial commitments," he said. "A lot of time was spent so that we could explain our business in sufficient detail so they understood what would be commercial and what wouldn't be commercial.

"Taken to an extreme example, producing product at below its fair value is not in the best interests of Canadians."

For future investments in Canada, the executive said they were still evaluating how best to develop Nexen's extensive northeastern British Columbia shale gas assets.

Nexen and its partners, a group led by Japan's Inpex Corp , have discussed the possibility of joining the rush to build liquefied natural gas plants on Canada's West Coast to help boost the value of the gas from the Horn River and Liard regions. There is no deadline for a decision.

Another commitment is a listing of CNOOC shares on the Toronto Stock Exchange. Executives said they will now go through the approval process with Canadian regulators and do not yet have a timing for the listing.

Nexen shares are due to be delisted shortly. They closed at C$28.18 in Toronto on Wednesday.

(Editing by Bob Burgdorfer)

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