This rail method should see China double its oil imports from Russia by 2006. However, it still does not settle the issue concerning the Siberia to China pipeline that China wants over Japan's rival Siberia to Pacific coast pipeline bid.

According to an unnamed source, CNPC's president, Ma Fucai, and Yukos senior vice-president, Alexander Temerko signed the deal on Tuesday. Under the terms of the agreement, the oil will be transported from the Russian border town of Zabaikalsk to Manzhouli on the Chinese border. Russia's state-run railway had announced earlier that it would increase its transportation capacity to ship 12 million tons from Yukos to China by 2006.

Both CNPC and Yukos had earlier signed a contract for the Chinese company to buy around 6 million tons of crude that would be delivered by rail between 2003 and 2006. However, according to the source, "Yukos has recently proposed to CNPC to increase its oil shipment to CNPC. The companies have basically agreed the trading terms, including the prices."

A Russian oil expert with the China Academy of Social Sciences does not believe that this increased export of oil via rail will bring about a breakthrough in the deadlocked Sino-Russia oil trunk line.

According to Li Fuchuan, "One of the signals we see behind the increased oil transportation by rail is that the oil pipeline project may be further delayed. Russia is meeting its commitment to oil exports to China anyway, whether it is coming by a railway or via a trunkline.