RIA Novosti is reporting that sources close to negotiations say Transneft has told China Development Bank it will repay a $10 billion 20 year loan early if it needs to take legal action through a London court over pricing. Transneft, which commenced oil supplies to China via the first stage of the Pacific pipeline in January, has said that China National Petroleum Corporation underpaid for the supplies, citing differences over tariffs. In May, Transneft said CNPC reduced its debt to 9% from 12% underpaid after an official tariff clarification letter from FTS of Russia. During the negotiations it was noted that the pricing terms of the agreement on supply of Russian oil to China are not being met. It was said that if the dispute is sent to the London court, Transneft will be ready to repay its 20-year loan to China ahead of schedule Under a China-Russian intergovernmental agreement, the supply of oil will be carried out under contracts between OAO \"NK\" Rosneft \", OJSC\" AK \"Transneft\" and Chinese National Petroleum Corporation (CNPC) for 20 years in the amount of 15 million tonnes per year. Monthly pricing is be based on market conditions and Russian oil quotes in the port of Kozmino. According to Chinese news agency Xinhua, 42 thousand tonnes of crude oil has been delivered from Russia to China as of January 2, 2011. Viktor Markov, senior analyst at Zerich Capital Management, says the pricing dispute reflects the lack of a price reduction reflecting a shortened route which China has largely financed. “The situation is as follows: China has been buying crude oil from Kozmino port for 155 roubles per tonne of oil transported to the port plus the actual price of oil before the Pacific pipeline was constructed. In a meantime during the crisis China approved $10 billion for Transneft to finish the Pacific pipeline construction which would make the transportation rout shorter. However, the Russian transportation tariffs remained equal to those applicable for Kozmino port since no update of pricing has been made.” Markov added that it is unlikely that the dispute will progress to court action or the repayment of the $10 billion loan as it is in the interest of both sides to come to agreement. “China has financed the construction and desperately wants tariffs to be reduced given that the route has changed. In that case, Transneft has much better options rather than get involved into the dispute when both sides have long term billion gas supply contracts. China is still buying a part of Russian oil from Kozmino thus that could mean that the oil supplied through the pipeline is not enough and the agreement should follow either tariff reductions compensated through gas contract where the Russian side can add on price or enter China’s gas processing industry.”