China was discussing lending Russian state oil major Rosneft and pipeline monopoly Transneft up to $25 billion in loans as part of a broader oil supply deal, which would allow Beijing to secure deliveries for 20 years and give Russian firms the means to sort out prompt refinancing needs.

A major delay in talks would deal a blow to the Kremlin's strategy to showcase its strategic relations with Asian energy consumers at a time of difficult relations with the West.

It will also put additional pressure on the finances of some of the biggest firms in the world's second-largest oil exporter at a time of plunging oil prices.

"The working groups have suspended talks after the Chinese side raised quite absurd lending conditions... One could have a feeling that there had been no previous round of talks in Moscow," one source, who asked not to be named because he is not allowed to talk about the issue publicly, told Reuters.

The shares of Rosneft fell 19 percent in London, underperforming the broader Russian index. Share trading on Moscow's main MICEX exchange was suspended on Wednesday after heavy losses on Tuesday.

Chinese Premier Wen Jiabao visited Moscow last month when the two countries agreed to jointly build a new overland supply route for Siberian oil to carry 15 million tonnes a year (300,000 barrels per day) between the countries' trunk pipelines from 2009.

Russia's top energy official, Deputy Prime Minister Igor Sechin, said Russian oil firms would receive "considerable" loans from China in return for increased oil supplies and outlined the end of November as a deadline for the deal.

TACTICS

"It (the talk suspension) really looks like some kind of negotiation tactic by the Russians," said Valery Nesterov, oil and gas analyst at Troika Dialog brokerage.

"A deviation from earlier agreements would mean reducing trading relations with a very important partner at a time when Russia is seeking new partners in Asia. I don't think that a dispute about interests would be decisive here," he added.

The source said the Chinese side had asked at the latest round of talks in Beijing to peg interest rates on the loans to LIBOR, after having agreed previously to lend the money at 7 percent a year.

He also said Beijing was seeking additional state guarantees from the Russian government and wanted direct access to some of Russia's biggest fields.

"They have demanded the entire Talakan field," the source said, referring to a large eastern Siberian field owned by No. 4 Russian producer, Surgutneftegas.

Another source said the deal was complicated by the fact a $10 billion portion of the loan to Transneft should be guaranteed by export deliveries. Transneft cannot supply this as it does not produce its own oil.

"Everything is on hold now. It is all very high-level politics," the second source said.

Nesterov said the $10 billion loan for Transneft was very important to help it build the second stage of Russia's first pipeline to Asia, so it can reach the Pacific coast. The first link to China is estimated to cost $14 billion and is due to be completed by the end of next year.

But Nesterov also said that the $15 billion portion of the loan to Rosneft was of a much bigger importance as Russia's most indebted firm has to refinance a large part of its $22 billion debt in the next years while also financing an ambitious development programme.

The first source said Transneft might now even decide against building a spur to China should talks over lending fail and could choose to construct only a direct pipeline to the Pacific coast, where a new oil terminal would be built.

"China is showing interest in this port. And Japan and Korea are also interested," he said.