BEIJING, February 17 (RIA Novosti) - China will extend $25 billion in loans to Russian state-controlled crude producer Rosneft and pipeline operator Transneft at 6% per annum in exchange for long-term oil supplies, a source close to negotiations said Tuesday.

Russia and China signed on Tuesday in Beijing an intergovernmental agreement on the construction of a branch of the East Siberia-Pacific Ocean (ESPO) oil pipeline toward China and long-term Russian oil supplies.

Under the agreement, Russia will supply 15 million metric tons (110 million barrels) of crude annually for 20 years to China.

According to the source, China will extend a $15 billion loan to Rosneft against the guarantee of oil supplies while Transneft will receive a loan of $10 billion against the pledge of its infrastructure.

"The interest rate was cut by 1 percentage point: previously loans at 7% were discussed," the source said.

After the agreement was signed, Russian Deputy Prime Minister Igor Sechin said the loan terms "suited both parties."

ESPO is currently under construction and expected to pump its first oil in December 2009.