Sibur, Eastern Europe and Russia's largest petrochemical company, is feeling the pinch from a sharp decline in global prices for its synthetic rubber and polymers, brought about by cautious Chinese customers.

Sibur is more concerned about inventory levels at its Chinese customers than the European debt crisis, the head of Sibur's export organization, Ilya Gushchin, told Reuters on Tuesday.

That is even though it channels about two thirds of its exports to Europe and just a quarter to Asia.

"The main factor here is not Europe but China, where monetary policy is being tightened. Companies there are reacting by decreasing their working capital," he said.

It generates almost half of its $6.2 billion in annual sales outside Russia.

"During the last three to four months, (China) has been the main driver behind the drop in global prices," which mostly affected its rubber business but also polymers and some liquid chemicals such as alcohols, Gushchin said.

Sibur mainly refines associated petroleum gas (APG) that emerges as a by-product of Russia's oil industry.

This is sold as fuel for cars in the form of liquefied petroleum gas (LPG) or processed further into synthetic rubber or building blocks for plastics.

"In LPG prices, we also see a negative trend but fortunately it is not so dramatic," Gushchin said.

But the company, which competes with Germany's Lanxess in rubber chemicals, remains confident about its long-term growth prospects and is sticking with its major investment projects.

It is spending $1.8 billion on a polypropylene plant in the western-Siberian town of Tobolsk and is also building a Baltic sea port in Ust-Luga, near Saint-Petersburg, both due to be fully operational in early 2013.

Sibur was built on the foundation of the former Soviet petrochemical industry and was recently bought by Leonid Mikhelson, the chief executive of independent gas producer Novatek.

The group's Chief Executive Dmitry Konov told the Reuters Russia Investment summit in September that Sibur's long-planned initial public offering will likely not happen until 2013.

Sibur is banking on Russia's bid to build up a manufacturing sector to reduce its dependence on the energy sector and is also keen to tap one of the country's major unused resources: the wasteful burning of associated gas at oil fields situated far from the state-controlled gas pipeline network.

Russia is the world's biggest flarer of associated gas but its government is preparing to impose stiffer limits on flaring from Jan 1.

"This is one of the cornerstones of our strategy. Governmental regulations are in line with Sibur's strategy in APG processing," Sibur export chief Gushchin said.