Russia’s Stalled Power of Siberia 2 Pipeline Highlights China’s Energy Leverage

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Russia’s Stalled Power of Siberia 2 Pipeline Highlights China’s Energy Leverage

Flags of China and Russia (© Shutterstock/Vitalii Vodolazskyi)
Flags of China and Russia (© Shutterstock/Vitalii Vodolazskyi)

Russian President Vladimir Putin’s recent visit to China has been marked by handshakes, joint statements, and a display of their “no limits” friendship with counterpart Xi Jinping. 

However, a significant issue looms behind the scenes: the stalled Power of Siberia 2 pipeline project.

The proposed 2,000-mile pipeline is crucial for Russia, allowing it to ship an additional 50 billion cubic meters of gas per year to China. This redirection of gas flows was initially intended for Europe before the invasion of Ukraine. 

Despite the lack of a deal during their recent meeting, Russian authorities remain optimistic, promising an agreement “in the near future.” Surprisingly, China’s official readouts of the meeting didn’t even mention the project, highlighting their upper hand in negotiations. 

China’s gas demand is steadily growing, and the nation has ample capacity to handle seaborne liquefied natural gas, even reselling cargoes abroad. In contrast, Russia’s Gazprom PJSC, a major energy player, posted its first annual net loss in 24 years due to challenges in replacing piped gas shipments to Europe. 

Erica Downs from Columbia University’s Center on Global Energy Policy suggests that Beijing aims to secure a lower gas price for Power of Siberia 2 than it pays for fuel via Power of Siberia. The latter is already forecast to be up to 28% cheaper than Russia charges its European clients.

Despite Moscow’s desperation, the Power of Siberia 2 remains uncertain. Russia is exploring alternative routes, including one through Mongolia and another alongside the proposed gas pipeline to carry oil. 

The project’s fate hinges on continued US-China tensions and the possibility of another Donald Trump presidency. Xi may ultimately decide to support Russia, but at a price favourable to Beijing.

The Power of Siberia-2 pipeline, a critical energy link between Russia and China, has become a focal point in their strategic partnership. While Russia seeks to secure its gas exports, China’s growing leverage and energy transition play a significant role in negotiations, with the outcome will shape the future of gas supply dynamics in the region.

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