Siberian Energy Alliance: Russia and China Move Forward with Power of Siberia 2 Pipeline Deal

On Tuesday, Russia and China finalized a “legally binding” agreement to accelerate the construction of the long-pending Power of Siberia 2 pipeline, a venture that will solidify Beijing’s status as Moscow’s primary energy buyer while Russia aims to compensate for the market losses in Europe.

This accord was one of four reached between Gazprom, Russia’s state-owned energy conglomerate, and the China National Petroleum Corporation, as reported by Gazprom’s CEO, Alexei Miller.

Miller emphasized, “This initiative is set to become the largest, most ambitious, and most capital-intensive undertaking in the global gas sector.”

Collectively, these undertakings are projected to deliver up to 106 billion cubic meters of Russian natural gas to China annually, according to Interfax news agency. Prior to the large-scale invasion of Ukraine in 2022, Russia exported over 150 billion cubic meters of gas each year to European countries.

The $13.6 billion pipeline project was first proposed by President Vladimir Putin to Chinese President Xi Jinping in 2022. The venture aims to supply 50 billion cubic meters of gas each year to northwest China but had faced delays due to protracted discussions around pricing and supply volumes.

Earlier reports indicated that Beijing was only willing to commit to a portion of the pipeline’s capacity and sought significant discounts in line with Russian domestic pricing. The ceremony held in Beijing on Tuesday, attended by both leaders, represented the initial official commitment to advance the project.

Miller mentioned that details regarding the launch date and pricing would still need to be resolved, adding that the original Power of Siberia pipeline, which commenced gas deliveries in 2019, was completed five years after its agreement and ahead of the expected timeline.

Additionally, Gazprom agreed to enhance the annual gas deliveries through the existing Power of Siberia pipeline, increasing the volume from 38 billion cubic meters to 44 billion. The Power of Siberia 2 is projected to operate for 30 years, traversing Mongolia via the Soyuz Vostok transit route.

China has already benefitted from significantly discounted exports of Russian oil, coal, and gas, as Moscow endeavors to balance the loss of its European energy partners.