New Potentials: The Impact of the Power of Siberia 2 Pipeline Agreement on Russo-Chinese Relations

On Tuesday, Moscow and Beijing finalized an agreement for the construction of the long-anticipated Power of Siberia 2 pipeline, which aims to transport Russian gas to China.

If successfully completed, this project would serve as a buffer for China against geopolitical uncertainties, while also providing Russia with a vital market for its gas exports following the exit of Western clients after the invasion of Ukraine.

Alexei Miller, the CEO of Gazprom, announced that the Russian company and China’s CNPC have signed a «legally binding» memorandum for the development of the Power of Siberia 2 pipeline during a Tuesday briefing.

This initiative, which has been in the works since 2020, will convey gas from western Siberian reserves to China through Mongolia.

The announcement is interpreted as a political achievement for the Kremlin, reinforcing the commitment of both nations to strengthen their relationship despite stagnant bilateral trade and historical disagreements over the pipeline’s details.

Miller highlighted that the construction of the Power of Siberia 2, along with the Soyuz Vostok transit pipeline through Mongolia, will represent the largest, most extensive, and most capital-intensive project in the global gas sector.

The Power of Siberia 2 pipeline is expected to enhance Russia’s export capacity by 50 billion cubic meters annually, in addition to the 38 billion cubic meters currently supplied via the original Power of Siberia pipeline located in eastern Siberia.

Miller stated that Gazprom could supply gas through this new route for a period of up to 30 years.

However, despite the apparent green light for the project, several uncertainties persist. Official contracts for the pipeline have not yet been finalized.

Firstly, it remains unclear if China will commit to fixed delivery volumes or prefer more flexible terms.

Secondly, Gazprom has not disclosed the specific pricing for the supplies, only mentioning that it would be lower than the rates currently charged to European clients.

Thirdly, Moscow has yet to release a construction timetable or the official cost estimate. Initial projections for the project’s cost range from $13.6 billion to $34 billion.

According to senior China analyst Alexei Maslov, it is expected that Russia will finance the domestic portion of the pipeline, while China will bear the costs of its segment.

Nevertheless, the Kommersant business daily reported that the financing arrangements from China for the project are still unresolved.

Alexei Gromov, director of energy at the Institute for Energy and Finance, anticipated that a formal contract for the Power of Siberia 2 could be finalized by late 2025.

He also noted that Beijing is likely to prefer prices aligned with Russia’s domestic rates, which are approximately $120-130 per 1,000 cubic meters.

Meanwhile, Moscow is looking for terms similar to those of Power of Siberia 1, with prices linked to the Asian oil-product index, which Gromov estimated to be around $265-285.

On Wednesday, President Vladimir Putin stated that gas supplied through the new pipeline would be priced «based on market principles» and determined «by a specific formula,» without providing further details.

Regarding the timeline for construction, Gromov estimated that building the pipeline on the Russian side could take about three years, while the schedule for the Chinese portion remains uncertain.

For Russia, increasing its gas export capacity to China will help mitigate the steep decline in sales to Europe, which are projected to fall from 157 billion cubic meters in 2021 to an anticipated 39 billion cubic meters in 2025.

Unlike oil, which Moscow has redirected to Asian markets via sea routes, gas relies heavily on pipeline infrastructure, making the development of new facilities essential for volume increases.

Most European nations have ceased purchasing Russian gas, contributing to a 3.2% year-on-year decrease in Russia’s natural gas output to 334.8 billion cubic meters in the first half of 2025, following the cessation of Ukrainian gas transit from Russia to Europe.

Energy analyst Sergei Vakulenko estimated that Power of Siberia 2 could generate annual revenue between $2.5 billion and $4.3 billion.

«While this is significantly lower than the $20 billion annually lost from the gas trade with Europe, it still represents a notable figure,» he commented in a 2023 article for Carnegie Politika.

For Beijing, increased Russian gas shipments can provide a safeguard against potential supply disruptions due to instability in the Middle East or escalating tensions with Western nations.

Data from Chinese customs indicate that Russia, Qatar, Australia, and the U.S. were the top gas suppliers to China by dollar value in the first seven months of 2025.