Russia and China sign Power of Siberia-2 gas supply expansion deal

Russia’s Gazprom and China’s CNPC have today agreed to build the Power of Siberia-2 gas pipeline and Soyuz-Vostok pipelines via a legally binding memorandum. Alexei Miller, Gazprom CEO, revealed that the pipeline will transport natural gas from Russia’s Yamal fields to China via Mongolia for 30 years, with annual supplies projected to reach 50bcm.

Both countries have also agreed to expand gas exports via existing routes. The Power of Siberia pipeline route will increase from 38 billion cubic meters (bcm) to 44 bcm per year, and the Far Eastern Route will increase its deliveries from 10 bcm to 12 bcm annually.

Following a reduced transport path, the plan is expected to lower gas prices in China compared to European rates.  

China set to benefit from relatively cheaper gas due to shortened pipeline route

Alexei Miller, Gazprom CEO, noted that gas pricing for China will be reduced compared to the current rate delivered to Europe. He revealed that payments will be made in a 1:1 ratio in rubles to yuan. This means that for gas transactions under the Power of Siberia-2 pipeline agreement, the payment currency will be split equally between Russian rubles and Chinese yuan. 

Gazprom CEO described the project as the biggest and most capital-intensive in the world. He revealed that plans for constructing the Siberia-2 and Soyuz-Vostok pipelines had been in place for over a decade, even before the original Power of Siberia pipeline was started in 2019.  

The Chinese President, Xi Jinping, has recently been engaged in several talks with Vladimir Putin. As reported on Cryptopolitan, Xi Jinping’s visit to Russia in May improved their ties and presented a united front against U.S. influence. The agreement follows trilateral talks between China, Moscow, and Mongolia discussing the pipeline project. 

During the visit, the two leaders signed over 20 deals across the energy and technology sectors. They insisted on building a global balance independent of U.S. dominance, with Putin describing their relationship as equal and mutually beneficial.

China will also allow visa-free visits for Russian citizens for up to 30 days from September 15. The previous rule only allowed limited access of up to 30 days for direct flights to Hainan Island. 

Russia shifts focus to Asia as Europe diversifies its gas supply sources

Russia began supplying gas via the Power of Siberia pipeline in 2019 through an agreement with CNPC. So far, the contractual obligations have been exceeded since 2020. Gazprom reached its maximum in December 2024 by supplying 38 bcm via the pipeline. Gas demand in China has also increased by 28% this year throughout the first eight months. 

The agreement follows Moscow’s increased energy deliveries in Asia as the country faces a European market shortage due to sanctions. According to a report by GIS, Russian pipeline gas exports to Europe via Ukraine were stopped when Kyiv rejected the renewal of the Gazprom contract.  

European markets have not been significantly impacted since they have already diversified their gas supply sources. According to the report, the U.S. is the leading supplier of liquified natural gas to Europe. Norway and Qatar have also expanded their exports into Europe, which reduces dependence on Russian gas. 

Moscow is shifting toward Asia through China, but some analysts warn that the country risks having a weaker negotiating position due to reliance on a single buyer. Some analysts have also concluded that Russia’s dominance in the global competition and energy market is likely dead. If implemented, the agreement with China means that  Russia’s east-bound exports will exceed 100bcm yearly, making Moscow the biggest gas supplier to China. 

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