Russia’s partially state-owned energy company, Gazprom, is working on a new pipeline called “Power of Siberia 2” to connect gas fields that once supplied Europe to the Chinese energy grid. This billion-euro project is set to span almost 2,800 kilometers and transport around 50 billion cubic meters of gas annually, providing an economic boost to Gazprom which reported a significant loss last year.
Gas exports to Europe have fallen by about 90% since the invasion of Ukraine began. Negotiations for the new pipeline with China are well advanced but there are concerns that China might back out of the deal if Gazprom does not agree to supply gas at prices similar to those charged to Russian companies domestically. The Chinese also want the flexibility to initially only buy a portion of the available gas and increase purchases later based on demand.
With Russia facing a substantial decline in gas exports to Europe and China emerging as a dominant buyer, the negotiations are putting Russia under pressure. The tough negotiating tactics used by China are forcing Russia to consider terms it may not have previously accepted. While Russia needs immediate revenue, China seems to be leveraging its position to secure more favorable terms in the long run.
In conclusion, as negotiations continue between Russia and China for the new pipeline, it appears that China has the upper hand due to Russia’s limited alternatives for gas exports. The outcome of these negotiations will likely have significant implications for both countries, indicating a shifting power dynamic in bilateral relations.
