A massive new gas pipeline to China could help Russia decrease its reliance on European buyers. But analysts say the project shows a growing imbalance between the long-term strategic allies.
Last year, after Western sanctions over Russia’s invasion of Ukraine, cut off vital trade links. Beijing appeared as an economic lifeline for Moscow. Particularly through energy purchases.
Moscow is sure that the new pipeline, Power of Siberia 2, will be built. But Beijing has yet to make an explicit promise.
Analysts believe the slow reaction reflects an imbalance in energy deals between the two countries. As well as concern China about over-reliance on Russia for gas.
According to researcher Marina Shagina of the International Institute for Strategic Studies (IISS) in Berlin, China is “in no hurry to sign anything unless the proposal is favorable and is shaped on China’s terms.”
The initiative was discussed during Chinese President Xi Jinping’s meeting with Russian President Vladimir Putin this week in Moscow.
After talks with Xi, Putin stated that “all agreements” on the Power of Siberia 2 project had been achieved.
However, their combined statement only stated that the two parties will work together. To advance “research and consultation” on the gas pipeline from Russia to China.
The Chinese foreign ministry did not reply to a request for additional information.
The power of Siberia 2 could allow for the yearly transport of 50 billion cubic meters of gas to China. Approximately equivalent to the total capacity of the contentious Nord Stream 2 pipeline from Russia to Germany.
Last year, a senior Russian official indicated that it could be used to strategically replace Nord Stream 2.
‘Russia is frantic,’
Russia, previously the world’s biggest exporter of liquefied natural gas (LNG), saw its LNG shipments plummet in 2022. As a result of a flurry of Western sanctions related to the Ukraine conflict.
As Europe sought alternative suppliers, Moscow turned to alternative buyers such as China. With which it is already connected via the Power of Siberia pipeline.
China will overtake Germany as the main buyer of Russian energy in 2022. According to the Helsinki-based Centre for Research on Energy and Clean Air, it has spent a total of $12.2 billion for Russian coal, gas, and oil so far this year.
Last year, Russian gas deliveries to China via the existing Power of Siberia pipeline hit a record 15.5 billion cubic metres.
However, sales to Asia pale in comparison to Russia’s previous exports to Europe of 155 billion cubic metres of gas.
“Russia is desperate to send as much gas eastward as possible as Europe seeks to reduce its reliance on Russian gas,” said Philip Andrews-Speed, senior research associate at the National University of Singapore’s Energy Studies Institute.
According to Jaime Concha, a gas market expert at industry research company Energy Intelligence, a potential Power of Siberia 2 gas deal would solidify China as a long-term market.
Concha told AFP that Russia’s current pipeline infrastructure “was mostly structured to cater to the European market.”
Building a comparable network in Asia would be costly and time-consuming, he said, “demonstrating Russia’s lack of alternatives.”
‘European Lessons’ –
Meanwhile, China has worked to guarantee a diverse set of energy suppliers.
In recent years, it has signed a flurry of long-term gas deals around the globe, including a $60 billion, 27-year agreement with Qatar in November.
“Chinese policymakers are also taking note of Europe’s overreliance on Russian energy imports,” said Yan Qin, Refinitiv’s senior carbon analyst.
With a stronger position in energy talks with Russia, “China emerged as the winner from the Ukraine war,” according to IISS researcher Shagina.
“Beijing capitalised on Moscow’s international isolation and ramped up its purchases of heavily discounted Russian oil, gas, and coal.”
At the same time, China has felt the bite from the turmoil in global energy markets.
The war in Ukraine has pushed thermal coal prices at China’s Qinhuangdao port “almost as high as Europe”, Qin said, while rising LNG prices have hit gas power plants and industrial users.
Ultimately, she said, the Power of Siberia 2 pipeline could “enhance China’s gas imports capacity greatly and potentially reduce China’s LNG imports demand”.