Bloomberg: China, Russia negotiate on frozen Power of Siberia 2 gas pipeline

This week's talks between Chinese leader Xi Jinping and Russian President Vladimir Putin will include a discussion of the Power of Siberia 2 gas pipeline project. Earlier, the project was suspended due to disagreements over the cost, route and urgency of construction, Bloomberg reports, citing sources.

The Power of Siberia 2 project is extremely important for the Kremlin, which hopes to use it to compensate for at least part of the losses caused by Gazprom's withdrawal from the European market .

However, economic difficulties on both sides may speed up a compromise: Russia is under severe Western sanctions and China is facing problems in industry and trade, so cheap gas looks attractive.

During Xi's visit to Russia, Beijing may be willing to move forward by allowing negotiations for a higher sale price than previously discussed, sources familiar with government discussions said.

China is now seeking to negotiate a price that will be between the domestic Russian gas price and the tariff that applies to the first Power of Siberia gas pipeline, which began deliveries in 2019.

Despite this, serious disagreements remain between the parties. China insists on a direct route, avoiding passage through Mongolia. The Power of Siberia connects Russia and China directly, but other options were considered for the second project.

The Power of Siberia 2 project would allow Russia to export an additional 50 billion cubic meters of gas per year – 1.8 trillion cubic feet – and help China replace more expensive imported liquefied natural gas. For comparison, in 2025, Russia plans to supply 38 billion cubic meters of pipeline gas to China as part of the first Power of Siberia, which will reach its design capacity.

However, negotiations on the second line have been going on for several years. China has so far avoided even a preliminary agreement, while Russia has repeatedly announced that it will sign it soon. Several sources said that a formal agreement is not expected to be signed during this visit.

Negotiations between Russia and China on the construction of a gas pipeline have reached a deadlock. Putin's visit to Beijing last June did not bring an agreement on the Siberian Power-2.

• After the invasion of Ukraine in 2022, Russia has effectively lost the European market and is increasingly dependent on China. A complete cessation of supplies to the EU is possible by 2027. Instead, for Beijing, which has alternative sources and is pursuing a policy of import diversification, an agreement with Moscow is not a priority.