Russia-China Gas Pipeline Deal Stalls Over Pricing Disputes

A new gas pipeline deal between Russia and China has stalled. According to a Financial Times report, Russia considers China’s price offer for the gas to be “unreasonable.”

Reports indicate China is seeking a significant discount on the gas, requesting a price near what Russia charges domestically, a request deemed unreasonable by Russia. Furthermore, China is only committed to purchasing a fraction of the pipeline’s planned annual capacity of 50 billion cubic meters.

As envisioned, the Power of Siberia 2 pipeline would stretch from Russia’s Arctic Yamal Peninsula to northern China. This project aims to significantly boost gas exports to China, building upon the success of the existing Power of Siberia pipeline.

Notably, Gazprom, Russia’s biggest gas company, recently reported record-breaking gas deliveries to China through the existing pipeline, reaching nearly 23 billion cubic meters in 2023.

It is worth noting, that Russia’s delegation to China lacked Alexei Miller, the CEO of Gazprom. It is suggested that Miller’s absence indicates a lack of seriousness on Russia’s part, as his presence would be crucial for any meaningful negotiations with China.

It was reported that securing the pipeline deal was a key objective for Putin’s recent visit to China in May. Beyond the pipeline, Putin sought increased involvement from Chinese banks in Russia’s economy and China’s refusal to participate in the upcoming Peace Summit for Ukraine in Switzerland.

According to Alexander Gabuev, director of the Carnegie Russia Eurasia Centre in Berlin, Russia’s options are limited, and they may ultimately be forced to concede to China’s demands on the pipeline project.

“China believes time’s on its side. It has room to wait to squeeze the best conditions out of the Russians and wait for attention on the China-Russia relationship to move elsewhere”, Gabuev said.

Previously, it was reported that diesel prices for Russian consumers have skyrocketed following the continued wave of Ukraine’s drone strikes on oil refineries in Russia.