News - Russia, China Sign New Gas Pipeline Deal

Russian state-owned gas giant Gazprom said on Tuesday that it signed a binding agreement to build the Power of Siberia 2 gas pipeline to China through Mongolia. The company also plans to expand deliveries via other routes. The pipeline could carry up to 50 billion cubic meters of gas a year for 30 years and the price would be lower than what Gazprom charges European customers, CEO Alexey Miller told Russian newswires. China has not confirmed these details, though the Chinese state-run Xinhua News Agency reported that the two countries signed more than 20 cooperation agreements, including in the field of energy, Bloomberg wrote. The project has faced years of delays. Since its full-scale invasion of Ukraine in February 2022, Russia has faced sweeping sanctions that cut it off from global capital and left its energy sector isolated from international partners. Russia wants to boost shipments to China after European deliveries fell following the full-scale invasion. China has been cautious, citing slower gas demand growth and the risk of overreliance on one supplier. Russia has been cut off from most international investment in its energy sector and from striking major deals due to sanctions. Miller called the project, including the Soyuz-Vostok link through Mongolia, the largest and most capital-intensive gas project in the world. He gave no timeline for construction or start of deliveries. Price negotiations and volume flexibility remain unclear, Bloomberg reported. Gazprom also agreed to raise flows to China via the existing Power of Siberia route by 6 billion cubic meters, on top of the current 38 billion cubic meters per year. Flows through the new Far Eastern link, expected to start in 2027, will exceed initial plans for 10 billion cubic meters annually. For Russia, any progress on the pipeline is a political win and a signal of deepening ties with China, Bloomberg wrote. The announcement comes as the Shanghai Cooperation Organization meets amid rising tensions with the West. Russian government officials also discussed several energy deals with the US, including the possibility of the US company ExxonMobil re-entering the Russian oil and gas project Sakhalin-1, Reuters reported.