Xi Shoots Down Putin's Pipeline Plan

Russian President Vladimir Putin's trip to China apparently failed last week to secure a project key to the hopes of Moscow's struggling energy sector.

Putin's state visit produced a joint statement heralding a "new era" for Beijing and Moscow's "no limits partnership," while the hug shared with Chinese counterpart Xi made headlines. But the long-ruling Russian leader walked away without a contract for a pipeline between his country and its largest export market.

Russia has offset some of the business it lost over its February 2022 invasion of Ukraine by rerouting natural gas and oil to China. This relationship continues to deepen with the first Power of Siberia pipeline expected to reach full capacity this year and pipe 38 billion cubic meters (bcm) into China annually.

However, the outsized importance of the Chinese market gives Beijing more control over the terms. Gas is flowing into China at a rate of $257 per 1,000 cubic meters, compared to the $320 for its remaining European markets, and this discount is set to increase to 28 percent next year.

During Xi's visit to Moscow last March, Putin reportedly said the planned Power of Siberia-2 was in a "high degree of readiness" and proposed increasing annual gas flows into China to 100 bcms. Putin failed to get a green light then and during his stay in China last October at the Belt and Road Initiative summit.

Putin and Xi's joint statement released after their most recent talks mentioned only a vaguely worded commitment to deepen "cooperation in the field of oil, natural gas, liquefied petroleum natural gas, coal and electricity;" facilitate "unimpeded transportation of energy resources;" and promote "major joint energy projects."

The statement also characterized Sino-Russian ties as a "model" for international relations, contrasting this with the "bloc confrontation" and "hegemony" of the U.S.-led order.

Newsweek hasreached out to the Russian and Chinese Foreign Ministries via emailed requests for comment.

Putin's visit came just two weeks after Russian state-run gas giant Gazprom Group reported losing money last year for the first time in more than two decades, adding to the pressure to make Power of Siberia-2 happen.

The pipeline is expected to reroute 50 bcm (1.8 trillion cubic feet) of natural gas annually to northern China, a capacity comparable to the 55 bcm the Nord Stream pipelines pumped to Germany before being sabotaged in 2022.

The South China Morning Post previously cited sources familiar with the matter as saying Beijing is holding out for a scenario in which Russia bankrolls the project in its entirety.

"China has been very quiet on the subject, but we know that they are receptive to the project, provided they get a good pricing deal," Macro-Advisory CEO Chris Weafer told Newsweek earlier in May.

Disclaimer: The copyright of this article belongs to the original author. Reposting this article is solely for the purpose of information dissemination and does not constitute any investment advice. If there is any infringement, please contact us immediately. We will make corrections or deletions as necessary. Thank you.