Yuri Barsukov about the unclear timing of the “Power of Siberia-2” project

The last month of winter means for Gazprom the last hope of signing a contract with China on Power of Siberia-2 this year. This gas pipeline, which would run through Eastern Siberia to Mongolia and then to China, would not only allow Gazprom to sell 50 billion cubic meters per year for export, but also gain a large market in eastern Russia by gasifying major cities. Considering the loss of 80% of supplies to Europe, the importance of this project for the company is difficult to overestimate: “Power of Siberia-2” is in fact the only real way to sell gas from already developed fields in the Yamal-Nenets Autonomous Okrug, for which there is currently no other export market.

In 2014, in a less desperate situation, when a contract was signed with China for the first “Power of Siberia,” Vladimir Putin’s personal participation in the negotiations helped. In October of this year, the Russian President visited China, but a breakthrough on gas was not achieved. Then presidential aide Yuri Ushakov promised “soon” the emergence of “interesting and meaningful protocols and agreements” between the governments of Russia and China. With Prime Minister Mikhail Mishustin heading to Beijing in two weeks for a regular meeting of the intergovernmental commission, this will likely be the last opportunity this year to record progress in gas negotiations.

At the moment I have not been able to find any evidence that this progress exists. For now, we can only state the fact that Gazprom’s investment program for 2024, which has been reduced by 20%, clearly does not imply active construction work on the Power of Siberia-2, and this despite the fact that the company, on behalf of the president, needs to bring gas to Krasnoyarsk already in 2028, and to Buryatia – by 2032.

Of course, we must make allowances for the caution of the Chinese side in covering the progress of the negotiations, as well as the fact that the final agreements in any case will require confirmation at the highest level. In the end, for China, such a long-term contract with Russia, which will cover 13% of its gas needs, is primarily a political, not an economic, issue. In such circumstances, the Chinese leadership is no longer concerned about the gas discount (although it is desirable), but rather about confidence in the ability of the other party to properly fulfill the contract, regardless of any circumstances, over the next 40–50 years. It is obvious that the main competitive advantage of Russian pipeline gas lies in absolute reliability, since a priori no one else can offer a similar degree of guarantees – technological and geopolitical – to China. Therefore, I have little doubt that the contract on Power of Siberia-2 will eventually be signed, but it is China that now sets the pace of the negotiations.