Siberia II Pipeline: What Do We Know?

In September 2025, Russia and China finally agreed to construct a 2,600-kilometer pipeline that will transport over 50 billion cubic meters of natural gas annually from western Siberia through Mongolia to China. Both nations have been discussing this project for over a decade now.

The Power of Siberia 2 pipeline offers Moscow a long-term alternative to its declining European revenue and enables Beijing to secure affordable overland gas and reduce its reliance on unstable maritime routes like the Strait of Hormuz and the Strait of Malacca.

At the May 2026 Russia-China summit, Presidents Vladimir Putin and Xi Jinping agreed on the pipeline’s route and construction. However, the agreement lacked specifics on pricing, purchase volume, and timeline.

Financial disagreements have delayed the project since its introduction in 2006. But Russia, now facing sanctions, is eager to finalize the deal, while China, aware of Moscow’s urgency, is negotiating for lower prices than Europe pays.

Meanwhile, Mongolia, which hosts a key section of the pipeline, is unwilling or unable to finance its construction. The country recently excluded the project from its long-term development plan and is seeking at least $1 billion in annual transit fees. There are also concerns that Mongolia could become a strategic chokepoint between Russia and China.

The Power of Siberia 2 has major geopolitical implications. Among other things, it would strengthen Sino-Russian relations and create infrastructure to bypass Western-controlled financial and trade systems. But would this project ever see the light of day?

Origin Story

The Power of Siberia 2 pipeline did not start with that name; it was initially called the Altai pipeline project. It was also planned for a different route and without government involvement.

The idea of expanding into new markets in the East is not new in Russia; the country has pursued this objective strategically since the 1990s. In 1997, Russia agreed to sell 30 billion cubic meters of natural gas to China and South Korea. However, no concrete plans emerged until the early 2000s.

According to the Center for Strategic International Studies, initial negotiations for the project began in 2004 between Gazprom, Russia’s multinational oil giant, and the China National Petroleum Corporation (CNPC).

The original plan was for the 6,700-kilometer pipeline to run from Russia’s Western Siberian gas fields through the Altai Mountains to China’s Xinjiang region.

In 2006, government involvement became official when Putin met with Hu Jintao, the first leader of the Communist Party.

At this meeting in Beijing, both leaders agreed to build two pipelines, one from the East, the other from the West, to transport 80 billion cubic meters of gas from Russia to China per year.

This matters because the Kremlin preferred the Western route, while the CPP favored the Eastern route. These preferences will be major points of contention in future negotiations.

At the corporate level, Gazprom CEO Alexei Miller and CNPC CEO Chen Geng signed a financial memorandum for the deal.

Interestingly, China was not in the original blueprint for the pipeline. Moscow aimed to supply Japan and the Republic of Korea with gas and planned to invest $11.5 billion in building a 2,550-mile pipeline from Siberia to the Pacific coast. Several factors, including stronger political ties and China’s economic growth, led the Kremlin to pivot.

Sergei Razov, former ambassador to China, explained why Russia chose to focus on the Chinese market, he said and I quote, “Given the surging demand of energy prompted by China’s rapid economic growth, Russia would like to increase energy co-operation with oil and natural gas in particular with China,” end quote.

After the meeting, the fifth between the two leaders in five years, Russia announced it would finance the feasibility study for the Altai project. The plan was to build a $10 billion pipeline capable of transporting up to 2.8 billion cubic meters of gas annually.

However, concerns remained about the project’s feasibility. Valery Nesterov, an oil and gas analyst at Troika Dialog investment bank, noted that Siberian reserves were already stretched thin. He said, and I quote, “I don’t see where Russia in the foreseeable future can pile up these resources,” end quote.

Nesterov also argued that Moscow may be promoting the pipeline to strengthen its bargaining position with its European customers.

Three years later, in 2009, disagreements over pricing arose. This dispute, which led to the first suspension of the pipeline, was not a one-time issue; it still affects Russia-China natural gas deals today.

China initially offered about $70 per 1,000 cubic meters. But, this was too low for Russia. Although Beijing later raised the price to $100, Moscow remained unimpressed, having sold 1,000 cubic meters of gas to Europe for $250 to $300.

The CNPC sought prices similar to those it pays Turkmenistan and Kazakhstan, its other gas suppliers, which offer cheaper rates. However, Russia’s Gazprom did not budge because the transportation route would be longer than its routes to Europe, and therefore demanded pricing at or above its European rates.

Even if the negotiators wanted to, the CNPC could not raise its offer because it could not increase gas prices on its own. China’s National Development and Reform Commission regulates gas prices.

For Gazprom, the offer was unacceptable because it was three times lower than what it received from its European customers, and the gas comes from the same fields in Western Siberia.

By late 2009, negotiations failed as both sides refused to compromise on pricing. This dispute led to the first suspension and eventually the collapse of this version of the megaproject.

The pipeline came back to life in 2013 following meetings between Gazprom and CNPC.

West to East: The Power of Siberia Pipeline 1

As negotiations resumed, China pushed to change the projects, opting for a pipeline designed to transport gas from Russian fields in Eastern Siberia. The Kremlin tried to ignore this demand. Beijing had made this clear when the original agreement was signed.

Beijing preferred the eastern route, which will transport gas from East Siberia to northeast China. However, Russia and Gazprom favored the western option, which would see the pipeline run from West Siberia through the Altai region to western China. Both sides had their reasons.

For the Communist Party and CNPC, the choice was strategic: they wanted to prevent Russia from using China as a bargaining chip with its European customers.

Keun-Wook Paik, an associate fellow at the Royal Institute of International Affairs, or Chatham House, said, and I quote, “Chinese planners did not want to be blamed for ‘robbing’ the Europeans of their gas,” end quote.

Beijing demanded more commitment from Moscow to the Chinese market. By 2010, China had already started importing gas for its West-East pipeline network from Central Asia and found the Altai project redundant.

More importantly, China’s fastest-developing cities, which are home to factories with high energy demands, are located along its eastern coast. The eastern route would supply this bustling commercial hub, which needed gas and lacked it at the time.

China also considered cost. Russia’s gas pipeline to its northeast meant Beijing didn’t have to build new domestic pipelines to distribute gas.

Also, the eastern route would support Beijing’s diversification efforts, helping it reduce its dependence on gas and coal imports via dangerous maritime routes such as the Strait of Malacca.

For the Kremlin and Gazprom, the western route was the most favorable option because their largest gas fields and pipelines, which they already use to supply Europe, are located in Western Siberia.

Another reason Russia preferred the western route was that the Kremlin sought to kill two birds with one stone. Russia wanted to become a swing supplier by connecting Europe and China via a single pipeline and controlling the flow based on which continent offered the best price. This plan was developed amid rising tension with Europe. This political and financial leverage is one of the main reasons Beijing refused the western route.

Daniel Bochkarev, an expert fellow at EastWest Institute, an international think tank focused on global security and economy, said of Russia’s strategy, and I quote, “The demand for Russian gas in Europe will determine Russia’s urgency to promoting the Altai route. Additional demand in Europe will reduce Russia’s appetite for too many price concessions on the Altai route supplies,” end quote.

Going west was also more cost-effective for Russia. Taking the eastern route would require a massive $35 billion investment and time-consuming construction. Moscow would also need to develop unproven gas fields and lay about 1,400 kilometers (870 miles) of pipeline in the eastern provinces of Siberia, known for its unforgiving weather conditions. Why do this when you have fully operational pipelines in the western fields of Siberia?

Wang Ilin, the Chairman of the Board of Directors of CNPC, said of the East and West debate, and I quote, “The Eastern route and the western route is difficult to compare. The project of the eastern route is closer to the market in China, but the western, on the contrary, at a very long distance. Moreover, on the eastern route, we have a fully formed customer base, and along the Western route the market will still have to be conquered.

Therefore, today we must, together with the Russian side, discuss the model of cooperation - both in terms of separating the benefits and risks on this project. As for the price, it is likely to be different, but it will be determined in any case by market patterns,” end quote.

As negotiations resumed in 2013, it became clear that the contract for the eastern pipeline had never been finalized despite preliminary agreements. It was put on hold because the terms depended on ratifying a bill that the Russian government had stalled. The bill took three months to pass from the Duma to the Federation Council before reaching Putin’s desk. And, he signed it in three days.

There were reports that Putin rushed the bill’s signing because it coincided with a historic visit from Beijing.

The Xi Effect

Around this time, Xi Jinping had just come to power and chose Russia for his first state visit as leader of the Communist Party. This gesture was emblematic of the importance China attached to its bilateral relationship with Russia.

During this inaugural visit, Russia formally gave in to China’s demands, and Putin agreed to the eastern Siberian pipeline route.

On 22, March 2013, the day of the state visit, a memorandum on the first Power of Siberia pipeline project was signed.

It took another year for both sides to agree on the financial terms. In May 2024, three months after Russia invaded Crimea, Gazprom and CNPC signed a $400 billion agreement for the first Power of Siberia project to transport 38 billion cubic meters of gas.

Both sides agreed to share the $77 billion cost of building the pipeline, estimated to be operational by 2018. Gazprom would shoulder most of the funding, as much of the 4,000-kilometer pipeline runs through five Russian regions. Per the deal, Gazprom would provide $50 billion and CNPC $20 billion.

The Kremlin and the Communist Party seem to have overcome the pricing hurdles that stalled the project for years. They signed a mutually beneficial contract which featured a ‘take-or-pay’ clause. The deal included a price formula tied to oil.

The exact price Russia charged China in the 30-year contract for gas from the Power of Siberia pipeline 1 was intentionally kept secret. Many believe this was to prevent other gas customers, especially in Europe, from getting upset about the bargain.

However, according to Bloomberg, China was able to negotiate a price of $350 per thousand cubic meters of gas. This figure is slightly lower than the price Gazprom charged most European customers for the same quantity at the time.

This wasn’t Moscow conceding; they chose this figure because it matched its current European prices. The Chinese deal was close to the $380 figure Gazprom charges Germany, its biggest EU customer.

Rain Newton-Smith, head of emerging markets at Oxford Economics, said on the terms of the deals, and I quote, “It is similar in many ways to China’s investments in Africa, where they drive a hard bargain over the price of raw materials but then provide infrastructure for the economies they are doing business with,” end quote.

He added, and I quote, “The whole tenet of the deal has a symbolic value - it says that the two countries are prepared to work with one another. For instance, there were other elements such as Chinese participation in Russian transport infrastructure and power generation,” end quote.

Putin, who described the deal as the biggest in the history of the gas sector of the former USSR, also acknowledged that the Chinese drove a hard bargain and that talks went on till 4 a.m.

He said, and I quote, “Our Chinese friends are difficult, hard negotiators,” end quote.

In Putin’s words, both sides had to compromise to reach, I quote, “not only acceptable, but rather satisfactory, terms,” end quote.

Things moved quickly after the deal was finalized. By July, the first set of pipes was delivered. By September 2014, construction of the first Power of Siberia pipeline was officially launched.

Putin and other senior officials, including Zhang Gaoli, the First Vice Premier of China’s State Council, attended the ceremony that saw the welding of the first joint for the pipeline.

There was optimism, and the project progressed well with a few hiccups along the way. By December 2019, China had completed the final phase of the pipeline running from the Russian border to Shanghai, a distance of about 5,111 km, comparable to the distance from London to Los Angeles.

Although natural gas started flowing after completion, the pipeline was designed to reach its peak capacity of 38 billion cubic meters in 2025. Soon after the pipelines became operational, Gazprom announced that its daily flow had surpassed volumes agreed in the contract with China’s CNPC.

Two years after the operations started, the Russian state-owned firm also announced it was considering increasing the annual capacity of the Power of Siberia pipeline to 44 billion cubic meters, up from its intended 38 billion cubic meters.

The success of this project and China’s growing need for natural gas led Russia and Gazprom to revive the western route pipeline idea as the Power of Siberia 2 pipeline.

Natasha Kuhrt, a lecturer in international peace and security at King’s College London, said of the second pipeline proposal, and I quote, “The first Power of Siberia pipeline took about 20 years or more to come into being, and the Chinese drive a hard bargain on price. On this second pipeline, the story will be no different, the cards will all be in China’s hands,” end quote.

Russia was not only optimistic but also desperate to secure the deal for the new pipeline.

The Power of Siberia 2

Moscow viewed the Power of Siberia 2 pipeline as essential to offset financial losses from lost European markets following its 2022 invasion of Ukraine, which led to global outrage and sanctions.

The shutdown of Nord Stream 1, Gazprom’s primary pipeline to the EU, in August 2022, had a significant impact on Russia’s economy. The Power of Siberia 1 could not compensate for the loss, and by 2023, Gazprom reported a $6.9 billion loss, its first since 1999.

The Power of Siberia 2, with a planned capacity of 50 billion cubic meters per year, was expected to recover nearly half of Russia’s lost EU revenue.

Additionally, the Kremlin required funding for its military operations. Energy taxes reportedly account for one-third of Russia’s federal revenue.

Russia also aims to secure China as a long-term customer. The pipeline deal would increase China’s consumption of Russian gas. In 2022 and 2023, Russia contributed just about 10 percent of China’s gas. The figures rose to 25 percent by 2024. Securing this agreement would be an economic achievement for the Kremlin, as China is the world’s largest importer of natural gas.

Moscow and Gazprom hoped to begin constructing the pipeline in 2024, targeting completion by 2030.

However, China was not in a hurry and sought a price below international rates. Beijing and the CNPC requested terms comparable to Russia’s domestic prices.

China began negotiations at $120 to $150 per 1,000 cubic meters, significantly lower than the price agreed for gas from the first Power of Siberia pipeline.

The Communist Party is either negotiating aggressively, aware of the Kremlin’s limited options, or proposing terms they expect will be rejected to delay negotiations.

Another challenge in the negotiations has been China’s refusal to commit to purchasing the pipeline’s full capacity.

The Power of Siberia 2 is intended to transport gas from fields in Russia’s Yamal region in western Siberia through Mongolia to China’s northern region.

Further doubts about the project’s feasibility arose when Mongolia, through which a significant portion of the pipeline would pass, excluded it from its long-term plans.

Mongolia’s coalition government, led by Prime Minister Luvsannamsrain Oyuun-Erdene, published its long-term development priorities called the ‘Action Program.’ However, the Power of Siberia 2 pipeline was not included in the plans for 2024 to 2028.

The project’s omission highlighted significant disagreements, now subject to negotiation among the three countries.

Aleksei Chigadaev, a China expert, said, and I quote, “It’s premature to declare the project over, but the omission signals significant challenges,” end quote.

Mongolian authorities sought to finalize the funding of the project. They requested participation in the construction of the 950-kilometer pipeline across their territory. The coalition government also requested negotiations on a transmission fee and an annual payment.

Li Lifan, a Russia and Central Asia specialist with the Shanghai Academy of Social Sciences, said, and I quote, “Mongolia hopes to get investment from China and Russia, [but] Russia does not have the money, and China is not in a rush to build the pipeline,” end quote.

On Beijing’s part, there was also no rush to sign the pipeline contract. China recognized Moscow’s urgency and leveraged it during negotiations.

Alexander Korolev, a political scientist at UNSW Sydney in Australia, said, and I quote, “For Russia, it is a strategic lifeline after losing most of its European gas market,” end quote.

He added that “For China, the pipeline is about energy security and leverage, and less about dependence. It diversifies supply away from maritime chokepoints,” end quote.

The CPP was hesitant to commit to the costly project, as China continues to increase its use of renewable energy each year. Additionally, China is looking to avoid overrelying on a single supplier.

The Communist Party doesn’t want to be too dependent on Russia, should the current positive relationship deteriorate.

China has a substantial supply of liquefied natural gas to meet its energy needs for years. Beijing also has domestic reserves that could be utilized if necessary.

Joseph Webster, a senior fellow at the Atlantic Council, described Beijing’s energy options. He said, and I quote, “North China’s access to [global] liquefied natural gas (LNG) markets is expanding, and global LNG markets will likely remain oversupplied for the rest of the decade,” end quote.

He continued, “Additionally, north China can squeeze out incremental volumes from domestic production and the existing lines of the Central Asia-to-China pipeline,” end quote.

Ultimately, disagreements over pricing and volume, combined with China’s lack of urgency, delayed the construction of Power of Siberia 2.

25th Meeting in 2025

The project gained momentum in September 2025, when President Putin visited China for the 25th time. During this visit, he signed two agreements related to the pipeline’s construction.

Alexei Miller, Gazprom CEO, announced a 30-year ‘legally binding memorandum’ for the Power of Siberia 2 pipeline. He boasted that the project would be the largest and most capital-intensive in the global gas industry.

Gazprom and CNPC also signed a memorandum on strategic cooperation. Under this agreement, payments would be made in equal amounts in rubles and Chinese yuan. The firms agreed to increase the annual gas volume from 38 billion to 44 billion cubic meters.

Christopher Granville, managing director at TS Lombard, said the deal is significant, especially given the backdrop of the Russia-Ukraine war.

He said, and I quote, “The fact that this has happened against the background of the fraught Ukraine war endgame, is a clear enough signal of China’s steady strategic backing for Russia as the lynchpin of the new multipolar order to which both these core Eurasian powers aspire,” end quote.

After the meeting, President Putin told reporters that the agreements satisfied all parties. Regarding pricing, which had stalled the deal for decades, he stated that China would receive a competitive rate, better than what Europe currently pays.

Putin said, and I quote, “Finally, the negotiating parties found a consensus.” “There is no charity on either side – these are mutually beneficial arrangements.” end quote.

However, Chinese officials did not make similar announcements.

Foreign Ministry spokesperson Mao Ning remained vague, neither mentioning the pipeline nor any agreement during her press briefing.

She said after the meeting, and I quote, “We stand ready to work with Russia to implement the important consensus reached by the two heads of state and continuously deepen comprehensive mutually beneficial cooperation between the two countries,” end quote.

Lu Ruquan, president of the CNPC Economics & Technology Research Institute, the research wing of the state-owned oil company, said huge projects like Power of Siberia 2 would take 8 to 10 years to complete.

In contrast to Russian coverage, Chinese media has remained largely silent about the agreement.

Joseph Webster, a senior fellow at the Atlantic Council, commented on this silence. He said, and I quote, “Chinese government organs and state media outlets have been quiet so far, suggesting negotiations are still ongoing,” end quote.

This approach reflected China’s broader stance on the gas project.

Alexei Gromov, head of the Russia-based Institute for Energy and Finance, said Beijing’s position on the pipeline is, and I quote, “If it happens, great, if it doesn’t, we’ll manage”, end quote.

Beijing’s silence, which speaks volumes, has delayed the construction of the Power of Siberia 2 pipeline. Things haven’t moved as rapidly as they did after both sides reached similar agreements for the first Power of Siberia project.

Negotiations remained at a stalemate for months until unrest in the Middle East highlighted the pipeline’s importance. The US and Israeli preemptive strikes on Iran in early 2026 disrupted global energy supplies and prices following Tehran’s closure of the Strait of Hormuz.

These events significantly affected China, disrupting over 60 percent of its energy supply. Beijing imports 30 percent of its natural gas and 50 percent of its crude oil through the Persian Gulf.

The conflict in Iran gave Russia a strong bargaining position to reintroduce pipeline discussions with China. Moscow argued that the unrest demonstrated the unpredictability of shipping routes compared to the stability of its overland network.

Erica Downs, a senior scholar at Columbia University, said the conflict makes the pipeline relevant to China, and I quote, “It definitely keeps Power of Siberia 2 on the negotiating table.”

“With supplies from Qatar disrupted, China’s preference for overland natural gas imports is likely to increase,” end quote.

As the Iran War rages on and its effect on international trade keeps LNG prices high, the Power of Siberia 2 pipeline would become attractive to Chinese authorities.

Laurent Ruseckas, executive director for global gas at S&P Global, noted that rising global energy prices may prompt China to reconsider its reluctance to rely on a single supplier.

He explained, and I quote, “Traditionally, China has viewed its energy security through the prism of limiting pipeline supplies to no more than 25% of the market and has been reluctant to depend too heavily on Moscow.”

“But in the context of the current crisis, having more pipeline supplies may appear more positive rather than negative,” end quote.

Despite increased pressure to finalize the Power of Siberia 2 pipeline, Beijing did not yield. Instead of rushing to secure a deal with Russia, China accelerated negotiations on new pipelines with Central Asia. This move, though discreet, signaled to Moscow that Beijing had alternatives and would not be constrained.

2026: Yet Another Agreement

In May 2026, Putin arrived in Beijing for the latest Russia-China summit with a stronger bargaining position as the closure of the Strait of Hormuz continues to push energy prices higher.

His arrival comes just a week after Xi hosted US President Donald Trump. Putin hoped to finalize the anticipated pipeline. He ended up signing about 40 agreements on education, tech, nuclear energy, and trade. However, there was nothing concrete about the Power of Siberia 2 pipeline in the documents, which ran to over 10,000 words.

In a press conference after the meeting, Putin described the partnership with China and a ‘new era’ of bilateral cooperation. He also stressed both nations’ disapproval of the West, particularly the US, for its military actions in Iran and its negative effects on global energy prices.

Although Putin mentioned that trade with China exceeded over $200 billion in 2025 and their cooperation in the energy sector, he did not mention the pipeline in his post-meeting speech.

The 73-year-old said, and I quote, “I would like to point out that Russia and China are actively cooperating in the sphere of energy. Our country is one of the largest exporters of oil, natural gas (including LNG), and coal to China. We are definitely ready to continue to ensure reliable and uninterrupted supplies of these types of fuel to the rapidly growing Chinese market,” end quote.

On Xi’s part, he emphasized the strength of the relationship between the two countries, noting that this meeting marked the 30th anniversary of the Chinese-Russian partnership and strategic international relations.

The leader of the Communist Party also criticized the West, particularly countries whose actions disrupt international trade. He called for a Multipolar world and for Russia to align its development plans with those of China.

Xi said, and I quote, “We should seize this highly favorable momentum to deepen cooperation in aligning China’s 15th Five-Year Plan with Russia’s national development goals to 2030, make full use of the stabilizing role of our energy cooperation,” end quote.

This was the most Xi said about energy or the pipeline deal.

It was the Russian side that brought the pipe up and gave updates to the press after the Presidents had concluded.

Russian government spokesman Dimitry Peskov revealed that both sides have yet again reached a general agreement on the gas transmission project.

He said, and I quote, “The basic parameters of understanding regarding the Power of Siberia and the 2 pipeline exist. This includes both the route and the construction method,” end quote.

Although he admitted that there were ‘several nuances’ left to be ironed out, he also claimed that the deal would be finalized soon.

However, there’s growing skepticism; because we’ve seen this before. Several agreements have been signed in the past. Analysts pointed out that the latest agreement did not include important details such as pricing, construction timelines, and financing.

The main hurdle to closing the mega project is pricing. Both sides are yet to agree on the specifics of the pricing formula, particularly, the exact volume of natural gas Russia would require China to purchase annually.

They also need to agree on the terms that will apply if they fail to purchase the amount of gas stipulated in the contract. These complex terms are preventing the pipeline contract from being finalized.

Despite long-term bilateral relations, Russian and Chinese interests have collided over many of these issues.

Moscow urgently wants to secure a long-term agreement that will guarantee future revenue due to its current declining economic state.

On the other hand, China isn’t desperate and needs more flexible terms that allow it to purchase volumes in line with market requirements. This flexibility to choose gas volumes every quarter is not ideal for Russia, which needs to make up for its lost EU customer base.

Go Katayama, principal insights analyst at energy firm Kpler, told Al Jazeera that China is driving a hard bargain while Russia insists on higher prices, he said, and I quote, “The negotiations ultimately reflect a balance between Russia’s need for revenue stability and China’s desire for secure, low-cost supply.”

“Every dollar shaved off the netback is a direct hit to Russian fiscal revenue at a time when gas-related tax receipts are already down,” end quote.

Although China may not be desperate to secure the deal, the CPP is seeking to diversify its reliance on maritime LNG imports amid the unpredictability of these routes.

Despite their conflicting interests stalling negotiations, experts think the failure to reach an agreement on the Power of Siberia 2 pipeline reflects a deeper political mistrust between Beijing and Moscow.

Jack Sharples, senior research fellow at the Oxford Institute for Energy Studies, said there are broader issues confronting the deal despite the show of friendship and solidarity at the just-ended Russia-China summit.

He told Al Jazeera, and I quote, “Both sides may have a degree of caution. For Russia, it locks them into supplying a large volume to a single customer. For China, it increases the share of Russia in China’s total gas supply,” end quote.

Seb Kennedy, CEO and founder of Energy Flux, an independent energy publication, described Russia as ‘toxic’ and said China is exercising caution before getting tethered to them.

He said, and I quote, “The risk for China is overconcentration in a politically toxic supplier just as domestic output and renewables are scaling. The risk for Russia is becoming a price-taker to a single customer who knows it has nowhere else to go,” end quote.

As negotiations continue, the West watches on with frustration. For the US and Europe, the Power of Siberia 2 represents the culmination of an alliance between two superpowers actively working to topple Western influence and create an alternative energy center.

The Western View

For decades, the Kremlin was Europe’s primary gas supplier. Before its 2022 invasion of Ukraine, over 40 percent of EU gas imports came from Moscow. Following the conflict, the EU reduced its reliance on Russian gas. Sanctions on Gazprom resulted in record losses, and European nations have set a goal to eliminate fossil fuels by 2027.

For the EU, the Power of Siberia pipeline, especially Putin’s insistence on it, is seen as an attempt to offset lost business. European leaders do not want the deal to proceed. If the project fails or stalls, Russia’s economic isolation will deepen, limiting its ability to fund the war in Ukraine.

The US and EU are united in restricting Russia’s access to additional funding for its war efforts. Additionally, US authorities have further reasons to oppose the Power of Siberia 2 pipeline.

Washington has imposed extensive sanctions on Russia, focusing on its energy sector. But Moscow has remained resilient due to Beijing, which has become the largest buyer of sanctioned oil. Construction of the pipeline would undermine US sanctions and create a profitable economic zone beyond Western influence.

Michal Meidan, head of China Energy Research at the Oxford Institute for Energy Studies, stated that the pipeline holds global significance. She said, and I quote, “Announcements about Power of Siberia 2 are a huge turning point in the geopolitics of energy.”

“The message is: China is no longer even pretending to comply with U.S. sanctions or care about what the West thinks. And it’s not alone,” end quote.

From a military perspective, the success of the Power of Siberia 2 pipeline would limit Washington’s ability to contain China in the event of a conflict over Taiwan.

For decades, Washington has used its Navy to enforce blockades of key maritime routes, such as the Strait of Malacca. The pipeline would reduce China’s reliance on these routes, which currently carry about 20 percent of its energy supply. This shift would give China a strategic advantage and decrease its vulnerability to the US Navy, which maintains a strong presence in the South China Sea.

Europe and the US are actively working to delay the negotiations. Since China and Russia are more difficult to influence, the West has focused on Mongolia as the weaker link.

Geopolitically, Mongolia, with an economy comparable to the Maldives, occupies a unique position between two superpowers.

Despite its size, Mongolia is crucial to the pipeline’s success. Western governments have begun offering renewable energy deals to encourage Mongolia to reconsider its involvement in the gas network.

Mongolia has a policy to transform its energy sector from coal to cleaner sources. Currently, about 90 percent of its electricity comes from coal-fired plants, which are increasingly unreliable and costly to maintain.

Despite this, Mongolia’s leadership remains committed to its pipeline agreements with Russia and China. This trilateral deal promises significant economic benefits.

Mongolia appears to be balancing both interests: supporting the pipeline while accepting substantial renewable energy investments from countries such as Spain, Denmark, and Australia.

The US has also sought to influence China by offering American LNG as a more reliable and politically stable alternative to Russian gas. A fully operational Power of Siberia 2 pipeline would significantly affect Washington’s LNG trade.

The US-China LNG trade has grown in recent years. However, Washington risks losing export volumes to China, and the pipeline would strengthen China’s bargaining position.

A US Congress report on the influence on the pipeline read, and I quote,” While China accounts for around 4% of total U.S. LNG exports, PS-2 could strengthen China’s bargaining position with LNG suppliers, including the United States. With a steady supply of pipeline natural gas from Russia, it could be difficult for U.S. suppliers to negotiate profitable terms for long-term LNG contracts,” end quote.

What’s Next?

The completion of the Power of Siberia Pipeline 2 is of great significance for global energy prices and trade. On the geopolitical level, finalizing the deal on favorable terms would be a victory for Russia.

It would demonstrate to the West that Sino-Russian relations remain strong. Notably, the Kremlin’s ability to secure the deal amid the war in Ukraine.

A fully operational Power of Siberia 2 pipeline would signal a shift in power dynamics from the West to the East. It would also strengthen BRICS by offering an alternative to the U.S. dollar and Western banking systems.

For the West, particularly Europe, this would mean Russia is no longer reliant on Western revenue. For the U.S., the pipeline’s success could undermine sanctions and allow Russia greater freedom of action.

However, Russia and China must still resolve key issues, and compromises will be necessary.

Mongolia continues to pose challenges that could delay the project, primarily due to financial concerns.

Financing the more than 960-kilometer section of the pipeline running through Mongolia remains unresolved. The scale of the project exceeds Mongolia’s economic capacity, so external funding, ideally from neighboring countries, will be required.

Russia, which maintains close ties with Mongolia, offered to finance the pipeline through Mongolian territory. However, Beijing opposes this proposal, as it would give Moscow control over this critical network and increase its leverage.

Some Mongolian politicians have raised concerns about accepting Russian funding. While the country’s current leadership supports the deal, many fear it could undermine Mongolia’s sovereignty and long-term economic independence.

The country is already heavily reliant on Russia and China for coal and gas. Some argue that unfavorable agreements could further increase this dependence.

Environmental concerns regarding the Mongolian section of the pipeline have persisted since 2006, when the route was initially proposed through the Altai Mountains. Although the route has changed, these concerns remain.

The Power of Siberia 2 pipeline will supposedly help Mongolia shift from coal to gas and reduce air pollution. However, critics argue that the project is contradictory, as it will extend the use of fossil fuels in Mongolia and neighboring countries for decades.

There are concerns about routing the pipeline near Ulaanbaatar, as it could significantly disrupt transportation and logistics within the city.

Mongolia is yet to complete its official environmental assessments of the pipeline’s long-term effects. The country’s position remains uncertain, particularly since the pipeline is not included in its long-term development plans.

To resolve the stalemate, Russia and China would need to accept challenging terms. This would include solving the Mongolia funding issue.

Moscow may have to agree to lower prices to ensure financial stability, while Beijing might need to make an exception to its policy against relying on a single buyer. The Communist Party may also need to commit to purchasing more gas than it prefers to.

It seems both countries have little choice but to reach a compromise, even if they have to do so begrudgingly. Failing to reach an agreement for such an important project could damage Sino-Russian relations. Besides, Putin and Xi would not want the West to witness the failure of such an ambitious project.

Key Takeaways

• Russia and China agreed to construct the Power of Siberia 2 pipeline in 2025, aiming to transport 50 billion cubic meters of natural gas annually.
• The pipeline offers Russia an alternative to declining European revenue and China a secure overland gas supply, reducing reliance on maritime routes.
• Negotiations have been delayed by financial disagreements, with Russia seeking higher prices and China pushing for lower rates.
• Mongolia’s involvement is crucial but uncertain due to financial constraints and strategic concerns about becoming a chokepoint.
• The pipeline’s completion would strengthen Sino-Russian relations and challenge Western influence in global energy markets.

Sources

• Original MegaProjects video: Siberia II Pipeline: What Do We Know?
• Hero image source by Kevin M. Gill / openverse, by.

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