Russia is selling gas to China at up to 45% below its European price

Russia is selling gas to China at up to 45% below its European price An E.U. estimate of the Power of Siberia discount shows how little leverage Moscow holds in Beijing, and how thin the replacement for lost European demand really is. Russia is supplying gas to China through the Power of Siberia pipeline at a discount of up to 45% to what it charges its few remaining European customers, according to an E.U. source.⁵ That figure puts a number on something traders have suspected since 2022: the pivot east is real, but it is happening on Beijing's terms. It matters because the discount defines how much value Russia actually recovers from the volumes it lost in Europe. Russia suspended gas exports to several E.U. countries in April 2022, and the bloc has not formally sanctioned the molecules. Even so, other policies and economic pressure cut E.U. imports of Russian gas by more than two-thirds, from 14.7 billion cubic feet per day in 2020, EIA data show.^5,2 Selling the redirected gas at close to half price is not a like-for-like replacement. Power of Siberia 1 is doing the heavy lifting. Exports through the line are projected to rise more than 20% this year (2026) to its maximum capacity of 38 billion cubic meters a year, according to figures reported in Russian federal statistics.¹ That is the ceiling. Once the pipe is full, additional Chinese demand cannot be served without new infrastructure. That new infrastructure is Power of Siberia 2, and on Tuesday (2026-05-19) Gazprom said it had signed a legally binding deal with China to build it, CNBC reported.⁷ Alexei Miller, Gazprom's chief executive, framed the agreement as a deepening of commercial ties. The pipeline would run through Mongolia and carry up to 50 billion cubic meters a year to China, according to estimates cited by VOA.^7,3 But the announcement was thinner than the headline suggested. AP reported that Gazprom's claim of a deal left many of the central questions unanswered, with no public agreement on price, financing or a firm construction timeline.⁶ Analysts told AP the event was primarily a chance for Moscow and Beijing to underline their relationship, and for China to snub seaborne U.S. LNG cargoes.⁶ The pricing impasse is the part that should hold a trader's attention. Gazprom and CNPC have been stuck on terms for Power of Siberia 2, and with European volumes gone, Russia negotiates from weakness.⁴ A 45% discount on existing Power of Siberia 1 flows is the template Beijing will push to extend. Whoever loses the European market loses pricing power, and Russia has already lost it. The supply backdrop is not helping Moscow's hand either. Russian natural and associated gas production fell 3.2% in the first half against the same period a year earlier, to about 334.8 billion cubic meters, according to federal statistics.¹ LNG output dropped 5.1% to roughly 16.5 million tons over the same stretch.¹ A pivot east is harder to sell as strength when total production is shrinking. The longer arc here is demand-led from China's side, not supply-led from Russia's. China will need more gas in coming years to substitute for an eventual wind-down of coal, said Vita Spivak, an energy analyst at Control Risks.³ That gives Beijing both a reason to buy and the patience to wait for its price. Russia, with stranded volumes and falling output, has neither. For European gas the read-through is indirect but worth holding. The consensus signal in our packet leans bearish, weighted heavily toward lower prices, on the logic that Russian gas is finding a home in Asia rather than competing back into Europe.² The contrarian flag sits on the supply side: ICE Endex TTF front-month carries a bullish supply signal in the packet, a reminder that Europe's balance still turns on LNG arbitrage and weather, not on what Russia ships to China. What to watch is whether Power of Siberia 2 moves past a signing ceremony to a priced, financed contract.⁶ Until there is a published price, the only hard number in this story is the discount Russia is already accepting, and it points one direction. The eastern market is large, but it is a buyer's market, and Moscow is taking what Beijing offers.^5,4