Putin-Xi Pipeline Talks Gain Momentum as Iran War Disrupts Global LNG Supply
China's LNG imports rebounded to 4.9 million tons in May as Power of Siberia 2 negotiations reopened, with pricing terms the remaining obstacle.
Asian LNG prices, measured by the JKM benchmark, were $23.61/MMBtu on Wednesday (2026-09-02), retreating from the above-$25 levels struck after Iran closed the Strait of Hormuz and disrupted Qatar's export infrastructure. The pullback reflects partial supply recovery, not a resolution of the underlying disruption.4
China's response has been running on two tracks. Ship-tracking data compiled by Bloomberg showed LNG deliveries to China reaching 4.9 million tons in May (2026-05), marginally above year-earlier levels, reversing a months-long decline that followed the initial Hormuz disruption. Buyers stepped up purchases ahead of peak summer demand.6
The more durable shift is being negotiated at the pipeline level. Russian President Vladimir Putin arrived in Beijing on Wednesday (2026-05-20) to meet Xi Jinping, with the long-delayed Power of Siberia 2 project explicitly on the agenda. Kremlin foreign policy aide Yuri Ushakov told reporters Tuesday (2026-05-19) that the pipeline "will be discussed in great detail between the leaders."1,7
The proposed route spans 2,600 kilometers from Russia's Yamal gas fields to China, designed to carry 50 billion cubic meters annually. That would complement the existing Power of Siberia 1 system, which delivered approximately 38 billion cubic meters to China in 2025, with both countries already committed to expanding that route's capacity further.1
Analysts told RFE/RL the Iran war's energy disruption could revive Beijing's interest in a project it had previously allowed to stall. The appetite for Russian energy is already visible in the data. Official Chinese customs data show Russian oil imports rose 35% year over year in the first quarter of 2026, as Beijing shifted volumes away from disrupted Middle East suppliers.2,3,1
ICE Brent crude front-month was at $95.26/bbl on Wednesday (2026-09-02), up 0.37%. Russia's Urals blend stood at $77.98/bbl, a discount to Brent of roughly $17. Kpler senior oil analyst Muyu Xu estimated China held approximately 1.23 billion barrels in onshore crude inventory, sufficient for around 92 days of refining needs — a buffer that reduces near-term urgency but does not remove the incentive to diversify supply routes.1
Pricing remains the obstacle on the pipeline side. China reportedly sought contract terms matching Russia's domestic gas rate of around $120-130 per 1,000 cubic meters; Moscow pushed for terms closer to the existing Power of Siberia 1 contract. That gap has persisted through multiple rounds of negotiation, and neither government has publicly indicated movement toward the other's position.1
Russia has simultaneously used the broader crisis to extend its regional footprint. Bloomberg reported Moscow released approximately 360,000 barrels of fuel to Vietnam and the Philippines, part of a wider effort to lock in buyers across Southeast Asia while sanctions constrain its access to Western markets.5
Whether the May summit produced a concrete pricing framework or another statement of intent is not clear from available reporting. A 50-bcm pipeline requires years of construction after commercial agreements are signed, meaning any breakthrough in Beijing would take time before it changes physical supply balances in Asia. The pricing gap between Moscow and Beijing is the one variable that has blocked this project repeatedly, and how that negotiation resolves is what shapes the Russia-China gas trade for decades.1