Russia Signs Power of Siberia 2 Deal With China as Gas Output Contracts
Gazprom's 50 bcm pipeline commitment to Beijing, signed in May, comes as Russian production has contracted 3.2% and sanctions limit equipment sourcing.
Russia and China on Tuesday (2026-05-19) signed a legally binding agreement to build the Power of Siberia 2 gas pipeline, with Gazprom chief executive Alexei Miller announcing the deal during President Vladimir Putin's summit with President Xi Jinping in Beijing. The signing converts years of exploratory talks into a formal commercial obligation, accelerating an energy pivot that Moscow has pursued since losing most of its European export revenue.4
Power of Siberia 2 is designed to carry 50 bcm of natural gas annually from Russia's Arctic Yamal fields to China via a 2,600-kilometre route through Mongolia — roughly equivalent to the volumes Russia once shipped to Germany each year. The project runs alongside the existing Power of Siberia 1, which delivered 38 bcm to China last year. Putin and Xi agreed at a prior summit in September to expand Power of Siberia 1's rated capacity to 44 bcm per year, and exports on that corridor are projected to rise more than 20% this year as the line approaches its current ceiling.2,1
The supply picture carries a complication. Russia produced approximately 334.8 bcm of natural and associated gas by June 2025, a decline of 3.2% from the same period the prior year, according to federal statistics data reported by Bloomberg. LNG output fell 5.1% over the same stretch, to around 16.5 million tons. A state expanding its pipeline commitments while output is contracting faces a volume gap the bilateral deal does not close.1
A Russia-China pipeline from Sakhalin, planned at 10 bcm capacity, is also under construction. Moscow is therefore building two new export corridors simultaneously while Power of Siberia 1 is still ramping to its stated ceiling, all drawing on fields in the Arctic and Pacific rim where Western drilling technology, now restricted under sanctions, was once central to development plans.2
China's demand for pipeline gas has grown consistently. Pipeline imports reached 59.4 million tons in 2025, and Beijing's 15th five-year plan, published in March 2026, listed "early-stage" work on Power of Siberia 2, wording that signals political support without specifying a construction timetable. Vita Spivak, an energy analyst at Control Risks, noted that China will need more gas in coming years as it phases down coal, providing Moscow with a medium-term demand rationale. Coal substitution plays out over a decade.2,3
Beijing also holds supply alternatives. Three pipelines from Turkmenistan and Uzbekistan, crossing Kazakhstan before entering Xinjiang, deliver more than 40 bcm to China each year. The 793-kilometre Myanmar-China Gas Pipeline, operational since 2013, was designed to add up to 12 bcm annually. That existing diversification constrains the leverage Moscow can extract from Power of Siberia 2 pricing talks, a dynamic that stretched negotiations for years before the May binding agreement.2
ICE Brent crude front-month was at $97.75 per barrel on September 8, 2026. Urals crude stood at $86.07 per barrel on September 8, 2026, a persistent discount reflecting Russia's constrained market access as it redirects barrels east on competitive terms. JKM Asian LNG was at $24.02 per MMBtu on September 8, 2026. A fully operational 50 bcm pipeline would eventually exert downward pressure on northeast Asian spot pricing, but that outcome depends on a construction timetable that neither government has published.
Russia's commitment to its Asian partners is now in writing. Whether declining Yamal output and restricted access to Western drilling equipment can support the expanding pipeline network that Alexei Miller has agreed to fill is the supply question that the binding contract leaves open.1,2,4