Putin and Xi Revive Siberia Gas Pipeline Talks as Hormuz Closure Tightens Global Supplies

Vladimir Putin arrived in Beijing on May 19 for his 25th visit to China, with the Power of Siberia 2 pipeline back at the top of the agenda after three months of Hormuz disruptions upended global energy flows. The proposed 2,600-kilometer line from Russia's Yamal fields through Mongolia to northern China would carry 50 billion cubic meters of gas annually — adding to the existing Power of Siberia 1 system's 38 bcm/year capacity. A memorandum was signed in September 2025, but pricing, financing, and delivery timelines remain unresolved. This is Russia's fifth attempt in four years to close the deal. The sticking point is price. China wants gas at Russia's domestic rate of $120–130 per thousand cubic meters. Russia is pushing for terms closer to Power of Siberia 1, which analysts estimate would more than double that figure. Kremlin foreign policy aide Yuri Ushakov said the project would be discussed "in great detail," and one Russian official indicated China has signalled interest in accelerating talks — though no breakthrough has been reported. The context driving that urgency is severe. U.S. airstrikes in late February killed Iran's Supreme Leader and triggered an effective closure of the Strait of Hormuz, cutting off roughly half of China's oil imports and nearly a third of its LNG supply. Qatar's output — around 20% of global LNG supply — remains offline. Chinese imports of Russian oil jumped 35% year-on-year in the first quarter. Domestic gas production rose just 2.7% in the first four months of the year, and while Beijing holds around 1.23 billion barrels of crude in onshore storage — roughly 92 days of refining capacity — gas diversification is now a strategic priority, not a long-term aspiration. Europe is competing for the same displaced cargoes. EU gas storage sat at 35.85% of capacity on May 15, against 43.64% a year earlier, according to AGSI data. TTF futures spent most of the first half of May between €44 and €49 per megawatt-hour, briefly topping €49/MWh on May 15 — a five-week high. To reach 80% storage by November 1, European buyers need to inject roughly 700 LNG cargoes, around 180 more than last year's refill cycle. Reuters estimates the cost at approximately $40 billion — $13.6 billion above pre-conflict projections. Norway is already running at maximum output. The supply gap falls entirely on LNG imports. The U.S. is filling that gap. American LNG accounted for 63% of Europe's imports in the first quarter of 2026, with Poland, Germany, Croatia, the UK, the Netherlands, and Greece each sourcing over 70% of their LNG from U.S. terminals. The Institute for Energy Economics and Financial Analysis projects the U.S. share could reach 80% by 2028. The next signal to watch is whether China accepts pricing concessions before winter demand peaks — a deal at any price would relieve some pressure on global LNG markets. European storage injection rates through June will indicate whether the 80% target is achievable. Any extension of the Hormuz closure past late May intensifies the competition between Asian and European buyers for every available U.S. cargo.