Russia's gas pivot is becoming a European captivity story

Russia's gas pivot is becoming a European captivity story The Chain Failed Power of Siberia 2 deal → Gazprom trapped as European price-taker → EU retains structural leverage over Russian LNG Link 1: The summit that didn't deliver Putin arrived in Beijing on May 19 for what Russian officials had framed as a potential breakthrough moment. The centrepiece was Power of Siberia 2 — a proposed 2,600-kilometre pipeline that would carry 50 billion cubic metres of gas per year from Siberia to China via Mongolia. Gazprom, according to sources close to the company, had tabled a "very attractive" pricing offer, and Russian Deputy Prime Minister Alexander Novak pointed to rising bilateral momentum: Chinese oil imports from Russia were up 10% across the first four months of the year.³ The summit produced 22 signed documents — memoranda, protocols, agreements — but the gas pipeline deal was not among them. Xi and Putin issued a joint statement condemning attempts to dominate global affairs, yet on the commercial question that mattered most to Gazprom, Beijing held firm. Key issues including pricing remain unresolved, and analysts expect negotiations could drag on for years. Link 2: Markets price the gap The market read the summit's outcome as a failure for Gazprom's diversification strategy. With the European pipeline route severed by the war in Ukraine, Power of Siberia 2 represented the principal path toward routing Siberian gas volumes to a buyer of scale. A no-deal outcome leaves Gazprom with no credible near-term escape from its current export constraints and no leverage in future pricing negotiations with either buyer. Link 3: Europe holds the card That dependency has a concrete price tag. EU countries paid Russia EUR 2.9 billion for approximately 5.1 million tonnes — 6.9 bcm — of LNG in the first quarter of 2026, up from 4.3 million tonnes in the same period the previous year, according to environmental group Urgewald. The concentration is striking: 97% of all Yamal Arctic LNG deliveries in Q1 2026 went to the EU, making Europe the indispensable market for Russia's primary Atlantic-basin export terminal. So long as Power of Siberia 2 remains unsigned, that dynamic persists — Europe buys at whatever discount it can negotiate, and Moscow remains a price-taker.² The political asymmetry compounds the commercial one. China's refusal to commit to long-term pipeline volumes is partly a negotiating posture — Beijing knows Gazprom has no credible alternative buyer at scale — and partly a structural preference for diversified supply. Hosting both Trump and Putin in the same week, China extracted political alignment while conceding nothing on pricing, signing 22 documents that pointedly excluded the pipeline anchor Moscow needed. Weakest Link The chain's most vulnerable assumption is that China's position is stable. The conflict in West Asia has already reinforced Moscow's role as a raw material supplier — Vasily Kashin of the Russian Academy of Sciences argues this "strengthens Russia-China relations."⁴ Moscow also reports growing Chinese interest in expanding overland transit corridors and the Northern Sea Route, which could signal incremental supply deepening even without the headline pipeline deal.^3,4 If Beijing recalculates its supply security needs — particularly if Middle Eastern flows tighten — a pricing compromise could move faster than analysts currently expect. There is a secondary constraint tightening at the other end of the chain. Ukraine has set a winter storage target of 14.6 bcm, representing 34% of capacity, with a floor of 13.2 bcm (30%), explicitly framed around wartime disruption risk to gas infrastructure.¹ Tighter Ukrainian storage margins heading into winter would normally firm European TTF spreads — which could paradoxically improve Gazprom's LNG pricing in the Atlantic market even as its pipeline ambitions stall. What to Watch The clearest signal will be any concrete movement on Power of Siberia 2 pricing — the gap between Gazprom's offer and Beijing's counter-offer is the critical unknown.³ On the European side, track EU LNG import volumes from Russia through Q2: if they continue running above the Q1 pace of 6.9 bcm, it confirms that market dependency is deepening rather than unwinding, irrespective of political pressure to cut it.² Ukraine's storage injection pace through June is the seasonal wildcard — a shortfall below the 13.2 bcm floor would tighten the EU supply picture and put a floor under TTF that changes the calculus on Russian LNG pricing from Moscow's perspective.¹