Russia Signs Gas Deal With China, but the Numbers Don't Cover the Loss

Russia Signs Gas Deal With China, but the Numbers Don't Cover the Loss Power of Siberia 2's 50 bcm annual capacity would replace less than a third of what Russia once exported to Europe. Russia and China signed a legally binding deal this week to build the long-delayed Power of Siberia 2 pipeline, with Gazprom chief executive Alexei Miller announcing to Russian state media that the agreement was in place.⁵ The headline figures — $400 billion over 30 years, 50 billion cubic metres of gas annually — were designed to project strategic weight.^3,4 The arithmetic behind them is less comfortable for Moscow. That discomfort starts with the volumes. Power of Siberia 2 would carry 50 bcm per year to northern China via Mongolia, drawing on reserves from Russia's Arctic Yamal fields across a 2,600-kilometre route.² Russia was supplying up to 180 bcm per year to Europe before the war, meaning the new pipeline at full capacity replaces barely a third of what was lost westward.⁵ The existing Power of Siberia 1 line, running from eastern Siberia, delivered 38 bcm to China last year, with Putin and Xi having agreed at their previous meeting to expand that capacity to 44 bcm annually.^2,5 Exports on that existing line are projected to rise more than 20 percent this year as it approaches maximum throughput.¹ Even combined, the two pipelines fall well short of pre-war European volumes. Russia's production data compound the problem. Output fell 3.2 percent in the first half of the year to approximately 334.8 billion cubic metres, while LNG production dropped 5.1 percent to around 16.5 million tons according to federal statistics.¹ A country committing to vast new supply infrastructure is doing so from a contracting production base. The deal also lacks the commercial clarity that would make it investable. Russia acknowledged that key terms and a construction timetable still need to be agreed, making what was signed closer to a framework than a contract.^5,2 Russia has committed to invest roughly $55 billion in exploration, development and pipeline construction, but financing arrangements remain open.³ Analysts were sceptical the announcement changes the near-term supply picture.⁵ The signing was primarily an opportunity for Russia and China to signal closer ties and for Beijing to publicly dismiss U.S. liquefied natural gas — a pointed gesture at a moment when Chinese purchases of American LNG are blocked by tariffs imposed as part of the ongoing trade dispute with Washington.⁵ Beijing's leverage is embedded in its existing supply architecture. China already imports over 40 bcm per year via three Central Asian pipelines from Turkmenistan and Uzbekistan crossing Kazakhstan before entering Xinjiang.² The 793-kilometre Myanmar-China gas pipeline, operational since 2013 and designed to carry 12 bcm annually, adds further optionality.² Beijing is adding a supplier thread, not acquiring a dependence. Vita Spivak of Control Risks noted that China will need more gas in the coming years as coal is phased down, giving Moscow reason to believe long-term demand will materialise.⁴ But China's 15th five-year plan, released in March, referenced only advancing "early-stage" work on Power of Siberia 2 — cautious language that signals interest without urgency.² For European gas markets the deal's symbolic weight matters more than its near-term supply implications. Power of Siberia 2 will not deliver gas for at least a decade if financing and construction proceed without delay.⁶ Industry experts have separately flagged the risk that low storage levels and limited alternative supply arrangements could eventually push Europe back toward Russian pipeline gas — a scenario that runs in the opposite direction from Moscow's claimed strategic pivot eastward.⁶ The near-term signal to watch is whether Power of Siberia 1 actually reaches its agreed 44 bcm expansion.² If Moscow cannot deliver on the pipeline already running, the credibility of a 50 bcm commitment tied to infrastructure not yet built will be difficult to sustain.²