Russia and China Sign Power of Siberia 2 Memorandum as China's LNG Pull Reshapes the Gas Map
Moscow's 50-bcm pipeline pact with Beijing lands as China cements its lead in global LNG and data-centre electricity demand accelerates, tilting Russian gas eastward.
Moscow said on Tuesday (2026-05-19) it had signed a memorandum with Beijing to build the Power of Siberia 2 pipeline, a 2,600-kilometre line designed to carry up to 50 billion cubic metres of gas a year from Russia's Yamal Peninsula to northern China via eastern Mongolia.5,2
The agreement, reached during Vladimir Putin's visit to China, is the largest economic project yet in Russia's long-promised pivot to the east, and it arrives as the global gas trade is being reordered by China's growing pull on supply and the electricity appetite of an AI-driven data-centre build-out.2,8
Details remain thin. Gazprom's chief says a deal exists, but pricing, financing and a firm construction timeline are unanswered, and analysts told AP the announcement served mainly to underline the Moscow-Beijing relationship and to snub seaborne U.S. liquefied natural gas.7 The Center on Global Energy Policy and CSIS both framed the memorandum as a diplomatic coup that could anchor Russian flows eastward if it materialises.6,5
For traders, the near-term significance sits less in the pipeline than in the demand it is meant to serve. China has already overtaken Japan as the world's largest LNG market, ending a decades-old order in which Japanese utilities and trading houses underwrote the industry's growth through long-term contracts.1
Wood Mackenzie's ship-tracking data showed China importing more than 7 Mt of LNG in a single month, up 35% year-on-year, with first-quarter imports 30% higher than the prior year and gas-fired power generation up 14% over the first four months.1 The firm expected 11 Mt of demand growth in a single year, enough for China alone to account for over half of the forecast increase in global LNG demand.1
Layer AI onto that. Wood Mackenzie argues the power sector is being reshaped by emerging-market development, electrification and a data-centre boom, and doubts supply can ramp fast enough to meet demand accelerating on several fronts at once.8 A pipeline that locks 50 bcm of Russian gas into China's grid is one answer to that supply problem, and one that bypasses the LNG market entirely.5
That is where the bearish read on seaborne gas comes from. Pipeline volumes displace cargoes. If PoS-2 eventually delivers, Russian molecules move overland into China rather than competing as LNG, and the marginal Asian buyer needs fewer spot cargoes, weighing on JKM, which sat at $16.52 per mmBtu as of Saturday's (2026-07-11) reading.5,1 The same logic loosens the pull on European hubs; ICE Endex TTF front-month was around €48 as of Saturday's (2026-07-11) close.1
The catalyst behind the timing is geopolitical. Analysts told RFE/RL and Oilprice that the war in Iran, and the resulting shutdown of the Strait of Hormuz that halted oil and LNG flows, revived Chinese interest in a long-stalled pipeline by exposing the risk in Beijing's seaborne dependence.3,4 A landlocked supply line from a neighbour looks more attractive when a chokepoint can close.3
The leverage runs one way. A murky, underspecified deal in which China holds the pricing power reflects Beijing's dominance, and Russia, cut off from European buyers, has fewer alternatives than its partner.7 That asymmetry is why the commercial terms matter more than the political theatre, and why the memorandum is not yet a contract.5
For now the physical market has not moved on paper alone. India sits on the other side of the same demand story, another emerging buyer whose growth competes for the same molecules, but the packet offers no firm Indian import figures to price.8 The next signal is binding volumes and a construction start; without them, the memorandum stalls again as previous iterations did.5 Until Gazprom and its Chinese counterpart publish a price and a financing structure, PoS-2 is a statement of intent, not a change in flows.7