China balks at Russia's 'Power of Siberia 2' gas pipeline deal, experts say

China has shown reluctance to finalize a deal for the "Power of Siberia 2" natural gas pipeline with Russia, a project seen as a key initiative by Moscow. Experts believe the pipeline offers little incentive for Beijing, especially as China's natural gas imports are expected to peak around 2030 and global supplies remain ample.

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The "Power of Siberia 2" natural gas pipeline lacks incentives for China.

The "Wall Street Journal" reported that during Russian President Vladimir Putin's visit to China in May, Russian representatives sought to advance the pipeline project. However, Chinese officials reportedly offered a lukewarm reception, indicating that a contract would only be considered if Russia agreed to export natural gas to China at prices below domestic market rates. This negotiation tactic has stalled the 20-year-old project, which has yet to see a breakthrough.

Analysts predict that China will likely not sign the "Power of Siberia 2" agreement, despite a memorandum of understanding reached last year. This hesitation stems from China's strategic position: the country has sufficient gas reserves and can secure imports from other nations. Former EU-China Chamber of Commerce Chairman Joerg Wuttke noted that investing five to six years in building a new pipeline, which would also increase dependence on Russia, is unjustifiable when alternative options exist.

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China will only sign the contract if Russia exports natural gas to China at prices below domestic market rates.

The situation highlights a structural shift in the power dynamics between Russia and China. Since Russia's invasion of Ukraine in 2022, the two nations have forged a close, "limitless friendship." However, as Moscow becomes increasingly entangled in the war, the relationship, once dominated by Russia, has seen a reversal, with China now holding a more advantageous position.

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There is little reason to invest five to six years in building a pipeline, which would also deepen dependence on Russia, when natural gas can be obtained from other countries.