Power of Siberia 2, a landmark natural gas pipeline that will connect Russia and China, has reached an impasse, with a gas price gap so wide that Beijing has told Moscow to stop raising the issue altogether. Neither side is officially out, but no timeline for a deal or for construction to begin is in sight.
The project, which received approval in principle from both governments last September, would transport up to 50 billion cubic meters of gas a year from Russia’s Yamal fields through Mongolia to China.
The Wall Street Journal reported that Chinese officials made it clear even before Russian President Vladimir Putin’s visit to Beijing in May that a deal was impossible under current conditions and urged the Russian delegation not to push the matter. The Kremlin says talks continue at the corporate level.
The dispute centers on the price of gas. China is asking to be allowed to pay US$50 per thousand cubic meters, the heavily subsidized rate that Russian households pay at home, which has nothing to do with commercial export terms. Russia wants about 250 dollars for a thousand cubic meters.
Public information showed that China already imports Russian gas through the Power of Siberia 1 pipeline at US$240 to US$280 per thousand cubic meters and Central Asian gas at about US$200 per thousand cubic meters. Before the war in Ukraine broke out in February 2022, Russia sold gas to Europe and Turkey at US$275 to US$340 per thousand cubic meters.
Beijing’s unusually low opening offer sits uncomfortably alongside Chinese leaders’ repeated promises of a “borderless” partnership with Moscow.
Chinese commentators say Russia is under increasing pressure on multiple fronts:
- Ukraine has intensified drone strikes on Russian territory;
- The European Union has committed to phasing out all imports of Russian liquefied natural gas (LNG) by the end of 2026, with a complete ban on pipeline gas from October 2027;
- Beijing has resumed buying US LNG.
Reuters reported On Thursday the first US LNG cargo in a year had arrived at a Chinese terminal last week, following a resumption of purchases after President Xi Jinping and US President Donald Trump met in mid-May.
“In 2025, China paid an average of about US$258 per thousand cubic meters for Russian pipeline gas, already far below what Europe used to pay.” writes a columnist based in Hebei using the pen name Riyue Zhige. “Beijing’s new demand pushes the discount much further. Even Belarus has never been offered terms so close to Russia’s domestic price.”
The columnist adds: “This is no longer an ordinary trade bargain. It reflects a fundamental shift in who holds the power at the negotiating table.”
The columnist says that Russia used to enjoy a seller’s market with Europe, where buyers had no choice but to pay – but now that dynamic has completely reversed, with China firmly in the buyer’s market.
He points to China’s diverse energy resources as the foundation of its bargaining power:
- China’s domestic gas production reached 262 billion cubic meters in 2025, up 6.2% year-on-year, marking the ninth consecutive year of growth exceeding 10 billion cubic meters.
- On land, the four gas pipelines in Turkmenistan, Uzbekistan, Kazakhstan and Tajikistan in Central Asia have a combined annual capacity of over 85 billion cubic meters, with additional routes in planning;
- At sea, LNG tankers from Qatar, Australia and Malaysia arrive at Chinese terminals in a steady stream. Russia is one of many options.
“China wants to expand energy imports from Russia as part of a diversified supply strategy, but this does not mean that Russian gas is irreplaceable,” he says. “This strategic calm gives Beijing unprecedented leverage at the negotiating table. Regardless of how Russia adjusts its position, it will have to come back to meet Chinese conditions.”
“Russia is like a cat on a hot tin roof because of the war in Ukraine, while China has no shortage of gas resources.” writes a Jiangsu-based commentator using the pen name New Day Student. “If Russia doesn’t want to sell, we’ll just keep buying from Central Asia, Australia and Qatar.”
It’s true, he says, that “some of Russia’s supporters may think it’s unfair that China is asking Moscow to sell gas at its domestic price and pay all the infrastructure costs. But what does that have to do with us? Nobody is forcing Russia to sell. That’s how markets work.”
He adds that the suggested price of $50 per thousand cubic meters is only an opening anchor for negotiations, not a final offer; in any case, the gas price of Power of Siberia 2 should be lower than that of Power of Siberia 1.
Rocky Pipeline Road
The Power of Siberia 2 project has been in the works for years. Russia’s Gazprom approved a feasibility study in 2021 and the two governments reached an agreement in principle last September. But the road to that point was anything but smooth.
Moscow had long wanted the pipeline to go through Mongolia, citing lower infrastructure costs compared to a direct route. Beijing resisted.
After Mongolia signed an open skies agreement with the United States and proposed a rare earth partnership with Washington in August 2023, China’s concerns deepened. Beijing worried that a gas supply routed through the landlocked country could one day be blocked, undermining China’s energy security.
China eventually contrite last September and agreed to the Mongolia route, but only on the condition that Russia agree to significantly lower gas prices.
The broader picture of energy has since then displaced in favor of Beijing. In May, China agreed to resume purchases of US LNG. On June 21, the US Treasury issued a 60-day exemption allowing Iran to produce and sell oil and oil products in US dollars. Together, these moves helped China replenish energy reserves depleted by the closure of the Strait of Hormuz.
Putin met Xi in Beijing on May 20, only to find China’s price conditions unchanged. He then traveled to Kazakhstan on May 28 to explore a Central Asian transit route for Russian gas to enter China, bypassing Mongolia altogether.
“Rerouting the pipeline won’t solve anything.” says another columnist based in Hebei. “This is basically a question of price and cost. It is true that Russia needs the Chinese market and China needs a stable energy supply. But China has many options and there is no reason to rush. We just hold the stronger hand.”
He adds: “It is Russia, not China, that is running out of time, with the EU’s ban on Russian pipeline gas coming into force in the autumn of 2027. Whether the Kazakhstan route can actually be realized depends on whether Russia is willing to show good faith on pricing and financing to China. If Moscow still clings to the old thinking of selling its high energy, it will now drive high costs to others.”
Shan Hai, a columnist based in Shandong, says that since the fall of the Soviet Union in 1991, Moscow has relied on selling energy at high prices, importing everything it needs and ignoring the development of its industrial ecosystem.
He says Russia should reform its economic system by selling energy to China at competitive prices and opening the door for Chinese manufacturers to build factories. He also points out that some Russian regions have started importing refined oil products from China after their oil refinery facilities were attacked by Ukrainian drones, which means that the field of energy cooperation between the two countries is expanding and becoming reciprocal.
Read: China-Russia gas pact raises risks of Western sanctions
Follow Jeff Pao at X at @jeffpao3
