2024-02-16 16:17:53
After two years of war in Ukraine and European sanctions, China is the main buyer of Russian gas. At the same time, according to data from the Russian state budget, they pay less for it than the countries of the European Union and Turkey: converted to 6,300 crowns per thousand cubic meters, Moscow charges 11,250 crowns to members of the union.
The Kremlin would like to export even more to China, and the means for this is to be the new Power of Siberia 2 gas pipeline. It is to lead from the Yamal Peninsula from a distant Russian server through Mongolia and its metropolis, Ulaanbaatar, to the east of China.
President Vladimir Putin and Energy Minister Alexander Novak talked about the fact that the construction of the gigantic gas pipeline, over 3,500 kilometers long, will start this year. But there is no sign of that because the Chinese side has not yet signed the agreement. When Putin and Chinese President Xi Jinping met in Beijing last October, the Chinese side did not mention Force of Siberia 2 in the official communique.
Moscow and Beijing have been silent on the project for the past months, and the one who has spoken is the representative of the so-called third party: Mongolian Prime Minister Luvsannamsraj Ojun-Erdene. In an interview with the British newspaper Financial Times, he was surprisingly open, saying that Russian and Chinese negotiators have “different ideas about prices”. “Both the Chinese and Russian sides are still making calculations and estimates and evaluating the economic benefits,” he said.
Russian Minister Novak also confirmed the postponement. At the end of January, he stated that the timetable would be finalized after the signing of contracts with Chinese partners. The original construction start date – the first half of this year – is obviously out of the question. After leaving the European market, the Russian gas giant Gazprom redirected exports to Asia, but so far this is far from enough to ensure pre-war income. For the period from July 2022 to last June, the company admitted a loss of over one trillion rubles (240 billion crowns).
“The agreement between the two countries on the price of gas is still a long way off,” wrote the Reuters agency, citing its sources.
Before the invasion, Gazprom exported approximately 180 billion cubic meters per year to Europe, last year it was only 28.3 billion. Last year, 22 billion cubic meters of gas flowed into China through the Power of Siberia gas pipeline, which has been in operation since 2019.
The capacity of the Power of Siberia 2 gas pipeline should have been 110 billion cubic meters of gas in 2030, when Moscow expected it to be put into operation. But what is happening is that the Chinese leadership wants to negotiate better terms, knowing that Russia simply urgently needs China as a customer.
Analyst Dmitry Kondratov of the Economic Institute of the Russian Academy of Sciences told Reuters the Chinese were clearly pushing for a lower price and hoping Moscow would back down.
“Beijing is calculating the additional costs of transporting gas and building the relevant infrastructure on its territory. It will amount to approximately 270 dollars per thousand cubic meters. So, unless Russia offers a more favorable price and a discount, I am skeptical that the gas pipeline will open in 2030, “says the Russian analyst.
Just like gas, Russia also directs its oil to Asia. China imported 107.02 million tons of crude oil last year, up 25 percent from the previous year. It also supplies oil to Beijing at lower prices than to other customers.