'Power of Siberia 2' Pipeline Could See Europe, China Compete for Russian Gas
As winter bites, Europe is facing a gas shortage. A cold snap has coincided with lower volumes of gas exports from Russia, forcing a big spike in prices. Consumers and businesses across the continent are facing a steep increase in their bills, with governments scrambling to cushion the impact. And analysts warn it could soon get worse.
Moscow plans to build a new pipeline to China, which could give Russia the power to sell gas to the highest bidder, pitting Chinese and European consumers against one another.
Chinese economy
From the frozen expanses of Siberia, Russia already is sending some natural gas to China. The "Power of Siberia 1" pipeline opened in 2019, tapping the gas fields in Russia's far east to help fuel the Chinese economy.
Europe remains Russia's largest customer by far, importing about 200 billion cubic meters of gas every year – about 30% of the continent's supply. By comparison, China purchases about 38 billion cubic meters annually.
"Power of Siberia 1 uses gas that is not connected to the fields that can supply the European market. So, it's not a question, at the moment at least, of gas from Russia going to China, being the loss of gas that could go to Europe," explains Tom Marzec-Manser, head of gas analytics at the energy data firm Independent Commodity Intelligence Services (ICIS).
'Power of Siberia 2'
That could soon change. Moscow and Beijing are close to agreeing on a second pipeline – the "Power of Siberia 2" – which would double gas exports from Russia to China, crossing through Mongolia and into the power-hungry industrial regions near Beijing.
Crucially, it also would join up Russia's internal gas network, connecting China with the same gas fields in Russia's Yamal peninsula that supply Europe.
"It does give Gazprom – as that major exporter – the optionality to direct gas to one market over another," Marzec-Manser told VOA.
That could give Russia considerable leverage, says Filip Medunic, who leads the Task Force for Strengthening Europe Against Economic Coercion at the European Council on Foreign Relations.
"Technically, it is hard to tell whether the pricing system will be designed in a way that there is going to be the possibility to sell to the highest bidder, but I think that Russia intent is definitely eyeing in this direction, to be able to use it as a leverage – at least rhetorically – in the coming decade," Medunic told VOA.
Construction of the Nord Stream 2 gas pipeline, which connects Russia directly with Germany, was completed last year. Certification of the pipeline is currently suspended amid tensions between the West and Moscow.
"Will it make a difference? Probably not," said Marzec-Manser. "The reality is that when Nord Stream 2 starts running commercially – and it's not running at the moment, it is ready, it's operable, but not operational – it will just reroute gas that is already flowing through other routes."
Sanctions
In recent months, Russia has amassed upwards of 100,000 troops on the border with Ukraine. The West has threatened crippling sanctions if Russia invades, including targeting its energy sector.
There are other incentives for Moscow to find new customers for its gas, says Marzec-Manser. "The trajectory of the European Union in particular in terms of decarbonization is that gas will have a diminishing role over the medium to long term," he said.
Olympics
But navigating a new Chinese market won't be easy for Moscow, says Medunic.
"China is well known for using its political, economic, also military posture and weight, and to be a tough negotiating partner. And [it] also is allegedly considering itself rather as the big hegemon here, and Russia as the junior partner," Medunic said.
There is speculation the deal for the Power of Siberia 2 pipeline could be signed during next month's Winter Olympic Games in Beijing, offering a diplomatic victory for both sides. Neither Moscow nor Beijing have yet confirmed, however, that the deal will be signed.