The Great China-Russia Natural Gas Game: Power of Siberia 2 Is Here, Global Energy Landscape Set to Change

Just now, the leaders of China and Russia signed a memorandum at the Shanghai Cooperation Organization meeting, officially greenlighting the Power of Siberia 2 pipeline project—this is the most significant natural gas deal globally in the past decade.

The numbers are staggering:

• The new pipeline will have an annual capacity of 50 billion cubic meters (roughly equal to the EU’s entire consumption in 2024)
• The International Energy Agency predicts that from 2025 to 2030, global new LNG export capacity will reach 300 billion cubic meters, with the US set to build half of it
• China’s annual demand is 80 billion cubic meters, making it the world’s largest buyer

What does this deal mean?

For Russia: It has found a replacement for the European market. After Nord Stream 1 was shut down, this pipeline is like a lifeline—it provides an outlet for Siberian oil and gas fields.

For China: It’s a trump card. Why? Because China has multiple gas sources (Central Asia, Australia, Qatar, US LNG, etc.), whereas 50% of Russia’s oil exports go to China—there’s an imbalance of power.

For the US and Europe: It’s a slap in the face. The US has invested heavily in building LNG export terminals, but now China is using cheap pipeline gas, directly pushing down global LNG market prices, undermining the economic viability of those new LNG projects.

There’s another variable

The route passes through Mongolia. The Mongolian government supports it (they can collect transit fees and gain access to gas), but being caught between two major powers carries risks.

Key issues remain unresolved:

• Russia wants to sell 50 billion cubic meters, but how much does China want?
• How will the price be set? Russia wants the Asia market price, China wants the cost price

But China can afford to wait, because its unconventional gas (shale gas, coalbed methane, etc.) production is rising and by the end of 2025 will surpass conventional oil and gas output. That means holding a long-term card.

The truth behind this move: On the surface, China-Russia cooperation is heating up, but in reality, China is still controlling the pace.