Geopolitical shifts cast a shadow on the Russian-Chinese gas pipeline

The Government of Mongolia voted against The Russian government has included the Power of Siberia-2 natural gas pipeline connecting Russia with China through its territory in its spending plans for the next four years, a sign that the megaproject may be on hold.

Find perspective: Mongolia’s new coalition government voted on its four-year action plan on August 16, and notably did not include the 2,594-kilometer pipeline, meaning that construction of the ambitious project is not expected to begin within that timeframe.

While most of the energy project requires an agreement between Beijing and Moscow, Mongolia would need to be involved in negotiations on construction and transmission fees.

Power of Siberia-2a joint project between the China National Petroleum Corporation and Gazprom, which would take at least five years to build and aims to supply gas to China from the vast reserves of the Yamal Peninsula in Western Siberia.

Much of these reserves were originally intended for sale to the European Union, but following Russia’s large-scale invasion of Ukraine, Moscow is now looking for a new market in China, the world’s largest consumer of natural gas.

But Beijing currently has no particular incentive to agree to the new pipeline, and there are ongoing disputes and tough negotiations between China and Russia in terms of price and supply levels.

In June, the Financial Times wrote, citing “people familiar with the matter” reported that the talks were put on hold due to China’s demands, which Russia considered unreasonable.

What’s next? Some analysts see the Mongolian government’s decision as the latest sign of setbacks in the pipeline’s construction.

“It is premature to declare the project over, but the failure points to significant challenges,” Aleksei Chigadaev, a China expert and former visiting professor at the Higher School of Economics in Moscow, told me.

As the war in Ukraine has progressed, Moscow’s negotiating power vis-à-vis its economically more powerful neighbor has diminished, and it remains questionable whether Gazprom will be able to finance such a complicated project.

The natural gas pipeline that would bring gas to northern China is also uncertain because it would face competition from China’s growing shift to renewable energy and Beijing’s broader strategy to avoid excessive dependence on any single exporter.

“Northern China’s access to (global) liquefied natural gas (LNG) markets is expanding, and global LNG markets are likely to remain oversupplied for the rest of the decade,” Joseph Webster, a senior fellow at the Atlantic Council, told me.

“In addition, North China can extract additional volumes from domestic production and the existing lines of the Central Asia-China pipeline.”

Why it is important: Approval for the pipeline would be a game-changer for Gazprom, as it would be even more tied to a huge consumer market. However, Beijing’s tough stance also underscores that President Vladimir Putin has little leverage after Russia’s invasion of Ukraine.

Closing a deal for a project as large as Power of Siberia 2 is incredibly complex, but China clearly believes it holds the upper hand.

However, Beijing also has alternatives. Xi has also offered support for the construction of the so-called Pipeline D, which would be the fourth to bring Turkmen gas to China.

As Chigadaev explains, the Turkmen pipeline offers some clear advantages.

“The pipeline will be significantly shorter than the Russian one, and its construction will be fully controlled by China, including investments, construction process and operation,” he said. “Negotiations with the political leadership of Turkmenistan are also easier – the country is even more authoritarian than Russia and has a simpler economy.”

Still, Webster said, Power of Siberia-2 and Line-D serve different parts of China and do not necessarily cancel each other out, although “China’s future and even current natural gas needs are a major analytical blind spot.”

“Line D is intended to serve southern China and would therefore only be in indirect competition with Power of Siberia-2, which would supply gas to customers in northern China,” he said. “Line D will compete more with American and Australian LNG. But the routes of Line D and Power of Siberia-2 have not yet been finalized. Things could still change.”

Three more stories from Eurasia

1. Li Qiang in Russia and Belarus

Chinese Premier Li Qiang arrived in Moscow on August 20 for a three-day official visit, where he is expected to hold talks with his Russian counterpart Mikhail Mishustin and Putin.

The details: The focus of the visit is on bilateral relations and economic cooperation between China and Russia. The visit is part of a regular diplomatic meeting between the prime ministers of both countries.

Ahead of the visit, Chinese Foreign Ministry spokeswoman Mao Ning said Li planned to have a “deep exchange of views on practical cooperation in bilateral relations and issues of common interest” in talks with Mishustin.

Neither the Chinese nor the Russian side mentioned the war in Ukraine in their previews, but Li’s trip is the first by a Chinese official since Ukraine invaded Russian territory.

Li will then leave Moscow for Belarus, where he will meet with Belarusian Prime Minister Roman Golovchenko and strongman Alexander Lukashenko.

Belarus is highly dependent on Russia’s political and financial support, but is also trying to offset this dependence through closer relations with China.

In July, Belarus became 10. Member the Shanghai Cooperation Organization and also Host China for military exercises in the western part of the country, about five kilometers from the Polish border.

2. Kazakhstan’s nuclear energy offer

Kazakh officials held their 20th public discussion in the country on August 20 about building a new nuclear power plant, said my colleague Asemgul Mukhitkyzy of RFE/RL’s Kazakh service. Reports.

What you need to know: The most recent public forum took place in the capital Astana, ahead of a possible national referendum on the issue.

The discussion tour will involve officials and nuclear energy experts and is intended in part to raise public awareness, dispel myths and misinformation about nuclear energy, and address any safety or environmental concerns about having another nuclear power plant in the country.

Kazakh authorities have not yet commented on who will build the power plant, but the government is reportedly considering proposals from French, South Korean, Chinese and Russian companies.

3. Dilution of Tajikistan’s China debt

Tajikistan’s Deputy Finance Minister Yusuf Majidi says China’s share of Tajikistan’s foreign debt is falling every year, RFE/RL’s Tajik Service Reports.

What it means: At a recent press conference, Majidi said Tajikistan’s total debt to China was $1.5 billion and Dushanbe had already repaid $610 million.

He added that Tajikistan’s remaining debt burden was about $850-890 million and that the government had taken steps to limit its debt.

“China’s share in the structure of Tajikistan’s foreign debt is decreasing. After 2018, we have only received grants from China,” Majidi told reporters.

Tajikistan’s growing financial dependence on China is a major criticism of the Tajik government. China owns half of the country’s foreign debt and is most important source of external investment.

Adding to these financial concerns, the terms of the loan agreements agreed with China have not been made public, raising fears that Tajikistan’s inability to repay its loans could lead it to offer land or other concessions in exchange for debt relief.

According to the Ministry of Finance, the grace period for a number of loans from China’s Export-Import Bank will end at the end of 2025. Dushanbe will then have to repay part of its debt to China.

About the supercontinent

Yuan listed: To boost cross-border trade with China, the National Bank of Kyrgyzstan announced From September 1, the official exchange rate of the Yuan against the Kyrgyz Som will be published.

Wheat problems: Kazakhstan has suspended wheat exports to China indefinitely after Beijing made unilateral tariff changes, the Kazakh Agriculture Ministry said. said in a statement dated August 7.

The “Not for you” page: TikTok’s algorithm promotes Chinese government narratives on sensitive issues such as Tibet, Taiwan and the Uighurs, while suppressing content critical of Beijing. new study found.

A raid at dawn and a verdict: The complaint by the Chinese company Nuctech that the European Commission’s raids in April to search for evidence of state subsidies were illegal has been thrown out by a court in Luxembourg.

Nuctech is a manufacturer of body and baggage scanners for airports and ports and sued the Commission in June for the illegality of the raids. The court’s ruling could have far-reaching effects on Chinese companies in Europe. The case is the EU Commission’s most spectacular use of its subsidy regulation to date.

One thing you should keep in mind

Azerbaijan has officially applied for membership in the BRICS countries, the group of emerging economies led by China and Russia, whose founding members also include Brazil, India and South Africa.

The country’s Foreign Ministry announced the notice on August 20. Azerbaijan is the latest applicant for the BRICS countries, which for years consisted of only five members until they were expanded in January to include Iran, the United Arab Emirates, Ethiopia and Egypt.

This development came after Azerbaijan signed a strategic partnership agreement with China on the sidelines of the Shanghai Cooperation Organization summit on July 3.

By RFE/RL

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