The Gas Gamble: Will Putin and Xi's Siberia 2 Pipeline Pay Off?

The world’s two largest energy producers, Russia and China, are once again dancing on the edge of a historic deal. The Power of Siberia 2 gas pipeline—potentially a $25 billion lifeline for both nations—has been a decade-long saga of ambition, geopolitics, and stubborn negotiation hurdles. With Putin and Xi set to meet again, here’s what investors need to know about this high-stakes game of energy poker.

The Pipeline’s Ambitious Blueprint

The proposed 1,600-kilometer pipeline would stretch from Russia’s Irkutsk region to China’s Heilongjiang Province, crossing Mongolian territory and delivering up to 38 billion cubic meters of natural gas annually by 2028. For Russia, this is a survival play: after losing 80% of its European gas exports post-2022, Siberia 2 could replace nearly half of those lost revenues. For China, it’s a chance to diversify energy imports and bolster its “dual circulation” strategy—a win-win on paper.

But here’s the catch: this isn’t just about gas. It’s about who sets the price and who holds the cards.

The Sticking Points: A Price War and a Stubborn Mongolia

1. Pricing Dispute: $350 vs. $60
   Russia wants $350 per 1,000 cubic meters—close to its pre-war European prices. China? It’s demanding $60, arguing its domestic gas costs are lower. The gap is staggering: an 83% discount for China. Without a compromise, the pipeline remains a pipe dream.

Gazprom’s stock has been flatlining amid losses, while China’s energy ETF has dipped as investors grow skeptical of the deal’s timeline.

1. Mongolia’s Veto Power
   The pipeline’s route through Mongolia is non-negotiable—yet Ulaanbaatar has delayed approval since 2023, citing environmental concerns and demands for transit fees and long-term gas supply guarantees. With no final deal yet, Mongolia holds a geopolitical ace.

2. China’s Fallback Plan
   Beijing isn’t waiting. It’s fast-tracking the China-Central Asia Gas Pipeline (Line D) and exploring cheaper routes via Kazakhstan. These alternatives could deliver 40 bcm/year at $4.4 billion—a fraction of Siberia 2’s $15 billion cost.

Why This Matters for Investors

1. The Winners If the Pipeline Goes Ahead
2. Gazprom (GAZP.ME): A lifeline for Russia’s gas giant, which posted a $6.8 billion net loss in 2023. A deal would stabilize its balance sheet.
3. CNPC (State-Owned): China’s energy behemoth gains a long-term energy supply, reducing reliance on Middle Eastern LNG.

4. Mongolian Stocks: Shares like Erdenes Tavan Tolgoi (ERTT.MM) could surge if transit fees are locked in.

5. The Losers If It Fails

6. LNG Producers: If China shelves Siberia 2, it might ramp up LNG imports. Keep an eye on Cheniere Energy (LNG) and Qatar Energy’s LNG exports.
7. Renewables Plays: China’s renewables capacity now tops 40% of total energy generation—a shift that could accelerate if fossil fuel projects stall.

The Bottom Line: Proceed With Caution

The Power of Siberia 2 is a high-risk, high-reward bet. While the May 2025 summit brought symbolic progress—a “final agreement” was announced—technical and financial details remain unresolved. Investors should:
- Watch for Mongolia’s Green Light: Without it, the pipeline is dead in the water.
- Track Pricing Talks: A compromise below $150/1,000 cubic meters would signal progress.
- Diversify into Alternatives: If the pipeline falters, renewables (like Longi Green Energy (002459.SZ)) and LNG infrastructure will shine.

The pipeline’s success hinges on whether Russia and China can bridge their $300-per-unit chasm—and whether Mongolia’s demands are worth the price. Until then? This is a game of wait-and-see—and for investors, that means staying nimble.

Final Verdict:
The Power of Siberia 2 has the potential to reshape Asia’s energy map—but only if the world’s most stubborn negotiators finally break ground. Until then, keep one eye on Gazprom’s stock and the other on China’s renewables boom. This isn’t just a pipeline—it’s a pressure valve for two superpowers, and a cautionary tale about the cost of compromise.

The data shows China’s energy self-reliance rising, making the pipeline’s urgency… increasingly optional.

Stay tuned—the next move is theirs.