The Power of Siberia 2 Pipeline: A Strategic Energy Play for Russia and China

The Power of Siberia 2 (PoS2) pipeline represents more than a technical feat of engineering—it is a geopolitical and economic recalibration of global energy markets. For Russia, it is a lifeline to offset the collapse of European gas exports, while for China, it is a strategic lever to diversify energy sources and counter U.S. LNG dominance. Yet the project’s success hinges on resolving thorny pricing disputes, navigating Mongolian political hesitancy, and balancing long-term strategic gains against short-term commercial risks.

Russia’s Energy Pivot: From Europe to Asia

Russia’s pivot to Asia is no longer a choice but a necessity. The invasion of Ukraine and subsequent Western sanctions have eroded Moscow’s access to European markets, where it once supplied over 75% of its natural gas exports. By 2025, European demand for Russian gas had plummeted to less than 20% of pre-2022 levels [1]. The Power of Siberia 2 pipeline, with its projected capacity of 50 billion cubic meters (bcm) annually, is a direct response to this crisis.

According to a report by Energy Policy at Columbia University, Russia’s motivation is less about profitability and more about securing a long-term export outlet [1]. The existing Power of Siberia 1 pipeline already delivers 38 bcm per year, and China National Petroleum Corporation (CNPC) has agreed to increase this to 44 bcm by 2026 [4]. Together, these projects will redirect a significant portion of Russia’s gas production eastward, reducing its vulnerability to European market volatility. However, this shift comes with risks: Russia is now heavily dependent on a single buyer, granting China unprecedented leverage in negotiations over pricing and supply terms [1].

China’s Energy Security Gambit

For China, the pipeline is a dual-purpose investment. First, it provides a stable, cost-competitive alternative to liquefied natural gas (LNG) imports, which have become increasingly expensive due to U.S. and Australian exports. Second, it aligns with Beijing’s broader geopolitical strategy of countering Western influence.

Data from Reuters indicates that China is pushing for a gas price of around $60 per 1,000 cubic meters—approximately one-quarter of current international rates [5]. This demand reflects China’s desire to minimize energy costs while ensuring energy security amid U.S. pressure on global supply chains. By locking in long-term pipeline supplies, China can reduce its reliance on seaborne LNG, which is subject to geopolitical risks such as sanctions and maritime disruptions [2].

Moreover, the pipeline strengthens China’s strategic alignment with Russia. As stated in a 2025 joint declaration by Presidents Xi Jinping and Vladimir Putin, the project symbolizes a “multipolar world order” resistant to U.S. hegemony [5]. This partnership is further reinforced by China’s growing investments in Arctic infrastructure and its role as a key financier of Russian energy projects [5].

Pricing Dynamics: A Clash of Priorities

The most contentious issue remains pricing. Russia seeks to maintain rates closer to its historical European export levels, which average around $250 per 1,000 cubic meters [1]. However, China, leveraging its position as a dominant buyer, is pushing for a formula tied to domestic prices, which are significantly lower.

According to The Geopolitical Economist, this dispute has delayed the formalization of a binding contract, with Russian officials indicating that a deal is unlikely before May 2026 [3]. The asymmetry in the partnership is clear: Russia needs the pipeline to stabilize its energy export revenue, while China can afford to wait for favorable terms [5].

A visual comparison of LNG prices versus pipeline gas prices (see chart below) underscores the challenge. While LNG prices have fluctuated wildly due to global demand and geopolitical tensions, pipeline prices are expected to remain lower and more stable, favoring China’s long-term energy budget [4].

Geopolitical Risks and Opportunities

The pipeline’s success also depends on Mongolia’s cooperation. Despite being a critical transit country, Mongolia has excluded the project from its national development plan through 2028, raising concerns about infrastructure delays and regulatory hurdles [4]. This uncertainty could push back construction timelines, increasing costs for both parties.

Geopolitically, the project reinforces the Russia-China axis. As noted in a Russia Matters analysis, the pipeline is part of a broader strategy to challenge U.S. influence in energy markets and promote a “de-dollarized” trade system [2]. However, this alignment is not without risks. China’s cautious approach—rooted in fears of secondary sanctions and over-reliance on Russian gas—suggests that Beijing will maintain a degree of strategic ambiguity [5].

Conclusion: A High-Stakes Energy Bet

The Power of Siberia 2 pipeline is a high-stakes investment for both Russia and China. For Russia, it offers a lifeline to sustain its energy export model in a post-European world. For China, it provides a strategic tool to diversify energy sources and assert its geopolitical influence. Yet the project’s ultimate success will depend on resolving pricing disputes, securing Mongolian support, and navigating the shifting tides of global energy markets.

As investors weigh the pipeline’s potential, they must consider not only its commercial viability but also its role in reshaping the geopolitical landscape. In an era of energy nationalism and multipolar competition, the Power of Siberia 2 is more than a pipeline—it is a symbol of a new energy order.

**Source:[1] Power of Siberia 2: Russia's Pivot, China's Leverage, and Global Gas Implications [https://www.energypolicy.columbia.edu/power-of-siberia-2-russias-pivot-chinas-leverage-and-global-gas-implications/][2] Russia Analytical Report, Aug. 25–Sept. 2, 2025 [https://www.russiamatters.org/news/russia-analytical-report/russia-analytical-report-aug-25-sept-2-2025][3] Russia Pushes for Gas Pipeline Deal with China Amid ... [https://m.fastbull.com/news-detail/russia-pushes-for-gas-pipeline-deal-with-china-4328022_0][4] China-Russia pipeline diplomacy threatens Trump's energy grip [https://www.reuters.com/markets/commodities/china-russia-pipeline-diplomacy-threatens-trumps-energy-grip-2025-09-04/][5] Sino–Russian Arctic Gas Cooperation Amid New Geopolitical Realities: Impacts and Perceptions [https://www.researchgate.net/publication/383327525_Sino-Russian_Arctic_Gas_Cooperation_Amid_New_Geopolitical_Realities_Impacts_and_Perceptions]