Russia's Strategic Gas Expansion to China: A New Energy Axis in a Multipolar World

Russia’s pivot to Asia is accelerating, with gas pipelines emerging as both a lifeline and a lever in its recalibration of global energy markets. The Power of Siberia 1 pipeline, already supplying 38 billion cubic meters (bcm) of gas to China annually, is set to expand to 44 bcm by 2025, with Gazprom hinting at further capacity increases beyond its current nameplate limit [1]. Meanwhile, the Power of Siberia 2 (PoS-2) pipeline—a $4.5–$13.6 billion project designed to deliver 50 bcm annually via Mongolia—remains a symbol of both ambition and uncertainty. These developments reflect a broader geopolitical realignment, as Russia seeks to offset its declining European market share and China deepens its energy security strategy [2].

The infrastructure investments are staggering. Power of Siberia 1’s expansion alone requires modernizing compressor stations and storage facilities, while PoS-2’s construction faces logistical nightmares in Mongolia’s rugged terrain and regulatory delays in environmental assessments [3]. Yet the stakes are equally high. For Russia, the pipeline is a hedge against Western sanctions and a way to lock in long-term revenue from China’s growing gas demand. For China, it diversifies energy sources and reduces reliance on volatile Middle Eastern imports.

However, the project’s success hinges on resolving a $9.85 billion annual pricing gap. Russia insists on European-level rates (~$257 per 1,000 cubic meters), while China demands domestic prices (~$60 per 1,000 cubic meters) [1]. This dispute mirrors broader tensions in the Sino-Russian relationship: Moscow seeks to monetize its energy wealth, while Beijing aims to control costs in its push for cleaner energy. The Mongolian segment of PoS-2, known as Soyuz Vostok, adds another layer of complexity. Excluded from Mongolia’s 2024–2028 national development plan, the project risks becoming a geopolitical pawn in a triangle of competing interests [3].

The geopolitical implications extend beyond energy. As Russia redirects gas flows eastward, it reinforces a multipolar financial order where China and Russia challenge Western-dominated energy corridors [4]. This shift is already reshaping global markets: European buyers, now priced out of Russian gas, are accelerating renewable investments, while Asian importers gain leverage in pricing negotiations. For investors, the key question is whether PoS-2 can overcome its technical and political hurdles. A 2030 completion date is optimistic, but even partial progress would signal a durable Sino-Russian energy partnership.

Critics argue that the project’s high costs and environmental risks could deter private capital. Yet state-backed financing—Gazprom and CNPC have already committed to joint ventures—suggests both nations are willing to subsidize the pipeline’s long-term strategic value. The real test will come when China’s demand for gas plateaus or declines, forcing Moscow to balance its Asian ambitions with domestic consumption needs.

In the end, Russia’s gas expansion to China is less about energy and more about power. It is a declaration that the 21st-century energy map will not be drawn by Western institutions alone. For investors, the lesson is clear: infrastructure projects like PoS-2 are not just pipelines—they are the arteries of a new world order.

Source:
[1] Russia to boost gas supplies to China, signs deal for new pipeline, https://www.reuters.com/business/energy/russia-boost-gas-supplies-china-signs-deal-new-pipeline-2025-09-02/
[2] Russia-China Gas Ties: A Strategic Energy Play for Long-Term Stability and Growth, https://www.ainvest.com/news/russia-china-gas-ties-strategic-energy-play-long-term-stability-growth-2509/
[3] Power of Siberia 2: Economic Opportunity or Geopolitical Risk for Mongolia?, https://thediplomat.com/2025/04/power-of-siberia-2-economic-opportunity-or-geopolitical-risk-for-mongolia/
[4] The Rise of a Multipolar Financial Order: China-Russia Alignment, https://www.ainvest.com/news/rise-multipolar-financial-order-china-russia-alignment-reshaping-global-markets-2509/