The Strategic and Economic Implications of Russia’s Power of Siberia 2 Pipeline for Global Gas Markets

The proposed Power of Siberia 2 (PoS-2) pipeline, a 50 billion cubic meters (bcm) per year natural gas artery from Russia’s Yamal Peninsula to China via Mongolia, represents a seismic shift in global energy geopolitics. This project is not merely an infrastructure endeavor but a strategic recalibration of Russia’s energy export strategy, driven by the collapse of European markets after the 2022 invasion of Ukraine. With European gas imports from Russia plummeting from 140 bcm annually in 2021 to just 22–25 bcm in 2025 [1], Moscow is pivoting to Asia to sustain its energy-driven economy. For China, the pipeline offers a cost-competitive, geopolitically insulated energy source, aligning with its carbon neutrality goals and reducing reliance on LNG imports from the U.S. and Australia [2].

Geopolitical Realignment: Russia’s Pivot to Asia

The PoS-2 pipeline is a cornerstone of Russia’s post-Ukraine energy strategy. By redirecting gas exports to China, Moscow aims to offset nearly half of the decline in European pipeline gas revenues [1]. This shift is not without precedent: in 2025, Russia already increased deliveries to China via the existing Power of Siberia 1 (PoS-1) pipeline to 44 bcm annually, with a legally binding memorandum signed for PoS-2 [3]. However, the project remains mired in pricing disputes. Russia seeks rates comparable to its European exports (~$350 per 1,000 cubic meters), while China insists on domestic prices (~$60 per 1,000 cubic meters), creating a 500% pricing gap [4]. This impasse reflects broader geopolitical tensions, as China leverages its market dominance to extract favorable terms from a Russia increasingly dependent on Asian markets.

Mongolia’s exclusion of PoS-2 from its 2028 national development plan further complicates the project [4]. As a transit state, Mongolia is wary of becoming a geopolitical proxy in the Sino-Russian energy corridor. This hesitation underscores the fragility of cross-border infrastructure projects in regions where national interests often clash with strategic ambitions.

Economic Implications: A Double-Edged Sword

For Russia, PoS-2 could generate $10 billion in annual revenue for Gazprom, stabilizing its financial position amid Western sanctions [5]. The pipeline would also stimulate economic development in eastern Russia, a region long neglected in favor of European markets. However, the lower pricing demanded by China—compared to European rates—reduces the project’s profitability. This trade-off is a pragmatic necessity for Russia, which must prioritize volume over margin to maintain export competitiveness.

China, meanwhile, gains a critical advantage: a stable, land-locked gas supply that bypasses maritime routes vulnerable to geopolitical disruptions, such as the Red Sea crisis. With China’s gas imports projected to reach 250 bcm by 2030 [6], PoS-2 could secure a significant portion of this demand. By reducing reliance on LNG, China also weakens the leverage of U.S. and Australian suppliers, who have dominated Asian LNG markets in recent years.

LNG Market Dynamics: A Tectonic Shift

The PoS-2 pipeline’s potential to reshape global LNG markets is profound. If completed, it could reduce China’s LNG import demand by up to 15 bcm annually, altering competitive dynamics in the Asia-Pacific region [7]. This shift would particularly impact the U.S., which has emerged as the largest LNG exporter since 2023, with exports to the EU valued at $13 billion in 2024 [8]. A decline in Chinese LNG demand could ease price pressures in the global market, benefiting buyers in Europe and Asia but challenging U.S. producers reliant on high-margin exports.

Conversely, delays or cancellations of PoS-2 would exacerbate Russia’s energy export challenges. Without a viable pipeline to China, Moscow may struggle to replace lost European revenues, with gas exports potentially declining by 31–47% by 2040 [9]. This scenario would accelerate the rise of LNG as a global commodity, incentivizing further investments in U.S. and Middle Eastern liquefaction capacity.

Challenges and Uncertainties

The pipeline’s future hinges on resolving pricing and construction cost-sharing disputes. China’s strategic patience—its current gas supply sufficiency and reliance on existing LNG contracts—means it is under no immediate pressure to finalize PoS-2 [10]. Additionally, the project’s high capital costs ($4.5–$13.6 billion) and geopolitical risks make it a high-stakes gamble for both nations.

Conclusion: A New Energy Order

The Power of Siberia 2 pipeline epitomizes the realignment of global energy markets in the post-Ukraine era. For Russia, it is a lifeline to sustain its energy-driven economy and geopolitical influence. For China, it is a strategic asset to enhance energy security and reduce dependence on Western suppliers. Yet, the project’s success is far from guaranteed, hinging on the delicate balance of economic pragmatism and geopolitical ambition. As the world watches this unfolding energy drama, the stakes for global LNG investments—and the broader geopolitical order—have never been higher.

Source:
[1] Power of Siberia 2: A Pipeline Between Ambition and Uncertainty [https://trendsresearch.org/insight/power-of-siberia-2-a-pipeline-between-ambition-and-uncertainty/?srsltid=AfmBOoqxliR-K1PYeUdAkfROI2i3CTTwlS1_NnOyeqJB-tnVf5NTLYES]
[2] The Strategic Implications of Power of Siberia-2 for Global Gas Markets and Geopolitical Energy Dynamics [https://www.ainvest.com/news/strategic-implications-power-siberia-2-global-gas-markets-geopolitical-energy-dynamics-2509/]
[3] Russia signs up to vast new China pipeline but price unclear [https://www.reuters.com/business/energy/russia-signs-up-vast-new-china-pipeline-price-unclear-2025-09-02/]
[4] Power of Siberia 2 Pipeline Future Hangs in the Balance [https://gasoutlook.com/analysis/power-of-siberia-2-pipeline-future-hangs-in-the-balance/]
[5] The Global Implications of a Russian Gas Pivot to Asia [https://www.nature.com/articles/s41467-024-55697-7]
[6] The Future of the Power of Siberia 2 Pipeline [https://www.energypolicy.columbia.edu/publications/the-future-of-the-power-of-siberia-2-pipeline/]
[7] Power of Siberia 2: Another Russia-China Pipeline [https://www.congress.gov/crs-product/IF12748]
[8] Bridging the US-EU Trade Gap with US LNG Is More Complex Than It Sounds [https://www.energypolicy.columbia.edu/bridging-the-us-eu-trade-gap-with-us-lng-is-more-complex-than-it-sounds/]
[9] Changing Restrictions on Russian Gas to Europe Would Disproportionately Impact US LNG Exports [https://www.prnewswire.com/news-releases/changing-restrictions-on-russian-gas-to-europe-would-disproportionately-impact-us-lng-exports-new-sp-global-commodity-insights-study-finds-302450275.html]
[10] China Ditches U.S. LNG as Russian Pipelines Boost Supply [https://discoveryalert.com.au/news/china-ditches-us-lng-russian-domestic-output-surge/]