The Diplomat author Mercy Kuo regularly engages subject-matter experts, policy practitioners, and strategic thinkers across the globe for their diverse insights into U.S. Asia policy. This conversation with Anne-Sophie Corbeau – Global Research Scholar at the Center on Global Energy Policy at Columbia University’s School of International and Public Affairs and visiting professor at SciencePo – is the 482nd in “The Trans-Pacific View Insight Series.”
Examine the asymmetry in the China-Russia Power of Siberia 2 (PoS2) agreement.
The public statements around the agreement reveal this asymmetry from the start. Russia has committed publicly and mentioned a binding agreement, while the Chinese side has remained vague. It is important to note that, while there is a memorandum, there is actually nothing concrete regarding a gas sale and purchase agreement – no price, no volume, no duration, and no take-or-pay clause. Consequently, there is still a lot of uncertainty about whether and when this pipeline may be built. While Russia lacks alternative pipeline buyers, China still has the option of walking away.
This 50 bcm pipeline has been on the drawing board for years; it was originally known as the Altai pipeline, even though the route differ. The pipeline is part of Russia’s Pivot to Asia. When the initial idea of pivoting to Asia was unveiled by Russia in the mid-2000s, the concept was to supplement sales to a potentially declining European gas market with sales to the growing Asian (Chinese) gas market. There was also a perception that too much dependence on Europe could lead to issues such as contractual disputes, and transit problems (with Ukraine).
Even when the agreement on Power of Siberia 1 (PoS1) was signed in 2014, Russia was still exporting large volumes of gas to Europe. Although Russia invaded Crimea in 2014 as well, its exports to EU countries grew in the following years. However, after more than three years of full-scale war in Ukraine, Russia has now lost almost the entire EU market. Thus, what was initially framed as a supplementary strategy has evolved into a partial substitution strategy, and the pipeline is a way to demonstrate Russia’s ability to redirect gas flows to Asia.
The deal would, however, be very asymmetric, given that Russia would become heavily dependent (again) on one single buyer, which could dictate its pricing and volume conditions. Other existing importers of Russian pipeline gas – Turkiye, Belarus, and Central Asian countries – lack the capacity to absorb such quantities. China, not Russia, has been slowing progress on implementing this project, which has been effectively frozen at its initiative.
Indeed, China is hesitating because it does not want to be too dependent on one supplier. Since it started importing gas two decades ago, China has successfully pursued a diversification strategy. But importing 100 bcm of Russian pipeline gas on top of 20-30 bcm of potential LNG supplies would significantly increase the share of Russian gas in its imports, even if, relative to total expected consumption (around 600 bcm by 2040), the share would still only be about 20 percent.
Analyze the commercial trade-offs of the PoS2 deal for Moscow and Beijing.
The cost of the PoS2 pipeline is estimated at around $13.6 billion. As mentioned, the two countries have not yet agreed upon any gas supply agreements due to complicated negotiations over price, volumes, duration, and supply terms.
Regarding the price, China has been negotiating for a very low gas price, in the range of $120 to $150 per 1,000 cubic meters ($3.5-4/mmBtu), even lower than the price agreed for PoS1 (which is already significantly lower than European gas prices, currently at $11-12/mmBtu). China is also aiming to secure a low take-or-pay commitment – possibly around 50 percent compared with the usual 80 percent – which would undermine the economic rationale of the pipeline. There is also a question mark around the duration of the contract: PoS1’s duration was 30 years, but such a duration for PoS2 could extend gas supplies until 2060 at least, potentially clashing with China’s net zero target.
Russia would be unlikely to make meaningful margins, but for Moscow the strategic gain of securing additional export volumes would matter more than profitability. One additional element is the financing of the pipeline. Usually, Russian pipelines have been entirely funded by Gazprom; however, based on comments from Gazprom’s CEO Alexey Miller regarding financing mechanisms, Chinese loans or equity contributions may also be included. Meanwhile, there have been recent reports that China is considering allowing Russian energy companies to issue yuan-denominated bonds (so-called Panda bonds) to help finance Russian energy projects.
Explain how the PoS2 agreement reflects Russia’s geopolitical alignment with China.
The agreement is very timely for both Russia and China. In 2025, China has been facing increasing concerns about LNG imports: first, there has been, for a second time in five years, a trade dispute with the United States, which has resulted – like in 2019-20 – in a halt to imports of U.S. LNG since February 2025.
Meanwhile, the war between Israel and Iran in June has highlighted China’s dependency on imports from Qatar, which transit through the Strait of Hormuz. Consequently, China is signaling a preference for pipeline gas from a close ally, Russia, over LNG imports, notably from the United States.
For Russia, the deal came just weeks after the summit between Presidents Putin and Trump in Alaska, which produced no concrete outcome on a potential peace in Ukraine.
What is Beijing’s messaging to the U.S. and Europe through the PoS2 memorandum?
The message from Beijing to the United States is very clear: not only can the country be much less dependent on U.S. LNG by building another pipeline with Russia, but it also undermines the idea that the United States could draw Russia closer in order to counterbalance the growing influence of China, a move often described as a “reverse Kissinger.” Russia and China are closer than ever, while at the same time the Shanghai Cooperation Organization summit showed China’s intention to create a more multipolar world.
Another sign of defiance is that China has already imported several LNG cargoes from the Russian Arctic LNG 2 project, sanctioned by the previous U.S. administration. In 2024, not a single Russian LNG cargo from this project had landed anywhere. In contrast, sanctioned LNG cargoes started to move at the exact moment when Presidents Trump and Putin were meeting in Alaska. The first sanctioned LNG cargo arrived shortly before the SCO summit, and more are coming. This is testing the current U.S. administration to see whether it would lead to any reaction, which has not happened so far.
When the initial idea of the PoS2 was conceived, it also aimed at creating fears that Russia could redirect gas supplies from the Yamal region away from Europe to China. Europe was then very dependent on Russia. Today, with Europe having almost stopped importing Russian pipeline gas, that leverage has disappeared. Instead, the project underscores a stark contrast: China would be getting very cheap gas, while Europe faces higher energy costs, which are damaging its industrial sector, and a growing reliance on LNG.
Assess the strategic implications of PoS2 for the U.S., China, and Russia in global energy markets.
The implications of the PoS2 agreement are very significant for the global LNG market. Since 2021, Chinese gas companies have been engaged in significant LNG contracting activity to reduce their dependency on costly spot LNG supplies. Most contracted LNG has come initially from U.S. LNG export projects, and more recently from Qatar’s new expansion.
While there is no certainty about whether the PoS2 pipeline will move ahead, two small pipeline expansions of PoS1 and the Eastern route are likely to move ahead. These expansions will bring an additional 8 bcm/y, which will reduce Chinese LNG imports in the medium term.
Given its scale, the 50 bcm PoS2 pipeline represents a key uncertainty for both China and the global gas market. While many LNG forecasts anticipate the global LNG market to be oversupplied in the medium term given the amount of LNG entering the market, some also expect that a gap could emerge between LNG supply and demand beyond 2030, requiring new LNG projects to move ahead.
Regardless of the outcome, the pipeline already introduces uncertainty for LNG projects seeking financing. If it does move ahead, it would sharply reduce China’s long-term LNG imports, prolong potential oversupply over the next decade, and narrow the LNG supply-demand gap in the late 2030s. It would also lower gas prices and could possibly endanger the economics of some LNG projects.
Additionally, this pipeline would give Chinese gas companies greater flexibility between the LNG contracts expiring in the early 2030s and Russian pipeline gas, and therefore additional leverage in contract negotiations. In practice, this means Chinese companies can renew only the contracts that best serve China’s interests, strengthening its bargaining power and influence in global gas markets.