The much-anticipated Power of Siberia 2 natural gas pipeline deal has failed to materialise during Vladimir Putin’s state visit to Beijing, despite an elaborate ceremonial welcome from President Xi Jinping. The Russian leader left the Chinese capital on Thursday without signing the supply agreement that Moscow had hoped would offset its dwindling European market, casting uncertainty over the two nations’ energy partnership.
Negotiations for the 50 billion cubic metre per year pipeline, which would transit through Kazakhstan, have dragged on for years. The primary sticking point remains pricing: Russia seeks a premium reflecting postwar energy scarcity, while China, buoyed by its own domestic production and diversified imports from Central Asia and LNG, demands a discount. Russian officials had been optimistic that Xi’s show of personal diplomacy, complete with a military parade and gala banquet, would generate momentum. Yet the final communique made no mention of a breakthrough.
This is a telling outcome. The Kremlin had portrayed the deal as a strategic counterbalance to Western sanctions, a symbol of the 'no limits' partnership declared weeks before the Ukraine invasion. But China operates as a pragmatic superpower, not an ideological ally. It will not subsidise Russia’s war economy. Beijing’s leverage is immense: it is the world’s largest energy importer and Russia’s only viable long-term gas customer outside Central Asia. Moscow, meanwhile, faces a shrinking window as its European exports have collapsed by roughly 80% since 2022.
The physics of the situation are clear. Pipelines are fixed infrastructure costing tens of billions of dollars, with lifetimes of decades. Once built, they lock in buyers and sellers. China can afford to wait while Russia’s budget bleeds. Russia’s urgency, by contrast, grows by the month. The country’s sovereign wealth fund has depleted rapidly, and its war spending is unsustainable without energy revenues. Western analysts estimate that Russia needs oil and gas to stay above $70 per barrel to balance its budget; currently Brent is below that threshold.
So what now? The failure does not kill the project, but it stiffens the terms. Moscow may be forced to accept a price closer to domestic Chinese gas rates, slashing its margins. Alternatively, it could pivot to building more LNG terminals, though that requires years and access to sanctioned Western technology. Meanwhile, China will continue to play hardball, extracting maximum concessions before signing what would be one of the largest infrastructure projects of the century.
The environment watches this chess game with concern. A new pipeline would lock in decades of additional fossil fuel consumption, contrary to the Paris Agreement goals. But in the calculus of geopolitics, climate ambition takes a back seat to energy security. For now, the world’s two most populous countries remain deadlocked on how to deepen their fossil fuel dependency. Their leaders’ photogenic handshakes, it seems, cannot override the cold arithmetic of national interest.
