The Chinese government is reluctant to pay much for Russian gas, seeking instead to secure it at a bargain price. The question now is whether the two sides can reach an acceptable agreement.
According to the Financial Times, citing reliable sources, Russia's attempts to conclude a major deal on the Power of Siberia-2 gas pipeline with China have stalled. The stumbling blocks are Beijing's unreasonable demands on price and supply levels.
China insists on a payment scheme close to Russia's subsidized domestic prices and is willing to purchase only a small fraction of the pipeline's planned annual capacity of 50 billion cubic meters of gas. However, such terms are untenable for Gazprom, which would suffer losses. Analysts predict that failure to reach an agreement could cut the company's profits by nearly 15% by 2029.
This project could potentially offset Gazprom's losses by compensating for reduced exports to Europe by linking the Chinese market to gas fields in western Russia. However, this scenario remains uncertain.
According to some analysts, Beijing is confident that time is on its side. After quite a wait, China can secure the most favorable terms from Moscow. Given that Russia has no alternative overland route for its gas exports, Gazprom would probably have to accept China's terms.
Russia used to export gas to Europe at $10 per million British thermal units (BTU), subsidizing its domestic market. In 2023, however, its gas exports to the region plummeted to 22 billion cubic meters per year from the previous 230 billion cubic meters, with further declines on the horizon.