China Rejects Russia's Price Demands for Gas Deliveries – Power of Siberia 2 Stuck in Deadlock

Beijing/Moscow — Russia wants to expand gas deliveries to China, but the planned Power of Siberia 2 pipeline project between Russia and China remains stuck in a deadlock, according to a report by the Wall Street Journal.

For Russia, the project is seen as key to redirecting part of the export volumes lost after the collapse of gas exports to Europe toward China. China, however, is using its strong negotiating position to push for significantly more favorable supply terms, while Russia insists on selling its gas exports only at market-based prices.

Power of Siberia 2: China Continues to Keep Russia Waiting

According to the Wall Street Journal, Chinese officials made clear even before Russian President Vladimir Putin's recent visit to Beijing that an agreement on Power of Siberia 2 would only be possible with significantly improved terms for China. The Russian delegation was reportedly asked not to raise the issue again for the time being. The dispute centers on the future gas price.

Officially, neither Moscow nor Beijing has declared the talks over. The Kremlin instead stresses that negotiations are continuing at the corporate level. However, no concrete timeline for an agreement or the start of construction has been set.

Price Dispute Shows Russia Is Not Offering China a "Friendship Price" Either

According to Reuters, Russia is seeking a market-based pricing formula for Power of Siberia 2, with a methodology similar to that used in its earlier long-term supply contracts with Europe. China, however, is demanding a gas price in line with Russia's domestic market level, according to the Wall Street Journal — significantly below the export price Russia is seeking.

The negotiations also show that Russia is not offering a politically motivated discount even to its most important potential new large-scale customer. While Russian pipeline gas could be cheaper than imported LNG due to lower transport costs, the pricing formula sought by Moscow is based on international market prices rather than a state-set "friendship price."

The frequently voiced expectation that Germany could automatically secure especially cheap gas on a lasting basis in the event of a resumption of Russian pipeline gas imports therefore finds no support in the current negotiations.

Power of Siberia 2 Is Gazprom's Most Important Pipeline Project

The planned pipeline is designed to transport up to 50 billion cubic meters of natural gas annually from the Yamal gas fields in Western Siberia via Mongolia to China. That would bring it close to the capacity of the former Nord Stream 1 Baltic Sea pipeline, which had a capacity of 55 billion cubic meters per year. Unlike the existing Power of Siberia 1 pipeline, which taps gas fields in Eastern Siberia, Power of Siberia 2 would for the first time connect the West Siberian Yamal deposits, whose natural gas was for decades exported mainly to Europe via pipeline.

Despite this scale, the new pipeline could only partially offset the loss of the European sales market. Before Russia's invasion of Ukraine, Russia exported around 155 billion cubic meters of natural gas to the European Union annually. Even at full capacity, Power of Siberia 2 could therefore replace only around one-third of those former delivery volumes — which is precisely why the project holds outstanding strategic significance for Gazprom and the Kremlin.

Source: IWR Online, 15 Jul 2026