China tries to twist Russia's arms over Power of Siberia-2 gas prices

Russian President Vladimir Putin and Chinese President Xi Jinping discussed energy supplies, but commercial issues related to this topic are not supposed to be exposed to the public, Putin's spokesman Dmitry Peskov said commenting on The Financial Times article about the disagreement of the parties on the price of natural gas.

The Financial Times newspaper said with reference to its sources that negotiations between Russia's Gazprom and the China's oil and gas concern CNPC on the Power of Siberia-2 had reached an impasse amid China's desire to purchase fuel along this system at prices close to domestic Russian prices.

"The topic of cooperation in the field of energy supplies was indeed on the agenda of the talks between the two leaders. <…> As for the aspects of the ongoing commercial negotiations, of course, they are non-public. It's completely normal that each country defends its interests,” Peskov said.

According to Peskov, negotiations on the topic will continue, and the parties will come to an agreement.

Putin visited China in mid-May. On May 16, Putin held talks with his Chinese counterpart Xi Jinping. As a result of the talks between the two leaders, a joint declaration was adopted on deepening relations of comprehensive partnership and strategic interaction. Putin and Xi also signed a package of other documents.

Russia may switch to Mongolia instead of China

Negotiations on the construction of the Power of Siberia-2 gas pipeline have been ongoing for more than five years and may last for a long time, independent resource and energy market expert Vladimir Demidov believes.

The pipeline will be completed, but it may not operate at full capacity. In addition, it is not China, but Mongolia that may become its key customer for a start, the analyst believes.

In May, Russian Deputy Prime Minister Alexander Novak announced Gazprom's intention to complete negotiations regarding further natural gas supplies via the Power of Siberia-2 and sign a contract with China's CNPC in the near future. Prior to this, Chinese Ambassador to Russia Zhang Hanhui reported that the parties were discussing the cooperation model, as well as technical and commercial issues regarding the project. However, Russia and China have not reached any agreement.

The works on the Power of Siberia-2 gas pipeline began in 2020. The system will run from Russia through Mongolia to China. The pipeline is expected to be about 6,700 kilometres long; 2,700 kilometres of the system will stretch through Russian territory.