Zhao Long Interviewed by South China Morning Post

Zhao Long    source：South China Morning Post

President Xi Jinping and his Russian counterpart Vladimir Putin stood shoulder to shoulder at this week’s Shanghai Cooperation Organisation summit, fuelling speculation about their countries’ “no limits” partnership. But beyond the optics, many analysts focused on energy: specifically, the long-delayed Power of Siberia 2 gas pipeline.

Valued at US$13.6 billion, the project was expected to be high on the bilateral agenda and would likely have featured when China, Russia and Mongolia – whose territory the pipeline would pass through – held a trilateral meeting in Beijing on Tuesday. If completed, it could supply 50 billion cubic metres of natural gas per year to northern China, providing a crucial economic lifeline to Moscow as it grapples with Western sanctions.

During his meeting with Putin, President Xi said that “big project cooperation” would deepen integration, according to a readout from the official Xinhua News Agency, though the report did not mention any specific projects.

By contrast, the Russian media agency RIA reported on Tuesday that Russian oil giant Gazprom and the China National Petroleum Corporation (CNPC) had signed a memorandum of understanding to build the Power of Siberia 2 and the Soyuz Vostok transit pipeline through Mongolia, citing Gazprom CEO Alexey Miller.

Despite the upbeat tone from Russian media, analysts warned that unresolved issues could delay the project.

Li Lifan, deputy head of the SCO centre at the Shanghai Academy of Social Sciences, cautioned that “certain critical matters” remained unresolved despite both countries having “strong confidence and a strong wish to keep the project going”.

Russia sought gas prices similar to those it had offered to Europe, Li said, while Beijing wanted lower prices.

“Although Gazprom and CNPC have agreed on general principles, negotiations on gas pricing and cost-sharing for construction remain unresolved,” said Yunis Sharifli, an independent foreign policy analyst, who wrote on the Trends Research and Advisory website back in March.

He also cited gas prices as the “key obstacle” to progress.

“While Russia aims to sell gas at a price similar to its exports to Europe – approximately US$350 per 1,000 cubic metres – China, leveraging its stronger negotiating position, seeks to lower the price to its domestic levels, around US$60 per 1,000 cubic metres,” he explained.

Talks on Power of Siberia 2 date back to 2006 but were shelved multiple times, according to Sharifli. The Ukraine war revived discussions, as Moscow sought alternative markets after losing access to much of the European market.

“There was some progress at certain stages, but [China and Russia] didn’t reach a final consensus,” said Zhao Long, a specialist in Russian and Central Asian affairs at the Shanghai Institutes for International Studies.

“The Siberia 2 gas pipeline could lead Russia to open up the Asian market, as a way to achieve export diversification,” he explained.

“On the other hand, the pipeline is a supplement to China’s energy security. It [China] could avoid geopolitical impacts by reducing import reliance on some countries, like Australia.”

Even as talks continued, Gazprom and CNPC signed commercial agreements on Tuesday to increase gas exports to China via the Siberia 1 gas pipeline. Supplies would rise from 38 billion cubic metres per year to 44 billion cubic metres per year, Russian media Interfax quoted Gazprom CEO Miller as saying. The Far Eastern Route project would also increase supplies from 2 billion cubic metres per year to 10 billion cubic metres.

Russia was one of China’s top crude suppliers last year, shipping a record 108.5 million tonnes, or 19.6 per cent of total oil imports, Chinese customs data showed.

The Tianjin Declaration – issued after the Shanghai Cooperation Organisation summit concluded on Monday – called on member states to “support the expansion of inclusive and mutually beneficial cooperation in the field of energy” and the “steady improvement of the sustainability of energy production and supply chains”.