Geopolitical changes cast a shadow over the Russia-China gas pipeline

Government of Mongolia voted no to include the Power of Siberia-2 natural gas pipeline linking Russia to China through its territory in its spending plans for the next four years, a sign that the megaproject could be on hold.

Finding perspective: Mongolia’s new coalition government voted on August 16 for its action program for its four-year term and notably did not include the 2,594 kilometer pipeline, meaning the ambitious project is not expected to start construction in this period.

While most of the energy project is between Beijing and Moscow to reach an agreement, Mongolia should be involved in negotiations on construction and transport fees.

Power of Siberia-2which is a joint project between the China National Petroleum Corporation and Gazprom, would take at least five years to build and would seek to bring gas from the vast reserves of the Yamal Peninsula in western Siberia to China.

Much of these reserves were originally intended to be sold to the European Union, but Russia’s full-scale invasion of Ukraine has prompted Moscow to seek a new market in China, the world’s largest consumer of natural gas.

But Beijing currently has no special incentive to agree to the new pipeline, and there have been ongoing disputes as well tough negotiations between China and Russia in terms of prices and supply levels.

In June, the Financial Times newspaper, citing “people familiar with the matter”, reported that talks are frozen over what Russia sees as unreasonable Chinese demands.

What’s next? The decision by Mongolia’s government is seen by some analysts as the latest sign that the pipeline is facing setbacks.

“It is premature to declare the project over, but the omission signals significant challenges,” Aleksei Chigadaev, a China expert and former visiting lecturer at the Moscow Higher School of Economics, told me.

Moscow’s bargaining power with its economically stronger neighbor has weakened over the course of the Ukraine war, and questions remain about Gazprom’s ability to sustain such a complicated deal.

The natural gas pipeline, which would bring gas to northern China, is also uncertain as it faces competition from China. incremental change to renewable energy and Beijing’s broader strategy to avoid over-reliance on a single exporter.

“Northern China’s access to (global) liquefied natural gas (LNG) markets is expanding, and global LNG markets will likely remain oversupplied for the rest of the decade,” Joseph Webster, a senior fellow at the Atlantic Council, told me.

“Furthermore, northern China can reduce incremental volumes from domestic production and from existing Central Asian lines to China (pipeline).”

Why it matters: Approval of the pipeline would transform Gazprom’s current fortunes, further tying it to a massive consumer market, but Beijing’s tough stance also underscores how Russia’s invasion of Ukraine has left President Vladimir Putin without leverage.

Closing a deal for such a sprawling project as Power of Siberia-2 is incredibly complex, but China clearly believes it holds the better cards.

Beijing also has alternatives to pursue. Xi also offered support for the construction of the so-called D-line pipeline, which would be the fourth to bring Turkmen gas to China.

As Chigadaev explains, the Turkmen pipeline offers some clear advantages.

“The pipeline will be significantly shorter than the Russian one, and its construction will be entirely controlled by China, including investment, construction process and operations,” he said. “Negotiation with Turkmenistan’s political leadership is also easier – it has an even higher level of authoritarianism than Russia and a simpler economy.”

Still, as Webster notes, Power of Siberia-2 and Line-D feed different parts of China and don’t necessarily cancel out the other, although “China’s future and even current natural gas demand is a big analytical blind spot.”

“Line D is believed to serve southern China, which would only place it in indirect competition with Power of Siberia-2, which would deliver gas to customers in northern China,” he said. “Line D is more likely to compete with American and Australian LNG. But the routes of line D and Power of Siberia-2 are not yet completed. Things could change.”

Three more stories from Eurasia

1. Li Qiang In Russia and Belarus

Chinese Premier Li Qiang arrived in Moscow on August 20 on a three-day official visit, where he is expected to hold talks with his Russian counterpart Mikhail Mishustin and Putin.

Details: The visit will focus on bilateral ties and economic cooperation between China and Russia as part of a regular diplomatic track created for the premiers of both countries.

Ahead of the visit, Chinese Foreign Ministry spokeswoman Mao Ning said Li intended to “exchange in-depth views on practical cooperation in bilateral relations and issues of common interest” in talks with Mishustin.

Neither the Chinese nor the Russian side mentioned the war in Ukraine in their previews, but Li’s trip is the first by a Chinese official since Ukraine’s incursion into Russian territory.

Li will then leave Moscow for Belarus, where he will meet with Belarusian Prime Minister Roman Golovchenko and strongman Alyaksandr Lukashenko.

Belarus relies heavily on Russia for political and financial support, but has sought to balance that reliance with closer ties to China.

In July, Belarus became the 10th member of the Shanghai Cooperation Organization and also hosted by China for military exercises in the western part of the country, about 5 kilometers from the Polish border.

2. Kazakhstan’s nuclear power bid

Kazakh officials held the country’s 20th public discussion on building a new nuclear power plant on August 20, my colleague Asemgul Mukhitkyzy of RFE/RL’s Kazakh Service reports. rEPORTS.

What you need to know: The latest public forum was held in the capital, Astana, and came ahead of a possible national referendum on the issue.

The talk tour includes nuclear power officials and experts and is being held in part as part of an effort to raise public awareness, dispel myths and misinformation about nuclear power, and dispel any safety or environmental concerns about the existence of another centers in the country.

Kazakh officials have not yet said who will build the plant, but the government is considering proposals from French, South Korean, Chinese and Russian companies.

3. Dilution of Tajikistan’s debt to China

Tajikistan Deputy Finance Minister Yusuf Majidi says China’s share of Tajikistan’s foreign debt is falling every year, RFE/RL Tajik Service rEPORTS.

What does this mean: Speaking at a recent press conference, Majidi said Tajikistan’s total debt to China is $1.5 billion and that Dushanbe has already paid $610 million.

He added that this leaves Tajikistan’s remaining debt at around $850-890 million, and the government has taken steps to limit its debt exposure.

“China’s share in the structure of Tajikistan’s external debt is decreasing. After 2018, we only received grants from China,” Majidi explained to reporters.

Tajikistan’s growing financial dependence on China has been a major source of criticism for the Tajik government, with China holding half of the country’s foreign debt and being the main source of foreign investment.

In addition to these financial concerns, the full terms of the loan agreements agreed with China have not been made public and have raised fears that Tajikistan’s inability to repay its loans could lead to land or other concessions being offered in exchange for debt relief.

According to the Ministry of Finance, the grace period for a series of loans owed to the Export-Import Bank of China will end at the end of 2025, and Dushanbe will have to pay a percentage of the debt held by China.

Over the Supercontinent

Yuan listed: In a move aimed at boosting cross-border trade with China, the National Bank of Kyrgyzstan announced will begin publishing the official exchange rate of the yuan against the Kyrgyz som starting September 1.

The bane of wheat: Kazakhstan has suspended wheat exports to China indefinitely following Beijing’s unilateral tariff changes, Kazakhstan’s Ministry of Agriculture said. said in a statement on August 7.

Page Not “For You”: TikTok’s algorithm promotes the Chinese government’s narratives on important issues such as Tibet, Taiwan and the Uyghurs, while suppressing content critical of Beijing, a new study he found.

A dawn raid and a decision: Legal claims by Chinese firm Nuctech that European Commission raids in April to look for evidence that state subsidies were illegal were thrown out by a Luxembourg court.

Nuctech is a maker of body and baggage scanners for airports and ports and sued the commission in June, alleging the raids were illegal. The court ruling could have a wider effect on Chinese businesses in Europe, and the case is the European Commission’s best-known use of foreign subsidy regulation.

A thing to watch

Azerbaijan has officially applied to become a member of BRICS, the group of emerging countries led by China and Russia, which also includes Brazil, India and South Africa as founding members.

The country’s Ministry of Foreign Affairs did announcement on August 20. Azerbaijan is the latest applicant to BRICS, which consisted of just five members for years until it expanded to include Iran, the United Arab Emirates, Ethiopia and Egypt in January.

The development also comes after Azerbaijan signed a strategic partnership agreement with China on July 3, on the sidelines of the Shanghai Cooperation Organization summit.

Via RFE/RL

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