Russia and China have agreed to build a new mega gas pipeline across Mongolia, which is oddly reminiscent of the pipelines Moscow built under the Baltic Sea. But there is a big flaw in this plan.
China and Russia have been talking up the idea of building another gas pipeline to link the latter’s massive fossil fuel reserves with the former’s thirsty energy market for years.
One already links Russia’s east with China’s northeast but this new project would be more substantial and more geopolitically important, if it is ever realised of course.
‘Power of Siberia 2’ would tap into the gas reserves of the Yamal peninsula, which up until a couple of years ago was one of the main sources of fuel for export to Europe.
But following the Kremlin’s decision to invade Ukraine in February 2022, European leaders decided to limit the import of Russian fossil fuels and in the intervening years, diversification of supply has been undertaken to reduce dependence on Moscow.
That dynamic was made rather permanent by the sabotage of the Nord Stream pipelines, which makes the prospect of gas flowing in significant quantities from Russia into Europe extremely unlikely anytime soon.
So Vladimir Putin has been looking around for another buyer of his climate-busting fuels ever since.
A proportion of the gas can be liquified and shipped as LNG onto the global market, but the likes of Australia, Qatar and the United States have already cornered much of that trade. The EU has also put in place sanctions on Russian LNG, so other solutions have to be found.
After all, Russia’s war effort and its wider economy is totally dependent on fossil fuel sales. India has been buying a lot of Russia’s oil and gas sales have continued to other non-European partners as well. But it is not enough in the long-run.
Putin and Xi Jinping put on a real show for the cameras this week in Beijing while advanced Chinese military technology was paraded in front of them. They were even caught on a hot mic talking about how organ transplants could extend their lives.
But China holds the cards here. It has other suppliers it can turn to and despite the headlines about coal power plants, its industries are electrifying fast. Carbon pricing has been introduced and is being rolled out further, renewables keep setting new records.
So unless Putin can make Xi an offer he can’t refuse on costs and prices, Power of Siberia 2 looks more like a ‘nice to have’ than an essential bit of energy infrastructure.
A therein lies the rub: this week’s announcement made no mention of those commercial terms, which are the main reason why the project has not made any progress already.
It feels more like a gambit of sorts on the part of both China and Russia, aimed at the United States and the European Union, respectively.
On the one hand, this tells the Trump administration that Beijing will do business with whoever it wants, particularly when it comes to energy. Russia too appears ro be sticking its two fingers up at Washington. On the other, Moscow is also telling Brussels that it doesn’t need the EU market to survive, so sanction away.
Ultimately though, Xi Jinping seems like an avid student of history. And history has shown that relying on Russia for energy supply and allowing it to hook you up to infrastructure is not a wise move.
So this columnist’s bet is that Power of Siberia 2 will not see the light of day and that China will continue on with its record-setting clean energy rollout and electrification rates. Russia is useful to Xi at the moment, but that won't last.
Russia meanwhile will be hoping that climate change keeps happening at an ever faster rate so that the Northern Arctic trade routes open up and it can sell more of its fossil fuels to more of the world year-round.
Maybe that’s another incentive for Europe and the rest of the world to stop faffing around, bring emissions down and make sure the climate doesn’t play into Putin’s hands? Just a thought.
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