Energy|China imposed financial conditions on the gas pipeline project that Russia could not accept.
The summary is made by artificial intelligence and checked by a human.
Russia’s plan to build a new gas pipeline to China’s conditions.
In addition, China only wanted to buy a fraction of the pipeline’s capacity.
The gas pipeline would have been important for the Russian economy, as the natural gas export market has shrunk.
Russian a plan to build a new gas pipeline to China has collapsed, the newspaper reported Financial Times on Sunday.
According to the newspaper, the scrapping of the project is due to the fact that Russia could not accept the price at which China demanded to be able to buy natural gas.
Moreover, China would be willing to buy only a fraction of the gas pipeline’s 50 billion cubic meter annual capacity. The newspaper bases its information on three well-informed sources.
According to the Financial Times, the agreement to build a new gas pipeline was one of the key issues, including the Russian president Vladimir Putin discussed in May the President of China Xi Jinping with during his visit to Beijing.
Russian researcher at the Bank of Finland specializing in economics Laura Solanko emphasizes that the failure of the project was not a surprise. It has been planned for years, and no one really expected that a new gas pipeline would be built in the near future.
“A new gas pipeline to China would be economically very important for Russia. Gazprom [kaasu- ja öljy-yhtiö] it appears from the financial statements that due to the contraction of the natural gas export market, the company’s result was heavily loss-making last year,” says Solanko.
Last year, the company’s net loss was 6.9 billion dollars, or 6.4 billion euros. There is only one gas pipeline from Russia to China, completed in 2019, called the Power of Siberia.
“Russia has plenty of excess natural gas that has no buyers. All the main gas pipelines go to the west, where demand has strongly decreased. A new gas pipeline would have reduced overproduction and increased government revenues.”
Also economist at financial company Nordea Kristian Nummelin assesses the collapse of the new gas pipeline as a significant setback for Russia.
“In the short term, the economic significance of the collapse of a new gas pipeline is not very great. In the longer term, however, it shows the effects of Russia’s war of aggression in Ukraine. China’s importance to the Russian economy is significantly greater than Russia’s influence on the Chinese economy.”
In the past, Russia counted a lot on the fact that it will be able to sell a lot of energy to Europe. The war of aggression messed up the plans. Now it has to find new markets for its energy and sell it even more cheaply.
“The difficulties in the energy industry indicate that the long-term growth prospects of the Russian economy have clearly weakened. The economic damage of the war of aggression will last for a long time,” says Nummelin.
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