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According to the newspaper’s report, which was seen by Sky News Arabia, Beijing’s hardline stance on the “Power of Siberia 2” pipeline highlights how (the Russian operation in Ukraine) has made President Vladimir Putin increasingly dependent on Chinese leader Xi Jinping for support. Economic.
According to the sources, China has asked to pay close to Russia’s heavily subsidized domestic prices and will only commit to purchasing a small portion of the pipeline’s planned annual capacity of 50 billion cubic meters of gas.
The Financial Times report stated that approval of the pipeline would have transformed the fortunes of Russian energy giant Gazprom, by linking the Chinese market to gas fields in western Russia that once supplied Europe.
Gazprom incurred a loss of 629 billion rupees ($6.9 billion) last year, the largest loss in at least 25 years, amid a decline in gas sales to Europe, which has achieved greater success than expected in diversifying energy sources away from Russian energy.
While Russia insisted it was confident of reaching an agreement on “Force Siberia 2” in the near future, two of the sources said the current impasse was the reason Gazprom CEO Alexei Miller did not join Russian President Vladimir Putin on his official visit to Beijing. Last month .
The newspaper quoted Tatiana Mitrova, a research fellow at the Center for Global Energy Policy at Columbia University, as saying that Miller, who was on a trip to Iran, could have been essential in any serious negotiations with China, and his absence carried a very symbolic significance.
It is noteworthy that reaching an agreement on the pipeline was one of three main requests that President Putin made to his Chinese counterpart in the last meeting, according to people familiar with the matter, along with more Chinese bank activity in Russia, and for China to ignore the peace conference organized by Ukraine this year. the month.
The British newspaper quoted its sources as saying that agreement on the pipeline is still far away, while the proposed cooperation with Chinese banks is still on a much smaller scale than what Russia requested.
The deal fell through
While Rami Al-Qalioubi, a professor at the Moscow Higher School of Economics, points out in exclusive statements to the “Eqtisad Sky News Arabia” website the faltering gas pipeline deal between Russia and China, he points out at the same time that “actually there is the Siberian Power Line 1, which is working and being completed.” Increase his energy.
Russia exports its natural gas from Siberia to northeastern China via the “Power of Siberia 1” gas pipeline, and aims to deliver 98 billion cubic meters of gas and 100 million tons of liquefied natural gas to its diplomatic and economic ally by 2030.
He adds: “One of the indicators of the deal’s faltering is related to the absence of the head of Gazobrom, Alexei Miller, from Russian President Vladimir Putin’s recent visit to China,” but he confirms that this (faltering) may not radically affect joint cooperation between the two countries.
The professor at the Moscow Higher School of Economics points out that during the past two years, the volume of trade exchange between Russia and China has increased at clear record rates.
Trade between China and Russia reached a record level in 2023, and trade between the two countries reached more than $240 billion, according to customs data, exceeding the goal of $200 billion set by the two neighboring countries in bilateral meetings last year.
Al-Qalioubi explains that the situation in the energy field has its own contexts and sensitivities, especially since China is interested in purchasing Russian oil and gas at discounts, and this is available to China as long as export outlets to Russia are limited after the European market was closed to it. This confirms that the relationship between Russia and China is more of a commercial partnership than an alliance. Strategically, as some seek to promote.
China’s need for Russian energy
Returning to the British newspaper’s report, it quoted the director of the Carnegie Russia Eurasia Center in Berlin, Alexander Gabuev, as saying: “China needs Russian gas strategically as a safe source of supplies that does not depend on sea routes that would be affected in the event of a maritime conflict over Taiwan or the South China Sea.” “But at the same time to make this worthwhile, China needs a very cheap price and flexible commitments.”
China’s demand for imported gas is expected to reach about 250 billion cubic meters by 2030, up from less than 170 billion cubic meters in 2023, according to a study published by Colombia’s CGEP group in May.
That study stated that the 2030 demand level could still be largely or completely met by existing contracts for pipeline and LNG supplies. However, by 2040, the gap between China’s import demand and current commitments will reach 150 billion cubic metres.
Gabuev said:
- Russia’s lack of an alternative land route for its gas exports means that Gazprom will likely have to accept China’s terms.
- China believes that time is on its side.. It has room to wait to obtain the best conditions from the Russians (..).
- The pipeline could be built very quickly, as the gas fields have already been developed.
- Ultimately, the Russians have no other option to market this gas.
Before the war in Ukraine, Gazprom relied on selling gas to Europe at high prices in order to support the local market in Russia.
China already pays Russia less for gas than it pays its other suppliers, with an average price of $4.4 per million British thermal units, compared with $10 for Myanmar and $5 for Uzbekistan, according to calculations by CGEP researchers from customs data for 2019-2021.
Gazprom’s exports to Europe fell to 22 billion cubic meters in 2023 from an average of 230 billion cubic meters annually in the decade before the war in Ukraine. It is likely to diminish further once the transshipment agreement with Ukraine expires at the end of this year. Failure to agree to increase supplies to China will be another strong blow, according to the Financial Times report.
China’s interest
For his part, the Russian writer and researcher, Dmitry Brega, says in exclusive statements to the “Eqtisad Sky News Arabia” website that the main problem behind the faltering of the new gas line deal is related to “prices”, as Beijing, China – according to circulated information – is asking for reduced prices, which are The prices that are traded in the local market of Russia and this thing are unacceptable in Russia due to Moscow’s desire to make profits, of course.
He added: “China wants to make the most of the underground wealth in Russia (..),” stressing that Beijing has a special policy through which it tries to benefit as much as possible from Russia (by exploiting the issue of sanctions imposed on Moscow and the deterioration of relations with European markets). This indicates that the Russian-Chinese alliance is weak in some aspects, especially since China has a different political orientation on other files, including the Ukrainian file as well, and its position is not to fully support military operations, as it criticizes Western policies in Ukraine. She has a different vision.”
He explains that the most prominent evidence of this is its failure to officially recognize the annexation of some Ukrainian regions to the Russian Federation so far, and this indicates that there are different points of view, amid President Putin’s desire for Chinese economic support and in light of the imposed sanctions and support for his ability to confront them.
Russia is confident that the deal can be concluded
After the Financial Timer report, Kremlin spokesman Dmitry Peskov said on Monday that there is no doubt that Russia and China will reach an agreement on the Power of Siberia 2 gas pipeline.
He added in a daily press conference by phone that talks on the pipeline will continue.
China also said that it will continue to push for enhancing all forms of mutually fruitful cooperation with Russia and that it looks forward to deepening cooperation with it in the oil and gas sector.
A Chinese Foreign Ministry spokesman said in a press briefing, “With regard to cooperation between China and Russia, what I want to say is to seek to bring the interests between the two countries closer and deepen the interconnectedness of interests.”
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