Russia is sitting on a mountain of gas it can't sell to Europe anymore. That’s the reality. Since the 2022 invasion of Ukraine and the subsequent blowing up of the Nord Stream pipelines, Gazprom has been looking for a lifeline. They’ve pinned all their hopes on a massive project called Power of Siberia 2. If you look at a map, it makes perfect sense on paper. You take the gas from the Yamal Peninsula—the same fields that used to feed Germany—and you point the pipes toward China instead. But here’s the thing. It’s not happening. At least, not yet.
People talk about this pipeline like it’s a done deal. It’s not. Negotiating with China is notoriously brutal, and Beijing knows exactly how much leverage they have right now.
The $100 Billion Poker Game
The Power of Siberia 2 isn't just a construction project; it’s a geopolitical gamble of the highest order. We are talking about a 2,600-kilometer monster that would traverse Mongolia to deliver 50 billion cubic meters (bcm) of gas annually. To put that in perspective, that’s roughly the same capacity as the original Nord Stream 1. Russia needs this. Like, really needs it. Their profits have cratered.
China, though? They’re chilling. Xi Jinping is playing the long game. While Vladimir Putin wants a signed contract yesterday, Beijing is looking at their energy mix and seeing options. They have Turkmen gas. They have domestic coal. They are building solar farms faster than anyone else on Earth. They aren't in a rush to over-depend on a single supplier that just got cut off by its previous best customer.
Why Mongolia is the Wild Card
Most of the conversation focuses on Moscow and Beijing, but Ulaanbaatar is stuck in the middle of this sandwich. Mongolia stands to make a fortune in transit fees. However, they are also incredibly wary of being caught in the crossfire of a regional power struggle. Recent reports from the Mongolian government suggest that the project hasn't even been included in their national development plan through 2028. That’s a massive red flag. If the transit country isn't budgeting for the groundwork, the "imminent" start dates being pushed by Russian media outlets like TASS start to look a bit flimsy.
🔗 Read more: Where Did Dow Close Today: Why the Market is Stalling Near 50,000
Price Wars and the "Turkmenistan Factor"
Let's talk money because that's where the wheels usually fall off. Gazprom wants a price similar to what they used to get from the Europeans. China wants a massive discount. In fact, they want to pay something close to their domestic subsidized prices.
There's also the Central Asia–China gas pipeline (Line D) to consider. China has been flirting with Turkmenistan for years to get more gas through a fourth branch of their existing network. Turkmenistan is a safer bet for China in some ways—they don't have the same level of international sanctions baggage as Russia. Every time Russia tries to push the Power of Siberia 2 negotiations forward, China conveniently brings up Line D. It’s a classic negotiation tactic, and it’s working.
- The Price Gap: Europe used to pay top dollar. China pays "friendship" prices.
- The Volume Issue: 50 bcm is a lot of gas to absorb into a market that is already diversifying.
- Infrastructure Costs: Who pays for the pipe? Russia is broke-ish, and China doesn't want to foot the bill for a project on Russian soil.
The Technical Nightmare of the Yamal Link
Connecting the West Siberian gas fields to the East is a feat of engineering that would make most builders weep. We’re talking about permafrost. We’re talking about mountain ranges. The original Power of Siberia (the first one) was already an ordeal, and that tapped into closer, "fresh" fields. Power of Siberia 2 requires a massive "interconnector" to bridge the two distinct pipeline systems Russia has.
Honestly, the sheer scale of the steel required is mind-boggling. With sanctions hitting Russian industrial capacity, sourcing the high-grade turbines and compressors needed to move that much gas over those distances is a headache Gazprom didn't have ten years ago. They claim they can do it all with "import substitution," but ask any engineer in the field—it’s easier said than done.
💡 You might also like: Reading a Crude Oil Barrel Price Chart Without Losing Your Mind
Is the Demand Actually There?
Energy analysts like those at the Oxford Institute for Energy Studies have been skeptical about China's future gas demand. China is pushing hard for a "Green Revolution." If they hit their peak carbon targets early, they might not even need an extra 50 bcm by the mid-2030s when this pipeline would finally be fully operational.
The Geopolitical Cost of "No"
If this deal falls through, Russia becomes a junior partner to China in a way that’s almost irreversible. Without the Power of Siberia 2, Russia has no major outlet for its stranded gas. They can try to expand their Liquefied Natural Gas (LNG) fleet, but the Arctic LNG 2 project is already struggling under the weight of US sanctions.
Beijing knows this. They are watching Gazprom's balance sheets bleed. The longer they wait, the lower the price goes. It’s a cold, hard business calculation disguised as a "Strategic Partnership."
Key Obstacles Moving Forward
- The Mongolia Transit Agreement: No finalized legal framework for the land use.
- Pricing Formulas: China wants "Netback" pricing that favors them heavily.
- Strategic Autonomy: Beijing's "Malacca Dilemma" makes them want land-based energy, but not at the cost of being beholden to Moscow.
What This Means for Global Energy
If the pipeline ever gets built, it fundamentally shifts the gravity of the global energy market. The "Gas OPEC" idea becomes more real. But for now, it serves as a reminder that pipelines are as much about politics as they are about physics.
📖 Related: Is US Stock Market Open Tomorrow? What to Know for the MLK Holiday Weekend
You’ve got to look at the actions, not the press releases. When Russian officials visit Beijing, they talk about "cooperation." When they leave, there is rarely a signed contract for Power of Siberia 2. That silence speaks volumes. It tells us that the "limitless" friendship between the two nations has a very specific price tag—one that neither side is ready to pay yet.
Actionable Insights for Following the Story
To truly understand where this project is headed, stop reading the headlines about "increased cooperation" and watch these specific indicators.
- Check the Mongolian Budget: If Ulaanbaatar starts allocating funds for pipeline security or land clearing, the deal is finally moving.
- Watch the LNG Tanker Sales: If Russia begins a massive push into "shadow fleet" LNG tankers, it means they’ve given up on the pipeline being ready anytime soon.
- Monitor the Turkmenistan Line D Progress: If China breaks ground on the Turkmen extension, the Power of Siberia 2 is likely moved to the back burner for another decade.
- Track Gazprom's Capex: Look at their Capital Expenditure reports. If they aren't spending billions on the "Soyuz Vostok" (the Mongolian section name), the pipe isn't being laid.
The reality of the Power of Siberia 2 is that it remains a potent symbol of Russia's "Pivot to the East," but until the first trench is dug in the Mongolian steppe, it stays a very expensive PowerPoint presentation. Keep your eyes on the pricing disagreements; that's where the real story lives.