The Power of Siberia 2 (PoS-2) gas pipeline project has become a crucial topic in China-Russia relations since the Ukraine war began. This proposed mega-pipeline would transport natural gas from Russia’s Yamal Peninsula through Mongolia to China, potentially transforming energy cooperation between the two nations. The project’s origins trace back to 2006 when Presidents Hu Jintao and Vladimir Putin agreed to an initial version that would cross the Altai Mountain range at the brief Russian-Chinese border between Kazakhstan and Mongolia. However, negotiations faltered in 2009 due to disagreements over project terms. While briefly revived in 2014, the project was indefinitely postponed in 2015 as both countries prioritized the Power of Siberia 1 (PoS-1) pipeline.[1]

The Ukraine war that began in 2022 reignited Russia’s interest in the PoS-2 project, as it urgently sought alternative gas export markets. Russia’s energy exports to Europe have plummeted, with oil exports declining by over 80% and coal by 100%.[2] Additionally, Russia’s share of European gas imports fell to 25% and its gas exports to Europe by pipelines dropped to 45%. While Russia has successfully redirected oil and coal exports to other markets, natural gas remains a challenge due to insufficient infrastructure linking its western production centers to Asian consumers.[3]

In this context, the Chinese market emerges as a critical consumer for Russia to compensate for some of its lost gas exports. The PoS-1 pipeline is expected to reach its full capacity of 38 billion cubic meters (bcm) by 2025, and in February 2022, Russia and China agreed to deliver an additional 10 bcm/year through the Far East pipeline (Sakhalin-Khabarovsk-Vladivostok) by 2027. The PoS-2 project would enable Russia to export an additional 50 bcm per year to China. However, PoS-2 not only serves both countries’ complementary energy relationship but also offers significant economic and geopolitical advantages for both nations in the long term.[4]

Benefits of PoS-2 for China and Russia

Benefits to Russia

The pipeline would allow Russia to export 98 bcm/year of gas to China when combined with other existing and planned pipelines. While it is not a full substitute for the European market, where Russia once sold up to 155 bcm/year of gas, PoS-2 could help offset nearly half of the decline in Russian pipeline gas exports to the EU between 2021 and 2023.[5]

Although PoS-2’s revenue potential does not match the US$20-30 billion annually that Russia previously earned from gas exports to Europe, estimates suggest that the project could generate between US$2.5 billion and US$4.3 billion per year.[6] Additionally, the pipeline’s economic benefits extend beyond gas exports—its development would stimulate demand for Russian steel producers and subcontractors, while also accelerating economic growth in eastern Russia, a strategic priority for Moscow.[7]

From a geopolitical standpoint, PoS-2 would enable Russia to diversify its gas exports, reducing its dependence on Western markets and minimizing its vulnerability to sanctions and geopolitical pressure. The project would also deepen energy interdependence between Russia and China, strengthening their strategic ties while signaling to Western nations that their isolation efforts have not fully succeeded. Most importantly, by securing a large and stable Asian market, Russia could counterbalance the influence of the U.S. and Middle Eastern LNG suppliers in Asia, thereby enhancing its market resilience and geopolitical leverage.

Benefits to China

Compared to Russia, the economic and geopolitical implications of the PoS-2 pipeline for China are broader and more multifaceted. Although China is a major natural gas importer, its energy mix is still dominated by coal (59%), followed by petroleum (20%), primary electricity sources (hydropower, wind, solar, and nuclear), and biomass (3%). Currently, natural gas accounts for only 8.4% of China’s total energy consumption, used in industry, residential heating, transportation, and power generation. However, China aims to increase this share to 15%, making reliable and cost-competitive gas supplies increasingly important.[8]

In this context, PoS-2 offers China access to cheaper gas compared to other suppliers. For example, in 2020, the average price of Russian pipeline gas was US$4.15/mmBtu, while gas from Myanmar was priced at over $9.08/mmBtu and gas from Turkmenistan, Kazakhstan, and Uzbekistan ranged between US$5 and US$6/mmBtu, according to customs data. Given China’s strong negotiating position vis-à-vis Russia, Beijing could further reduce prices, securing cost-competitive energy.[9]

Even if PoS-2’s pricing at the border is similar to PoS-1, the delivered cost to the Beijing-Tianjin-Hebei region will be even lower, as PoS-2 covers less than half the distance compared to PoS-1.[10] In this context, developing a new pipeline infrastructure would help China secure more affordable and stable gas supplies. Moreover, PoS-2 would enable China to reduce its dependence on coal and transition to cleaner energy sources, aligning with its carbon neutrality goals and long-term energy strategy.

From a geopolitical perspective, PoS-2 would help China reduce its dependence on LNG imports from the U.S. and Australia. Given the growing tensions between China and the U.S. (and the AUKUS pact countries), reliance on LNG imports from these countries presents a strategic vulnerability. By securing a stable gas supply from Russia, China can enhance its energy security and reduce its exposure to geopolitical risks associated with maritime routes.[11] The recent Red Sea crisis—caused by Houthi attacks—has further underscored the risks of over-reliance on maritime energy transport. Disruptions in major shipping chokepoints, such as the Malacca Strait, could pose supply chain risks. PoS-2 would mitigate these vulnerabilities by ensuring a reliable overland energy supply, strengthening China’s energy resilience.[12]

Furthermore, the expansion of pipeline gas imports could enhance China’s role in global LNG markets. With a long-term gas surplus, Chinese LNG importers could expand their presence as global traders, increasing China’s influence over LNG trade flows, market liquidity, and energy geopolitics by the 2030s. Lastly, Russia’s growing dependence on China as a major gas buyer will increase Beijing’s leverage over Moscow in the long term. As Russia shifts its energy exports away from Europe and toward China, Beijing will strengthen its bargaining power in bilateral relations and regional affairs, further consolidating its strategic position.[13]

Challenges and Issues

Despite the significant economic and geopolitical impacts of PoS-2 for both Russia and China, the project remains uncertain due to ongoing negotiations. Russia has yet to secure a binding agreement with China regarding the pipeline’s construction and the conditions for gas imports. Additionally, in August 2024, Mongolia’s coalition government excluded PoS-2 from its long-term development plan through 2028, further signaling uncertainty about the project’s future.[14] Economic and financial challenges, China’s shifting energy security priorities, and broader geopolitical considerations have stalled discussions and increased doubts about the project’s viability.

Economic-Financial Challenges

One of the most critical challenges facing PoS-2 is the economic and financial disagreements between Russia and China. Although Gazprom and CNPC have agreed on general principles, negotiations on gas pricing and cost-sharing for construction remain unresolved. The key obstacle is the gas price. While Russia aims to sell gas at a price similar to its exports to Europe—approximately US$350 per 1,000 cubic meters—China, leveraging its stronger negotiating position, seeks to lower the price to its domestic levels, around US$60 per 1,000 cubic meters. This price gap, with China demanding a price nearly one-fifth of Gazprom’s expectations, remains a major point of contention.[15]

Another significant financial hurdle is the issue of loans to fund the Russian section of the pipeline. China is pushing to finance the project under its own terms, aiming to involve its banking sector to secure returns of US$8 billion to US$15 billion. However, Russia and China have been unable to agree on the interest rates and other loan conditions, creating another financial roadblock.[16]

Finally, there are concerns about the project’s economic rationale for China. PoS-2 is designed to supply gas to northern China, primarily for household consumption, especially for winter heating. This seasonal demand fluctuation raises questions about the pipeline’s long-term commercial viability.[17] Moreover, for Russian gas to reach southern China—where demand is higher—it would face strong competition from multiple sources, including the fast-growing Tianjin-Tangshan coastal LNG import capacity, offshore gas production from the Bohai Sea, domestic gas from Shaanxi, and even imports from Russia’s other two pipelines.[18] This oversaturation risks making PoS-2 an unnecessary and costly infrastructure investment.

China’s Changing Energy Security Priorities

Another significant challenge for PoS-2 is China’s evolving energy security priorities. Beijing aims to reduce its reliance on imported energy resources by increasing domestic production, strengthening its energy security in the long term. In 2018, Xi Jinping instructed China’s national energy companies to prioritize the development and production of domestic gas and oil.[19]

This directive led to a significant shift in China’s energy strategy. In 2019, China’s three major national oil companies announced their first-ever seven-year plan to boost domestic energy production. As a result, these companies collectively increased domestic gas production by 43% between 2018 and 2023.[20] By 2024, 58% of China’s total gas consumption came from domestic sources,[21] while only 42% relied on imports. This growing focus on domestic gas production raises uncertainty about PoS-2’s long-term viability and influences China’s decision-making process regarding the project.[22]

Additionally, China’s aggressive expansion of renewable energy presents another challenge for the future of PoS-2. As of 2025, over 40% of China’s total energy generation capacity comes from renewable sources such as wind, solar, and hydropower. This rapid expansion could reduce China’s demand for natural gas.[23] Given China’s track record of surpassing its renewable energy targets ahead of schedule, the share of natural gas in its energy mix may grow more slowly than previously anticipated. In this context, China’s dual focus on increasing domestic gas production and expanding renewable energy capacity could scale down its need for additional gas imports, potentially undermining the economic rationale for PoS-2.

Geopolitical Considerations

Another significant challenge for PoS-2 is China’s geopolitical calculations. If the pipeline is completed and begins exporting gas, China’s reliance on Russian pipeline gas could rise to 40% by 2030. While this would enhance China’s energy security by reducing its dependence on LNG imports via the Malacca Strait, it could also deepen its dependence on Moscow.[24]

Moreover, despite the ongoing war in Ukraine, some EU officials are debating whether to restart Russian pipeline gas imports as a potential incentive for Moscow to negotiate peace. If, after the war, the EU resumes importing cheap Russian gas, it could impact China’s geopolitical strategy.[25] A functioning PoS-2 pipeline would strengthen Russia’s energy position, potentially giving Moscow leverage over both China and the EU. In the short term, PoS-2 might improve China’s energy security, but in the long term, it could merely replace dependence on global gas imports with reliance on Russia.

Additionally, China has viable alternatives to PoS-2 that offer strategic advantages. One option is the completion of Line D of the China-Central Asia gas pipeline, which would increase imports from Turkmenistan. This alternative is particularly appealing because the pipeline would be significantly shorter than PoS-2 and would be entirely controlled by China, including its investment and construction. Negotiating with Turkmenistan is also easier than with Russia, as Ashgabat is eager to expand its exports to China and holds a weaker bargaining position than Moscow.[26]

Another alternative is importing Russian gas via Kazakhstan rather than through PoS-2. Estimates suggest that a Kazakhstan route could transport 40 bcm/year of gas at a cost of US$4.2–$4.4 billion—far cheaper than PoS-2, which is estimated to cost between US$8 billion and US$15 billion. Moreover, this option would increase interdependence between Russia, Kazakhstan, and China. This is particularly significant given recent concerns over Russian politicians and media figures making provocative statements about Kazakhstan’s sovereignty since the Ukraine war began. Strengthening Kazakhstan’s strategic value for both Moscow and Beijing could serve as a deterrent against potential Russian territorial ambitions.[27]

Finally, China’s broader geopolitical strategy is influenced by the potential return of Donald Trump to the U.S. White House. Since Trump has won the presidency, Beijing anticipates increased friction between the U.S. and the EU, particularly due to Trump’s decision to impose tariffs on European imports.[28] In this scenario, China may seek to strengthen ties with the EU by exploiting tensions between Brussels and Washington. Signing a major new pipeline agreement with Russia could antagonize European countries and result in lost diplomatic and economic opportunities for Beijing. Given these geopolitical considerations and the presence of alternative options, China is likely to carefully weigh its decisions, adding further uncertainty to the future of PoS-2.

Conclusion

The PoS-2 pipeline offers advantages for both China and Russia, potentially strengthening their long-term relationship. However, economic-financial challenges and geopolitical risks for China present barriers to the project’s realization. China’s growing leverage in its bilateral relations with Russia provides Beijing with a strategic opportunity to prolong discussions and negotiate the most favorable terms for its national interests. Additionally, the availability of alternative energy sources and China’s increasing influence in the global LNG market give Beijing multiple options to enhance its energy security. These factors contribute to the ongoing uncertainty surrounding the PoS-2 pipeline’s future.

[1] “The Power of the Siberia 2 pipeline: China, Russia, and Mongolia at the nexus of energy geopolitics,” European Institute for Asian Studies (EIAS), April 30, 2024, https://eias.org/publications/op-ed/the-power-of-the-siberia-2-pipeline-china-russia-and-mongolia-at-the-nexus-of-energy-geopolitics/.

[2] Erica Downs, Akos Losz and Tatiana Mitrova, “The Future of the Power of Siberia 2 Pipeline,” Center on Global Energy Policy at Columbia, May 15, 2024, https://www.energypolicy.columbia.edu/publications/the-future-of-the-power-of-siberia-2-pipeline/.

[3] Carole Nakhle, “Dethroning Russia’s gas hegemony,” Geopolitical Intelligence Service, February 5, 2025, https://www.gisreportsonline.com/r/russian-gas/.

[4] Rajoli Siddharth Jayaprakash, “The Power of Siberia-2 saga: Russia’s energy pivot to China faces roadblocks,” Observer Research Foundation, September 16, 2024, https://www.orfonline.org/expert-speak/the-power-of-siberia-2-saga-russia-s-energy-pivot-to-china-faces-roadblocks.

[5] Ibid.

[6] “Has the Power of Siberia-2 pipeline project between Russia and China been shelved?,” Harici, August 28, 2024, https://harici.com.tr/en/has-the-power-of-siberia-2-pipeline-project-between-russia-and-china-been-shelved/.

[7] Erica Downs, Akos Losz and Tatiana Mitrova, “The Future of the Power of Siberia 2 Pipeline,” Center on Global Energy Policy at Columbia, May 15, 2024, https://www.energypolicy.columbia.edu/publications/the-future-of-the-power-of-siberia-2-pipeline/.

[8] Genevieve Donnellon, “Power of Siberia 2: Moving beyond a pipe dream?,” Asia Society, October 5, 2023, https://asiasociety.org/australia/power-siberia-2-moving-beyond-pipe-dream.

[9] “China’s CNPC drives hard bargain for impending Power of Siberia 2 gas deal with Russia,” S&P Global, September 13, https://www.spglobal.com/commodity-insights/en/news-research/latest-news/lng/091323-chinas-cnpc-drives-hard-bargain-for-impending-power-of-siberia-2-gas-deal-with-russia.

[10] Ibid.

[11] Lucas Myers, “China’s Economic Security Challenge: Difficulties Overcoming the Malacca Dilemma,” Georgetown Journal of International Affairs, March 22, 2023, https://gjia.georgetown.edu/2023/03/22/chinas-economic-security-challenge-difficulties-overcoming-the-malacca-dilemma/.

[12] “Chinese Tanker Hit with Houthi Missile in the Red Sea,” USNI News, March 24, 2024, https://news.usni.org/2024/03/24/chinese-tanker-hit-with-houthi-missile-in-the-red-sea.

[13] Erica Downs, Akos Losz and Tatiana Mitrova, “The Future of the Power of Siberia 2 Pipeline,” Center on Global Energy Policy at Columbia, May 15, 2024, https://www.energypolicy.columbia.edu/publications/the-future-of-the-power-of-siberia-2-pipeline/.

[14] “Mongolia omits Russia-to-China Power of Siberia 2 pipeline project from action plan for years ahead,” Bne IntelliNews, August 19, 2024, https://www.intellinews.com/mongolia-omits-russia-to-china-power-of-siberia-2-pipeline-project-from-action-plan-for-years-ahead-339259/.

[15] “A two pipe problem,” Novaya Gazeta Europe, July 1, 2024, https://novayagazeta.eu/articles/2024/07/01/a-two-pipe-problem-en.

[16] Ibid.

[17] Aiqun Yu, “China is rightly dragging its feet on Russia’s Power of Siberia 2 pipeline,” Global Energy Monitor, May 2024, https://globalenergymonitor.org/report/china-is-rightly-dragging-its-feet-on-russias-power-of-siberia-2-pipeline/.

[18] “Russia and China Expand Their Gas Deal: Key Implications,” The Oxford Institute for Energy Studies, March 2022, https://www.oxfordenergy.org/publications/russia-and-china-expand-their-gas-deal-key-implications/.

[19] Shangyou Nie and Erica Downs, “Rising Production, Consumption Show China is Gaining Ground in Its Natural Gas Goals,” Center on Global Energy Policy, October 2, 2024, https://www.energypolicy.columbia.edu/rising-production-consumption-show-china-is-gaining-ground-in-its-natural-gas-goals/.

[20] Ibid.

[21] U.S. Energy Information Administration, “China’s natural gas consumption, production, and imports all increased in 2023,” August 14, 2024, https://www.eia.gov/todayinenergy/detail.php?id=62804#.

[22] Aiqun Yu, “China is rightly dragging its feet on Russia’s Power of Siberia 2 pipeline.”

[23] “Wind and solar to surpass 40% of China’s power capacity by year-end,” South China Morning Post, July 28, 2024, https://www.scmp.com/business/commodities/article/3272181/wind-and-solar-surpass-40-chinas-power-capacity-year-end.

[24] Erica Downs, Akos Losz and Tatiana Mitrova, “The Future of the Power of Siberia 2 Pipeline.”

[25] “EU debates return to Russian gas as part of Ukraine peace deal,” Financial Times, January 29, 2025, https://www.ft.com/content/a19aa690-fb54-41ea-9885-10972b11ab24.

[26] Reid Standish, “China In Eurasia Briefing: The Power of Siberia-2 Pipeline Hits A Snag In Mongolia,” Radio Free Europe, August 21, 2024, https://www.rferl.org/a/china-eurasia-power-of-siberia-mongolia-putin/33086686.html.

[27] “Will China still have enough for gas pipelines from Russia: The “Power of Siberia-2” has a competitor,” EADaily, August 26, 2024, https://eadaily.com/en/news/2024/12/26/will-china-still-have-enough-for-gas-pipelines-from-russia-the-power-of-siberia-2-has-a-competitor.

[28] “EU tariffs ‘pretty soon’ but UK can be worked out – Trump,” BBC, February 3, 2025, https://www.bbc.com/news/articles/cn4zgx808g7o.