"The Power of Siberia" and the Mind of China

Of the news headlines of the past two weeks, at least one claimed to be sensational: “The Chinese have refused new gas contracts with Russia,” they say, there will be no construction of the second branch of the Power of Siberia (Power of Siberia-2) gas pipeline.

In fact, Gazprom has been trying for more than a decade to negotiate with China on gas supplies via the so-called western route, and for about the same amount of time, Beijing has consistently rejected Moscow's proposals. Why? The whole question is in the initial motivation. For the Chinese, it is purely economic, the result of pragmatic approaches and calculations. With Russia, it's a slightly different story.

The Russian gas pipeline project "Altai", which later began to disguise itself under the name "Power of Siberia-2", has deposits in the north of Western Siberia as a resource base. It is here that the main gas transportation systems leading from Russia to Europe originate. In September 2014, President Putin explained the essence of the project: by implementing it, in the future the country will be able to switch gas export flows from Europe to Asia and vice versa, depending on the price situation. Observers, however, cynically suggested that the real purpose of such a scheme was to politically blackmail the Europeans: if you start showing disagreement with the Kremlin's course, we will send the gas due to you to China.

By the way, Putin several times mentioned the amount of gas that Russia expects to offer China - 68 billion cubic meters per year. (Gazprom even built the Sakhalin-Vladivostok pipeline for hypothetical gas supplies to China from Sakhalin - it was built without sufficient gas resources on Sakhalin or agreements with the Chinese). Annual deliveries to Europe now exceed 170 bcm ³ . True, Putin mentioned that Gazprom would deliver more to Asia than to the West, but this intriguing forecast remained unrealistic. Because the Chinese, since 2006, have reduced all negotiations to empty memorandums of understanding, intentions, and so on. Their stubbornness was not even mitigated by the consideration that, as the sole buyer of gas at the far end of exorbitantly expensive pipelines, they could dictate any terms to a pushy seller.

Observers cynically suggested that the real goal of Power of Siberia-2 is political blackmail of the Europeans: if you start showing disagreement with the Kremlin’s course, we will send the gas due to you to China

In the end, they agreed only to the "Power of Siberia", and even then they are in no hurry to start laying this route on their territory. The fact is that China can more than satisfy its gas needs with its own production, purchases in Central Asia (from where the Chinese are building the fourth branch of the main pipeline), supplies from Myanmar and imported liquefied gas. According to sources in Beijing, supplies from Russia are considered there only as an "emergency exit" - in case military operations at sea interfere with the receipt of gas by tankers.

As a result, Gazprom, which optimistically estimated the Power of Siberia at $40 billion, will have to rely on the Chinese price, which will not cover either the capital or operating costs of the project: by 2048 (this is the date Gazprom is guided by in calculating the profitability of the gas pipeline) the cost of the "Power of Siberia" at the current price of a barrel of oil will definitely not be repaid. There can be no talk of any advertised profits of $400 billion. In fact, the “national treasure” is going to subsidize Chinese gas consumers…

As for the Power of Siberia-2, the Chinese announced last year that they would agree to the project only if they were allowed to produce gas in Russia themselves, build their own route and export their own gas. On that, the negotiations were prudently curtailed. For the Chinese encroached, one might say, on the sacred. Today let them engage in gas production in Russia, and tomorrow, you see, someone will start comparing Chinese costs for contractors with Gazprom's. Gazprom ones - they are generally incomparable with anything ...