Power of Siberia 2: A litmus test of Sino-Russian relations

If the Power of Siberia 2 (PoS2) pipeline proceeds, it will further cement the asymmetrical Sino-Russian relationship, with Russia becoming even more dependent on China for its energy exports, says Henrik Wachtmeister in his analysis for the China-Russia Dashboard.

According to Russian sources, the massive Power of Siberia 2 (PoS2) pipeline is finally set to be built. Gazprom CEO Alexei Miller announced on September 2 that a binding memorandum for its construction had been signed in Beijing. The planned pipeline could transport up to 50 billion cubic meters (bcm) of natural gas from Russia’s giant northern Yamal fields to China, supplies once bound for Europe but partly stranded since the invasion of Ukraine.

The Chinese side has yet to explicitly confirm the project, and many key terms likely remain to be negotiated. Still, if the pipeline proceeds, it will come with significant implications for global energy markets and great-power relations. And while the announcement may have been weak in substance and concrete details, it still carried considerable symbolic weight. This commentary revisits Russia-China energy relations in light of recent developments and discusses some forward-looking scenarios and their implications.  

China’s balancing act

In a 2023 report by the Swedish National China Centre, we analyzed Russia–China energy ties since the 2022 full-scale invasion of Ukraine, including several forward-looking scenarios for how the relationship might evolve. A major theme of the report was that the energy relationship between Beijing and Moscow depends to a large degree on China’s relations with the United States and the broader West.

China’s initial stance following the invasion was cautious. While some energy trade with Russia increased, there was still signs of limits. Notably, the PoS2 plans remained stalled despite strong promotion from the Russian side, as its gas exports to Europe dwindled. In 2024, they stood at only around 30 bcm, a sharp decline from the 2019 peak of 180 bcm. Several factors likely lay behind China’s cautious approach: its relations with the West and the threat of sanctions, its risk-diversification strategy, and its relatively well-supplied energy market which allowed Beijing to adopt a wait-and-see approach.  

We argued that the most important factor shaping the future of the energy relationship was China’s broader ties with the West, particularly the US. If those ties deteriorated, China would have less to lose by deepening cooperation with Russia and more to gain. From this, we outlined two scenarios for this factor. In the first, we assumed a continuation of the then-current state of China’s relations with the West, with Beijing maintaining its balancing act—sustaining its economic and diplomatic relations with the West while still supporting its strategic partner Russia. The second scenario assumed deteriorating relations with the West, resulting in deeper energy collaboration and a stronger even more asymmetrical Sino-Russian relationship.  

Even under the first scenario, we estimated that PoS2 would likely move forward eventually, though without additional major pipeline projects. Under the second scenario, we speculated about deeper collaboration across multiple dimensions, including sanctions evasion and further pipeline projects. We estimated that the first scenario was China’s preferred outcome, even if it would be difficult to uphold as long as Russia continues the war in Ukraine.

The PoS2 announcement, along with other recent developments, suggest the trajectory is shifting away from the first scenario and toward the second, with China beginning to abandon its balancing act and instead strengthen its ties with Moscow.  

Deteriorating relations with the United States

Our analysis predated the “Trump II” era, during which China–US relations have deteriorated further through tariff wars, export controls, and other measures. Even if any actual market impact remains a long way off, the announcement of PoS2 carries significant immediate signalling value.

The memorandum can be seen as a "trial balloon" with China "crossing the river by touching the stones" as it gauges Western reactions to its deepening alignment with Russia. Similarly, a Liquefied Natural Gas (LNG) cargo from Russia’s sanctioned Arctic LNG 2 project was recently delivered to China, directly challenging Washington’s sanctions enforcement resolve.

The announcement also targets US trade policy more broadly, and its oil and gas sector and "energy dominance" strategy in particular, Donald Trump’s agenda to maximise US energy production and wield it to reward allies and punish adversaries. PoS2 would add around 50 bcm to global gas supply in the 2030s, reducing demand and prices for US LNG exporters. This market uncertainty might already at this stage be forcing LNG investors to reconsider plans for new capacity additions. Moving ahead with the pipeline signals that Beijing will not be coerced by Washington’s energy dominance. In the same vein, China has reduced US LNG imports to nearly zero since this year’s tariff escalation and has publicly pushed back against US demands to stop buying Russian oil.  

China has two powerful counters to US energy dominance: deploying and dominating green technology and doubling down on fossil fuel imports from friendly suppliers such as Russia and Iran, conveniently at discounted prices due to Western sanctions. Whatever happens with the actual PoS2 pipeline, the announcement, together with the broader geopolitical signals from the Tianjin summit and the Beijing military parade this week, sends a strong message: the US-led order can be challenged.

Outlook and implications

Looking ahead, it will be important to follow how Washington responds, not only to the PoS2 announcement itself but also to concrete follow-on steps, developments around the Arctic LNG 2 project, or potential secondary sanctions on buyers of Russian oil.

China’s mineral export controls and hardball tactics in the trade war have seemingly weakened US resolve. This latest step could either push Washington further down that path of accommodation, or provoke a strong counterreaction. With Donald Trump at the helm, the outcome is difficult to predict.

If PoS2 proceeds, it will further cement the asymmetrical Sino-Russian relationship, with Russia becoming even more dependent on China for its energy exports. China, in turn, secures another cheap source of energy, insulated from western interference and Middle Eastern volatility, while simultaneously providing a channel for much-needed hard currency to its most important strategic partner in its quest to reshape the world order.  

Still, China continues to hedge its Russian bet, for example with parallel declarations of continued gas cooperation with Turkmenistan. Moreover, Yamal gas exports to China will be far less profitable for Russia than sales to its former European customers. Construction costs are expected to run into the tens of billions of dollars, and Beijing is driving a hard bargain on price. Power of Siberia 1 is already the cheapest source of China’s pipeline gas imports, and PoS2 could be even cheaper given Russia’s weak bargaining position. As a sign of the announcement’s limited substance, and the uncertainty surrounding the project’s costs and profitability, Gazprom’s stock price actually fell by a few percent on the news. 

This analysis is part of the China-Russia Dashboard, a collaborative research effort of the Centre for Eastern Studies (OSW), MERICS, and the Swedish National China Centre (NKK) and Stockholm Centre for Eastern European Studies (SCEEUS) at the Swedish Institute of International Affairs (UI). Explore the project here.