Russia has begun gas supplies to China via the Power of Siberia pipeline, the largest gas project in its history and a symbol of Moscow’s diplomatic pivot towards Beijing at a time of worsening relations with the west.
Dubbed “the contract of the century” by Russian gas group Gazprom, the $55bn deal with China’s oil and gas major CNPC will eventually allow for 38bn cubic metres in annual gas supplies to China via the 3,000km pipeline that crosses Siberia to the Chinese border in the south-east.
The pipeline will allow Gazprom to significantly increase gas exports amid declining demand and gas prices in its traditional export markets of Europe and Turkey, which buy on average about 200bn cubic metres of gas a year. Work on the pipeline began shortly after the US and the EU introduced the first Crimea-linked sanctions against Russia.
For China, Asia’s largest economy, the project will help to ensure its energy security amid declining domestic gas production and rising demand. It should also help combat air pollution in the coal-dependent north-eastern regions.
The two leaders launched the project via video, Russian president Vladimir Putin from Sochi and China’s president Xi Jinping from Beijing. “This is truly a historic event, not only for the global energy market, but first of all for us, for Russia and China,” Mr Putin said from Sochi. “This step takes Russia-China strategic energy relations to a new quality level and brings us closer to reaching the goal set together with Xi Jinping to raise mutual trade turnover to $200bn by 2024.”
“The gas pipeline launch is an important transitional result and the start of a new stage of our co-operation,” Mr Xi said. “Together with Mr Putin we have announced our relations’ development, all-encompassing partnership and strategic co-operation entering a new epoch, and agreed that developing Russia-China relations is and will be a priority in our countries’ foreign policy. We will strengthen co-operation in various areas between our countries,” Mr Xi said.
China has become heavily involved in Russia’s gas projects in the past years, becoming the largest foreign shareholder in Russia’s Arctic gas liquefaction projects, Yamal LNG and planned Arctic LNG 2.
China is also still in talks with Gazprom on two additional gas pipelines: Power of Siberia 2, that will deliver 30bn cubic metres a year to China’s western border with Russia; and another smaller pipeline from Sakhalin Island.