Is China Reexporting Russian Gas to Europe?

Russia’s Gazprom and the China National Petroleum Corporation (CNPC) signed a $400 billion 30-year agreement in 2014 to build the Power of Siberia, a pipeline with a 3,000-kilometer (1,865-mile) section in Russia and 5,000 kilometers in China. The pipeline was launched in late 2019 and is expected to supply China with up to 38 billion cubic meters of gas a year once it reaches full capacity in 2025.

Moscow’s energy plans call for an increase in exports to China. Russia knows that it needs to diversify into new markets as the EU lowers dependence on its supplies.

“What Russia sells to China is also on a contracted price basis and, from my understanding, the deal that China and Russia made for Power of Siberia 1 was rather more advantageous toward China, also in terms of price,” Mikulska reasoned.

“The Chinese would break Gazprom’s export monopoly when reselling Russian LNG gas,” Albrecht Rothacher, an EU diplomat and East Asia specialist, said. “The Kremlin would have to be really desperate — or politically very weakened — to permit this,” he told DW.

Not Enough – and Too Much
Experts warn that Europe cannot expect Chinese suppliers to cover its energy shortages, given that the total amount of gas that China can export to Europe is limited, compared with other sources like Russia.

Also, as economic activity revives in China, the situation will reverse, leaving Europe dependent on Beijing for its gas at higher prices.

“I am afraid that China is not really on the EU’s radar yet for potential LNG deliveries,” Rothacher said.

 “There could be some surplus shipments from Yamal heading west to Europe, but they would be minor compared with what the EU needs to import from Norway, Algeria, Qatar, UAR, Turkmenistan, Azerbaijan, Oman, Israel, maybe Iran and last but not least the US to make up for Russian shortfalls, which remain unpredictable at the moment.”

Chinese-Russian Cooperation
Mikulsksa for her part believes the situation exposes the issue the EU as well as the US and NATO will need to really be thinking about, namely, “that as they gravitate towards cooperation, Russia and China can work together to manipulate/influence global energy markets to a level that’s much greater than if they acted independently of each other,” Mikulska warned.

“This won’t be resolved until Europe figures out the issues of alternative supply. It won’t be easy, and it won’t happen this winter,” she said.

Mikulska adds it also will not be as easy for Russia to repeat year after year its high profits from rather low gas sales as European countries move away from Russian gas and as prices hopefully moderate.

“In addition, there is the possibility that Russia makes itself increasingly dependent on China for demand of energy. And while these countries cooperate now, it’s a complicated relationship to say the least.”

Jo Harper is freelance journalist based in Warsaw. This article was edited by Hardy Graupner. It is published courtesy of Deutsche Welle (DW).