• Russian President Vladimir Putin confirms a legally binding agreement has been signed to advance the Power of Siberia 2 gas pipeline to China.
  • Critical commercial terms, including final pricing and capacity commitments, remain unresolved, casting doubt on the project's immediate economic viability.
  • The deal underscores Russia's strategic pivot to Asian energy markets but faces skepticism from analysts over its potential profitability for Gazprom.

Russian President Vladimir Putin announced that significant progress has been made on agreements for the massive Power of Siberia 2 natural gas pipeline, a project central to Moscow’s efforts to redirect its energy exports from Europe to Asia. The announcement confirms that a legally binding intergovernmental agreement has been signed between Russia, China, and Mongolia to advance the project, which aims to transport up to 50 billion cubic meters of gas annually from the Yamal Peninsula.

Despite the high-level political commitment, people familiar with the matter indicate that the most difficult commercial negotiations are still ongoing. The core issues of final pricing, specific capacity commitments, and project financing have yet to be finalized, leaving a significant gap between a political accord and a bankable commercial deal. This echoes the lengthy and difficult negotiations that characterized the first Power of Siberia pipeline, which took years to settle on price terms.

The announcement is a strategic win for the Kremlin as it seeks to secure alternative markets for its gas following the sharp reduction in sales to Europe. For China, the pipeline represents a potential source of affordable and stable energy imports to support its long-term industrial growth. However, a substantial pricing gap persists. According to analysts, China is pushing for domestic-rate prices of around $120–130 per 1,000 cubic meters, while Russia is seeking a price closer to $265–285, which is still a discount to European rates.

This discrepancy is raising concerns among investors and Russian analysts about the deal’s economics for Gazprom. The state-controlled energy giant’s core gas business was already loss-making last year, reporting a deficit of 1.1 trillion rubles ($13.6 billion). A deal at prices favorable to China could effectively mean Russia subsidizing Chinese consumers, a prospect that caused Gazprom’s shares to fall following the announcement. Efforts to reach Gazprom for additional comment on the commercial terms were not immediately successful.

The project also carries inherent geopolitical risks. Western officials have previously warned of potential sanctions risks for large-scale energy projects that deepen ties between Moscow and Beijing. While construction is not expected to be completed until the late 2020s, the agreement signals a further entrenchment of the strategic partnership between the two nations, even as China faces increased Western scrutiny for its support of Russia.

For now, the market is treating the news with caution. Many experts suggest that while the political will is clear, the history of Russia-China energy megaprojects is filled with delays and complex negotiations. The true test will be whether the two sides can bridge their commercial differences and transform this high-level agreement into a concrete and profitable investment.