Russia’s efforts to reach a major gas pipeline deal with China have hit a roadblock due to disagreements over price and supply, the US State Department reported. Financial timesciting sources.
The agreement concerns the 2,600 km Power of Siberia 2 pipeline, which starts in Yamalo-Nenets Autonomous Okrug (Russia) and ends in Inner Mongolia (China).
China’s approach to the pipeline underlines the extent to which President Vladimir Putin’s dependence on Chinese leader Xi Jinping for financial support has increased since Russia’s invasion of Ukraine.
People familiar with the development told the publication that China had demanded prices almost identical to Russia’s heavily subsidized domestic marks.
In addition, it had agreed to buy a small portion of the pipeline’s expected annual capacity of 50 billion cubic meters of gas, she added.
If approved, the pipeline will connect the Chinese market to gas fields in western Russia that previously supplied Europe, supporting state-backed gas company Gazprom, which is struggling with losses.
Amid declining gas sales to Europe, which has been more successful than expected in diversifying Russian energy, Gazprom has experience a loss from Rbs629 billion ($6.9 billion) last year, the largest in at least a quarter of a century.
Despite Russia’s insistence that an agreement on the Power of Siberia 2 is certain “soon”, sources said the standstill was the reason Gazprom CEO Alexei Miller did not accompany Putin on the Russian leader’s state visit to Beijing last month .
According to sources, President Putin presented President Xi Jinping with three primary demands during their meeting: further involvement of Chinese banks in Russia; a pipeline deal; and China’s rejection of a peace summit planned by Ukraine this month.
Last week, China said it would not attend the summit with Ukraine in Switzerland.
Sources said Beijing and Moscow were in talks to ring-fence one or more banks to finance the latter’s trade in components for the latter’s defense sector.
They added that an agreement on the pipeline is still far away, and that the proposed cooperation with Chinese banks is still significantly smaller than what Russia had asked for.
A request for comment was not immediately answered by the Kremlin, and Gazprom declined to comment FT said, adding that China did not respond to a request for comment.
“Russia-China Gas Pipeline Talks Hit Roadblock on Price and Supply” was originally created and published by Offshore technologya brand owned by GlobalData.
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