Russia’s Energy Pivot to the East: The Siberia 2 Pipeline

President Putin signed over 20 bilateral agreements with President Xi covering energy, aerospace, agriculture, and more during his recent visit to China (Zhang, 2025). Notably, they agreed to complete the long-delayed Power of Siberia 2 pipeline (Bloomberg News, 2025).

The pipeline aims to deliver 50 billion cubic meters (bcm) of natural gas annually to the industrial hub in northern China. Most importantly, the new pipeline will carry gas from the Yamal fields, previously a key supply region for Europe, especially Germany. Hence, this strategic shift will have repercussions not only for China and Russia but also for Europe and the U.S., as well as global markets (Zadeh, 2025).

Strategic Risks in Sino-Russian Energy Ties

For Beijing, this pipeline allows it to further diversify away from Middle Eastern and the U.S. suppliers. In addition, the Malacca Dilemma has long confounded Beijing. With a combination of new coal-fired power stations (Reuters, 2025), greater investments in renewable energy, and deepening ties with Moscow, Beijing is attempting to solve this dilemma. Moreover, diversifying towards Russia will also reduce the risks associated with future instability in the Middle East.

However, there are risks for Beijing. If Russia became their sole supplier, then Beijing would be comparatively exposed and vulnerable to Moscow’s demands should relations deteriorate over a dispute.

One such dispute currently is the pricing; Beijing will attempt to offer a price as close to its low domestic rate as possible, meanwhile Moscow will attempt to maintain the premium which Europe has traditionally paid (Al Jazeera, 2025). President Putin himself said that the gas would be sold at market rates (Reuters, 2025). Disagreeing on an acceptable rate could potentially delay the pipeline. 

Yet, other disputes may also arise, such as the Chinese economic expansion in Central Asia, which may eventually come into conflict with Russian security concerns. Maintaining good relations is crucial for Beijing to benefit from this strategic opportunity.

In addition, for Moscow, this new pipeline is a sign that U.S. attempts to isolate it have failed and that its loss of European market share could be offset with access to a new Asian market. With Gazprom recently reporting an annual loss (Reuters, 2025), this pipeline will also help maintain revenue streams.

Despite the additional 50 bcm, which will only increase Russia’s overall export to China to about 90 bcm, a figure still significantly less than the estimated 177 bcm that Russia supplied to Europe in 2018-19 (Asharq Al Aswat, 2025; Energynews, 2024). Therefore, this pipeline will not fully compensate for the loss of the European market. 

However, the pipeline for Moscow offers something more than money; it offers stability. Ostensibly, the pipeline ensures a reliable export market, and that may be worth the loss in revenue. 

Implications on Energy Dependence

Russian gas has been the bedrock of the German economy, and the German economy in turn has been the bedrock of the European economy. The loss of Russian gas has left both Germany and Europe dangerously exposed and weakened. As a result,  Europe has also lost its leverage over Moscow.

Europe

Although Europe and Russia were historically interdependent—Europe relying on Russia as a primary and reliable supplier, and Russia depending on Europe as its main market—Europe’s ability to seek alternative sources previously gave it leverage. In fact, with Russia now shifting its energy exports toward China, that leverage has been largely eliminated, leaving Europe increasingly dependent on costly U.S. liquefied natural gas (LNG).

With supply from the Gulf facing persistent difficulties (Martin, 2025), Russia redirecting exports toward China, and the United States prioritizing Europe as its LNG market (Reuters, 2025), Europe has little choice but to rely on costly U.S. liquefied natural gas (LNG). This dependence is likely to further strain European economies and erode industrial competitiveness (European Commission, 2024).

US

The Power of Siberia 2 pipeline undermines the effectiveness of U.S. sanctions as a foreign policy instrument. Due to the threat of sanctions or their actual imposition, it no longer provides a sufficient deterrent for states that perceive tangible advantages in continuing economic engagement with Russia (Zadeh, 2025). Moreover, attempts to leverage sanctions to extract concessions from Moscow in the context of the Ukraine conflict have largely failed, as Russia has proven far less isolated than Washington initially anticipated.

Furthermore, U.S. energy exporters had also hoped to access China’s market, but since this new Russian pipeline may supply up to half of China’s natural gas demand (Bloomberg News, 2025b), they appear to have lost that opportunity.

Nevertheless, the Trump Administration appears unshaken as it remains focused on replacing Russia in Europe. With regard to Chinese interest in Russian energy, U.S. Energy Secretary Chris Wright said, “I don’t worry about that for U.S. energy exports”(Reuters, 2025d).

Conclusions

China: The Power of Siberia 2 pipeline strengthens China’s energy security by diversifying its sources away from the U.S. and the Gulf, reducing the vulnerability of traditional maritime supply routes. Long-term benefits, however, will depend on maintaining stable and cooperative relations with Moscow, as overreliance on a single supplier could create new strategic risks.

Russia: The Siberia 2 pipeline demonstrates that Moscow is not as isolated as Western policymakers may have assumed, and that sanctions can be circumvented or mitigated through strategic partnerships. Beyond revenue, the deal provides Russia with stability and a reliable market, even if negotiated gas prices ultimately favor Beijing.

Europe: Europe is now heavily exposed, reliant on expensive U.S. liquefied natural gas (LNG), and vulnerable to supply disruptions from Texas or the Gulf (Jaller-Makarewicz, 2025). If Russia’s pivot to China is permanent, European energy costs are likely to rise, further eroding industrial competitiveness and highlighting the continent’s diminished leverage over Moscow.

United States: Imposing or threatening to impose sanctions as a foreign policy tool now appears ineffective. While U.S. exporters appear to have lost out to the Russians for access to the Chinese market, the Trump administration’s focus on finalising its capture of the European market may compensate.

Bibliography

1. Al Jazeera. “Russia, China ink deal to build new gas pipeline as they deepen energy ties.” Al Jazeera. September 2, 2025. Available at: https://www.aljazeera.com/news/2025/9/2/russia-china-ink-deal-to-build-new-gas-pipeline-as-they-deepen-energy-ties 
2. Asharq Al Aswat. “Russia to Boost Gas Supplies to China, Signs Deal for New Pipeline.” Asharq Al Aswat. September 2, 2025. Available at: https://english.aawsat.com/business/5181791-russia-boost-gas-supplies-china-signs-deal-new-pipeline 
3. Bloomberg News. “Russia and China Sign Major Deal for New Gas Pipeline.” Bloomberg UK. September 2, 2025. Available at: https://www.bloomberg.com/news/articles/2025-09-02/russia-china-sign-deal-for-power-of-siberia-2-gas-pipeline-ifx 
4. Bloomberg News.“Putin’s Energy Wins in China Deal a Blow to Trump’s Export Push.” Bloomberg UK. September 3, 2025. Available at: https://www.bloomberg.com/news/articles/2025-09-03/putin-s-energy-wins-in-china-deal-a-blow-to-trump-s-export-push 
5. Energynews.“Gazprom to export a record 40 billion m³ of gas to China in 2024.” Energynews. July 25, 2025. Available at: https://energynews.pro/en/gazprom-to-export-a-record-40-billion-m%C2%B3-of-gas-to-china-in-2024/
6. European Commission. “The Draghi Report on EU Competitiveness.” European Commission. September 9, 2024. Available at: https://commission.europa.eu/topics/eu-competitiveness/draghi-report_en 
7. Jaller-Makarewicz, A. M. “Strait of Hormuz disruption would jeopardise 10% of Europe’s LNG imports.” Institute for Energy Economics and Financial Analysis. June 27, 2025. Available at: https://ieefa.org/resources/strait-hormuz-disruption-would-jeopardise-10-europes-lng-imports 
8. Martin, N. “Why Qatar’s gas lifeline to Germany is at risk.” DW.  August 1st, 2025. Available at: https://www.dw.com/en/why-qatars-gas-lifeline-to-germany-is-at-risk/a-73460153 
9. Reuters. “Russia’s Gazprom posts first annual loss in 20 years as sales to Europe collapse.” CNN Business. May 3, 2024. Available at: https://edition.cnn.com/2024/05/03/business/gazprom-posts-first-loss/index.html 
10. Reuters. “China’s 2024 coal power construction hits 10-year high, researchers say.” Reuters. February 13, 2025. Available at: https://www.reuters.com/business/energy/chinas-2024-coal-power-construction-hits-10-year-high-researchers-say-2025-02-13/ 
11. Reuters.  “Putin says planned gas pipeline to China will be mutually beneficial, use market price formula.” Reuters. September 5, 2025. Available at: https://www.reuters.com/sustainability/boards-policy-regulation/putin-says-planned-gas-pipeline-china-will-be-mutually-beneficial-use-market-2025-09-05/ 
12. Reuters. “Russian gas sales to China would not harm US, energy secretary says.” Reuters. September 5, 2025. Available at: https://www.reuters.com/business/energy/russian-gas-sales-china-would-not-harm-us-energy-secretary-says-2025-09-05/ 
13. Zadeh, J. “Power of Siberia 2: Russia’s Strategic Pipeline to China.” Discovery Alert. September 4, 2025. Available at: https://discoveryalert.com.au/news/power-of-siberia-2-pipeline-2025-russia-china-energy/ 
14. Zadeh, J. “India Vows to Continue Purchasing Russian Crude Oil.” Discovery Alert. September 6, 2025. Available at: https://discoveryalert.com.au/news/indias-russian-oil-strategy-2025-energy-economy/ 
15. Zhang, Y. “Xi, Putin eye stronger partnership.” China Daily. September 3, 2025. Available at: https://www.chinadaily.com.cn/a/202509/03/WS68b77e78a3108622abc9e866.html?utm_source=chatgpt.com