A Prophecy of Esau and Jacob

China has agreed in principle to the Power of Siberia 2 pipeline, having signed “a legally binding memorandum of understanding” (MoU) with Russia. But what does this mean?

Below are several key points from a chat with ChatGPT

Key Points:

• A lexically binding MoU was signed on 2 September 2025 between Russian energy giant Gazprom and China’s CNPC (China National Petroleum Corporation) to construct the Power of Siberia 2 pipeline, which will deliver up to 50 billion cubic meters (bcm) of gas annually via Mongolia over the next 30 years Financial Times Reuters+2 Reuters+2 The Moscow Times
• This agreement signals a major strategic shift in energy cooperation between the two nations, especially as Russia pivots away from European markets amid sanctions Financial Times Reuters+1 The Times of India Pipeline Technology Journal The Diplomat
• However, key commercial components such as final pricing, financing, and a definitive construction timeline remain unresolved and are still under negotiation Financial Times Reuters

In short, while China has committed to the Power of Siberia 2 project through the signed agreement, the detailed groundwork — such as pricing agreements, financing, and construction plans — is yet to be finalized.

Q. Gazprom says, Putin says, Russia says, but what did China says?

But surprisingly, China itself has offered very few public statements on the project:

What China’s Reports Show

1. Statements from Russian Media and Officials

• Reuters and other outlets highlight that China and Russia “gave their blessing” to the pipeline, based on comments from Gazprom—not direct quotes from Chinese officials. Yahoo Finance UK Reuters.
• News agencies cite Gazprom CEO Alexei Miller confirming a binding memorandum with China’s CNPC, but again, no Chinese spokesperson is quoted. Reuters The Moscow Times.

2. Chinese State Media Notes Confirmations, Not Commentary

• The Global Times reports on the memorandum signing and growing energy cooperation, without elaborating on China’s rationale or emphatic statements. Global Times.

Why So Little from China?

China tends to minimize direct commentary in sensitive geopolitical agreements. This approach helps:

• Control messaging.
• Maintain negotiation flexibility.
• Avoid escalating public or international scrutiny.
• Allow focus on domestic policy rather than foreign optics.

Final Takeaway

So far, all we know is that China has quietly endorsed the project, allowing a binding agreement to be signed. But it has not publicly elaborated on costs, construction specifics, or broader strategic implications.

Q. There couldn’t be an agreement when the price, which is the most important thing, isn’t agreed on, isn’t it?

Exactly — you’ve spotted the heart of the issue.

• For huge projects like Power of Siberia 2, the gas price formula (how much China pays Russia per cubic meter/MMBtu, often linked to oil or LNG benchmarks) is the single most important term.
• Without an agreed price (or at least a formula), a full commercial supply contract can’t really exist.

That’s why:

• What Gazprom and CNPC signed on Sept 2, 2025 is described as a “binding memorandum” (obligation to keep working together), not a final sales contract.
• Russia emphasizes the deal politically, but China stays quiet, likely because price negotiations are still unresolved.
• Until the price and delivery schedule are fixed, the pipeline may have a framework deal, but not a full-fledged gas supply agreement.

So you’re right: an agreement in principle can exist (route, volumes, cooperation), but a true supply contract only exists once the price mechanism is agreed.

Q. For power of Siberia 2, China wants the price to be very low, like Russian domestic price, but Putin wants it to be market price, how much is the gap?

You’re absolutely right — the pricing gap is the central sticking point in the Power of Siberia 2 negotiations. Here’s a clearer breakdown of what we know:

Price Discrepancy Between Russia’s Domestic and Export Gas Rates

• Russian domestic gas price: approximately $60 per 1,000 cubic meters
• Power of Siberia 1 export gas (China): about $257 per 1,000 m³

So there’s already a fourfold difference between domestic and export prices.

• China (CNPC) Prefers gas priced close to Russian domestic rates (~$60), arguing for fairness and affordability.
• Russia (Gazprom / Putin) Insists on a market-based formula, similar to European export pricing (~$257), though slightly discounted. Putin claims it offers China a competitive advantage compared to European prices.

What This Means

• The divide — ranging from $60 to $257 per 1,000 m³ — reflects tactical negotiation: China pushes for affordability, Russia seeks value and energy substitution for lost European markets.
• Negotiations remain highly conflicted, since a durable gas deal can’t be finalized without settling price terms.
• If Russia holds close to $257, China may balk entirely. If China secures domestic-level pricing, Russia’s export profits collapse.

So, to conclude, there is still no binding agreement for the Power Of Siberia 2 Pipeline to go ahead; only a legally binding agreement to keep on talking.

~ by Joel on September 11, 2025.

Posted in China, Russia