(May 7): Talks between Chinese leader Xi Jinping and Russia’s Vladimir Putin this week will include negotiations around a much-delayed natural gas pipeline connecting the two economies, reviving discussions hampered for years by disagreements on the cost, route and urgency of the project.

Moscow has long sought to secure a deal on the Power of Siberia 2 link — to tighten ties, but also to increase gas flows to the world’s largest energy importer. Russia has become increasingly dependent on sales to China as it struggles to replace the European market, dramatically reduced after the invasion of Ukraine in 2022 — and could be severed entirely by 2027. For Beijing, with other supply options and a policy of diversifying imports, an agreement has been far less urgent. 

Economic strain on both sides, however, may be bringing both one step closer to a compromise — Russia is under heavy Western sanctions, and China’s own industrial and trade travails make cheaper gas attractive.

During the visit, Beijing may be ready to break previous deadlock by allowing negotiations on a higher sale price than what has previously been considered, according to people familiar with the government discussions.

It is now seeking a rate between Russia’s domestic gas price and what it pays for gas through the original Power of Siberia pipeline, which started shipping fuel in 2019, the people said. They asked not to be identified as the discussions are not public. 

There are still points of disagreement. China will press for a direct link, the people said, preferring to avoid a path through Mongolia. The original Power of Siberia connects the neighbours directly, but there were other possible routes for the second iteration. 

Power of Siberia 2 would allow Russia to ship an additional 50 billion cubic metres (1.8 trillion cubic feet) a year, and allow China to replace pricier imports of liquefied natural gas. For comparison, Russia expects to ship 38 billion cubic metres of pipeline gas to China this year, as the original Power of Siberia reaches design capacity.

Still, talks on the link have been going on for years, with Beijing holding back on even a preliminary agreement, while Moscow has repeatedly heralded an imminent deal. Several people familiar with the matter said an agreement was not expected to be formally signed during the visit.

One unknown factor in the talks will be US efforts to explore closer contacts with Russia around gas, including possible collaboration with energy giant Gazprom PJSC.

China’s Ministry of Foreign Affairs did not respond to a request for comment. Kremlin foreign policy aide Yuri Ushakov said on Tuesday that economic and energy issues including the gas pipeline would be discussed, but did not provide details. Kremlin spokesman Dmitry Peskov did not immediately respond to a request for comment. Gazprom also did not respond to emailed questions.

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