Putin, Xi Push 50 bcm Power of Siberia 2 Deal

Russian President Vladimir Putin and Chinese President Xi Jinping met in Beijing on Wednesday and pushed forward stalled negotiations on the Power of Siberia 2 natural gas pipeline, a 2,600 kilometre project designed to carry 50 billion cubic metres of gas annually from Russia's Yamal fields to China through Mongolia. The talks did not produce a final agreement, but Kremlin spokesperson Dmitry Peskov said the two sides had reached an understanding on the project's main parameters, according to CNBC and UPI reporting from the summit.

Hormuz Closure Forces China Back to the Russian Pipeline

The renewed urgency around Power of Siberia 2 reflects the energy shock that has hit China since the United States and Iran went to war in late February. The effective closure of the Strait of Hormuz has cut roughly half of China's seaborne crude oil imports and almost a third of its LNG supply, according to the International Energy Agency's Oil Market Report for May 2026. The IEA cited 14.4 million barrels per day of Gulf output offline and OECD on-land stocks falling 146 million barrels in April alone.

That backdrop has shifted Beijing's calculus on overland gas. Power of Siberia 1, which began service in 2019, hit its 38 billion cubic metre design capacity in 2025 and is now running at over 100 million cubic metres per day, according to Gazprom. A second pipeline would more than double Russia's overland gas export capacity to China at a moment when Chinese buyers are losing access to Qatari and Iranian LNG cargoes, the latest of which Oil Authority covered in the Qatar Ras Laffan force majeure coverage.

Pricing Remains the Sticking Point

Bloomberg and the Center on Global Energy Policy at Columbia University report that China is pushing for pricing close to Russia's regulated domestic rate of roughly $120 to $130 per thousand cubic metres. Russia is anchoring its position to Power of Siberia 1 terms, which industry sources put at about $250 to $260 per thousand cubic metres indexed to an Asian oil-product basket with a nine month lag.

The gap matters. Oil Authority calculates that at the Russian asking price of $250 per thousand cubic metres, 50 bcm of annual deliveries would generate roughly $12.5 billion in yearly gas sales for Gazprom. At the Chinese counter-offer of $130 per thousand cubic metres, that figure falls to roughly $6.5 billion. The $6 billion annual revenue gap between the two positions explains why the project has remained stalled since the binding memorandum of September 2025.

Beijing's Leverage Has Grown

Russia's negotiating position has weakened as European gas sales remain near zero and Indian crude buyers have throttled back on Urals barrels under fresh US sanctions pressure. With fewer pipeline customers competing for Yamal gas, Moscow has less room to hold firm on price. China, by contrast, has alternative suppliers under development. ConocoPhillips' commitment to a thirty year supply agreement at Alaska LNG Phase One, which Oil Authority detailed in the Alaska LNG Phase One FID coverage, gives Asian buyers a Pacific basin alternative that did not exist when Power of Siberia 1 was negotiated.

Wood Mackenzie analyst Massimo Di Odoardo has argued that a Power of Siberia 2 deal would only close if Russia accepts a deep discount, leaving Moscow exposed to a single buyer. Beijing's analysts have made the reciprocal calculation: a pipeline switch from Hormuz-dependent LNG to Yamal-fed pipeline gas trades one chokepoint for another.

What Was Actually Agreed in Beijing

According to UPI, Peskov said the parties had aligned on the main parameters but stopped short of confirming binding pricing, financing, or a delivery start date. The pipeline still requires Mongolian transit terms, which were last revised in September 2025 when Mongolia and Russia signed a 30 year intergovernmental memorandum. No construction timeline was announced on Wednesday.

Crude markets responded modestly. WTI crude was trading near $100 per barrel as of late morning on the CME on Wednesday, down for a second consecutive session as traders weighed reports of preliminary US-Iran negotiations against the lack of a firm Russia-China gas deal. Brent extended its retreat on the same session, building on the move detailed in Monday's Iran pause coverage.