Vladimir Putin’s visit to China and his second talks with Xi Jinping this year ended again without a major decision that the Kremlin had been waiting for years.
Although Putin called Xi a “dear friend,” praised Beijing for the success of the Belt and Road project and declared “great prospects” for bilateral ties, Chinese officials did not sign a contract for additional supplies of Russian gas and construction of the Power of the Siberia 2 pipeline.
The project, which the Kremlin has been promoting for more than seven years, would be subject to negotiations, Kremlin spokesman Dmitry Peskov said on the first day of the visit. And although Putin took an impressive delegation to China, including Deputy Prime Minister Alexander Novak responsible for energy, Gazprom President Alexei Miller and Rosneft CEO Igor Sechin, he failed to convince Xi Jinping.
When the leader of the People’s Republic of China visited Moscow in the spring, Putin said that the project for a new gas pipeline with a capacity of 50 billion cubic meters per year was “virtually agreed in all respects.” He also promised China up to 100 billion m3 of Russian gas per year, five times as much as Gazprom currently pumps.
However, in the final statement to the press, Xi did not say a word about Russian gas, and the joint communiqué only announced the expansion of cooperation in the energy sector.
Russia needs China because it lost its gas market in Europe after the attack on Ukraine
The Chinese contract is desperately needed by Gazprom, which after the Russian attack on Ukraine lost its European market, reduced exports to a minimum and was forced to cut production by almost a third, which is a historic record.
In the 12 months from July 2022 to the end of June 2023, Gazprom posted more than 1 trillion rubles in net losses and spent two-thirds of its cash reserves on bills to cover these losses.
This year, China will buy 22 billion cubic meters of gas from Russia through the Power of Siberia 1 pipeline launched in 2019, which will, however, compensate Moscow for only an eighth of its current exports to Europe, which at its peak amounted to 170 million cubic meters of gas amounted to. -180 billion m3 per year.
Gazprom sells gas to China at a price almost half lower than that to EU countries. According to the Russian government’s draft budget and the macroeconomic forecast cited by Bloomberg, the price of gas exported to Europe in 2022 was $984 per 1,000 m3, and to China $277. In the years 2023-2026, the price of deliveries to China will continuously decrease – from $297 to $243 per 1,000 m3.
Source: Do Rzeczy
Roy Brown is a renowned economist and author at The Nation View. He has a deep understanding of the global economy and its intricacies. He writes about a wide range of economic topics, including monetary policy, fiscal policy, international trade, and labor markets.
