China’s energy pivot: Power of Siberia 2 gains traction after Iran-Israel conflict

According to a report by The Wall Street Journal (WSJ), citing sources close to decision-making processes within the Chinese government, the recent conflict between Iran and Israel has heightened Beijing’s interest in Russia’s Power of Siberia 2 natural gas pipeline project.

The report indicated that Beijing, increasingly concerned about the reliability of oil and natural gas supplies from the Middle East, is exploring alternative energy sources.

Approximately one-third of China’s imported natural gas is supplied as liquefied natural gas (LNG) from the United Arab Emirates (UAE) and Qatar. These shipments traverse the Strait of Hormuz, a critical waterway that Iran has previously threatened to close. Furthermore, private Chinese refineries have reportedly become increasingly reliant on inexpensive Iranian oil in recent years.

According to analyst data, 90% of Iran’s oil exports are directed to China, despite US sanctions. Following the announcement of a ceasefire between Iran and Israel, US President Donald Trump stated, “Now China can continue to buy oil from Iran. I hope they buy a lot from the US as well.”

Price: The biggest hurdle in negotiations

Mid-month, Russian Deputy Prime Minister Alexander Novak affirmed the ongoing relevance and importance of the Power of Siberia 2 project within the framework of energy cooperation with China, in a statement to Vedomosti daily.

Design work for the Power of Siberia 2 pipeline commenced in 2020. The pipeline is planned to have a total length of approximately 6,700 kilometers, with 2,700 kilometers of this route passing through Russian territory.

However, Financial Times reported that the gas price proposed by China for future contracts has not satisfied the Russian side. According to the report, Beijing aims to purchase gas at a price nearly equivalent to Russia’s domestic market cost.

In response to these claims, the Chinese Foreign Ministry announced that Beijing is prepared to deepen mutually beneficial cooperation with Russia.