Russia’s new Power of Siberia-2 pipeline project to increase natural gas supplies to China has long been on hold.
According to the South China Morning Post (SCMP), Mongolia, the country through which the 2,500-kilometre pipeline will run, has not included the pipeline in its national development plan until 2028.
Russia had offered Mongolia to buy gas from the pipeline, which has a capacity of 50 billion cubic metres a year, in addition to transit revenues.
But former Mongolian Security Council member Munhnara Bayarlhavga told the SCMP that Moscow had failed to reach an agreement with Beijing.
We are entering a long pause as Moscow no longer believes it can get the deal it wants from Beijing, and the project is likely to be shelved until better times,” Bayarlhavga said.
In recent years, Russian President Vladimir Putin has suggested to his Chinese counterpart Xi Jinping that Gazprom should increase its gas purchases to 100 billion cubic metres a year to replace the lost European market.
Despite Putin’s visits to Beijing, the Chinese president has not approved the construction.
According to the Financial Times (FT), the stumbling block was the price of gas. China demanded that the price of gas be reduced to local levels, around $60 per thousand cubic metres. This is four times cheaper than the current cost of Russian gas to China.
Late last year, Moscow claimed that the Power of Siberia-2 project was at a high level of readiness and that design contracts would be approved in the first quarter of 2024. After that, we can start construction,’ said then Deputy Prime Minister Victoria Abramchenko.
Mongolia was expecting an influx of investment from the construction of the gas pipeline, estimated to cost between $8 billion and $15 billion, but Li Lifan, an expert at the Shanghai Academy of Social Studies, said: ‘Russia has no money and China is in no hurry to build it.
