Russia offers deeper gas discount to China

Russia has increased the discount on natural gas sold to China to nearly 40%. According to a report by the Reuters news agency, based on the updated socio-economic development forecast prepared by Russia’s Ministry of Economic Development, the Russian government plans to further reduce the price of natural gas for China.

Last year, Gazprom shipments to China via the Power of Siberia pipeline, which became operational in 2019, cost $267.6 per thousand cubic meters.

This price was 30% lower than the price paid by customers in Europe and Türkiye ($376.9 per thousand cubic meters).

According to data from the Ministry of Economic Development, the price of natural gas sold by Gazprom to China will decrease to $247.3 per thousand cubic meters in 2025, while it will increase to $403 per thousand cubic meters for buyers in Europe and Türkiye. This will bring the discount to 39%, exceeding $150 per thousand cubic meters.

For 2026, the government plans a smaller decrease in the natural gas price for China, down to $241.8 per thousand cubic meters.

According to the ministry’s forecast, the decrease in natural gas export prices and the sharp decline in oil prices will negatively impact the economy’s foreign exchange earnings.

This year, hydrocarbon sales abroad will bring the country $200 billion instead of the planned $236 billion.

The ministry acknowledges that foreign exchange earnings in 2026 will be $9 billion below initial estimates.

Last year, Gazprom shipped 31 billion cubic meters of natural gas to China and this year brought the Power of Siberia pipeline to its project capacity of 38 billion cubic meters annually.

However, this amount compensates for less than 20% of the gas giant’s pre-war exports to the European Union, which reached 200 billion cubic meters at their peak.

Since then, Gazprom’s shipments to Europe, once its largest market, have decreased by nearly 7 times, falling to their lowest level since the second half of the 1970s—28 billion cubic meters in 2023 and 32 billion cubic meters in 2024.

Consequently, the powerful state-owned company Gazprom, which once aimed to reach a market value of $1 trillion, recorded the largest loss in its history in 2023 according to international accounting standards.

To survive after losing its main source of export revenue, Gazprom is laying off 1.4 thousand employees at its headquarters and is effectively dissolving its export unit, Gazprom Eksport.

According to Reuters, only a few people remain in this unit, and they are engaged in legal battles with former customers in Europe who have filed lawsuits against Gazprom totaling $18 billion.

BCS analyst Ronald Smith estimates that the halt of transit through Ukraine will deprive Gazprom of approximately 10 billion cubic meters of exports annually.

According to Smith’s forecast, the company will ship 40 billion cubic meters of natural gas to Europe and Türkiye this year; this is 20% less than the previous year.

Smith notes that Gazprom’s total exports, including shipments to China, will be 78 billion cubic meters, with no expectation of growth in the next three years.

According to Gazprom’s own estimates, the total deficit in the company’s budget between 2025 and 2034 will reach 15 trillion rubles (approximately $179 billion at the current exchange rate).