Beijing-Moscow pipeline plan is going nowhere
FORUM Staff
The omission of a Russian natural gas pipeline from Mongolia’s latest development plan underscores the economic consequences of Moscow’s unprovoked war in Ukraine. It also illustrates a rift between the People’s Republic of China (PRC) and Russia, whose leaders have been negotiating the pipeline plan for years but remain at odds on how much Beijing is willing to pay for Russian gas and which nation would control development, the Hong Kong-based South China Morning Post newspaper reported.
Moscow’s proposed Power of Siberia 2 pipeline was originally envisioned to carry Russian gas through Mongolia to the PRC in a bid to increase the Kremlin’s revenues and diplomatic influence. The urgency has increased for Russian President Vladimir Putin as he looks for a way to replace trade lost to Western sanctions and Europe’s rejection of Moscow’s natural gas.
After Russia invaded Ukraine in February 2022, Moscow’s energy-dependent economy saw sharp losses. The state budget declined by 24% from 2022 to 2023, according to the Atlantic Council, a Washington, D.C.-based think tank. State-owned natural gas giant Gazprom reported a 71% decline in profits in the first half of 2023.
While the pipeline idea is at least a decade old, Putin and Chinese Communist Party General Secretary Xi Jinping discussed the project in 2022, during the same visit when they proclaimed a “no limits” partnership, according to the Financial Times newspaper.
“Since then, while Russia has repeatedly emphasized its readiness to launch … Beijing has been conspicuously silent,” the newspaper reported.
The Mongolian plan that alerted the international community to the PRC-Russia roadblock details the nation’s development projects through 2028. Analysts say the project could be on hold due to the threat of sanctions against those that aid Russia’s military in Ukraine or because Russia and the PRC can’t agree on pricing.
“We are entering a long pause, where Moscow no longer believes it can get the deal it wishes from Beijing and will probably park the project until better times,” Munkhnaran Bayarlkhagva, a former official with Mongolia’s National Security Council, told the South China Morning Post.
The PRC already receives gas from a separate Russian pipeline, although experts say Moscow, which negotiated rates in 2014 when global prices were lower, collects significantly less than other suppliers. The PRC has demanded Russia provide natural gas at subsidized domestic prices and has offered to buy only a fraction of the proposed pipeline’s capacity, according to media reports.
Xi might also be unhappy with Putin’s plan to unilaterally control the Mongolian section of the pipeline, Bayarlkhagva told the Post. “This would have meant a sudden and long-term increase in Moscow’s influence in Mongolia, to the detriment of Beijing,” he said.
Mongolia would have received revenue from the project, along with a share of the natural gas. “Mongolia hopes to get investment from China and Russia, [but] Russia does not have the money and China is not in a rush to build the pipeline,” Li Lifan, a Russia and Central Asia specialist at the Shanghai Academy of Social Sciences, told the Post.
Mongolia agreed in June 2023 to cooperate with South Korea and the United States in mining and energy security. Rio Tinto, a mining corporation headquartered in Australia and the United Kingdom, has the largest direct foreign investment in the nation.
