Russian gas giant Gazprom has entered into what officials describe as a legally binding memorandum with China National Petroleum Corporation to construct the Power of Siberia 2 pipeline. The 6,700-kilometer infrastructure project would transport natural gas from Russia's Yamal Peninsula through Mongolia to Chinese markets, representing a strategic pivot following the loss of European demand during the ongoing war in Ukraine.

The proposed pipeline capacity of 50 billion cubic meters per year would supplement the existing Power of Siberia line's 38 billion cubic meter annual capacity. However, this combined volume remains significantly below the 180 billion cubic meters Russia previously supplied to European markets before cutting off most pipeline deliveries. The timing of the announcement during high-level diplomatic meetings between Presidents Putin and Xi underscores the geopolitical dimensions of the energy partnership.

Energy analysts note the absence of critical commercial terms in the announced agreement, particularly pricing mechanisms and project financing arrangements. China's position as the dominant negotiating party has enabled Beijing to secure heavily discounted rates in previous energy deals with Russia. Market observers suggest China maintains multiple supply alternatives, providing substantial leverage in ongoing price negotiations.

The pipeline project faces uncertainty regarding long-term Chinese gas demand projections into the 2030s. China's accelerating renewable energy deployment and potential battery storage expansion could limit future natural gas requirements. Additionally, the country's transition away from coal as a swing fuel creates complex demand scenarios that may not support the pipeline's full capacity utilization over its operational lifespan.