You Snooze, You Lose: UK, US Media Fear Russia May ‘Outsmart’ EU With New Gas Mega Pipeline to China

US and European officials and media have blamed Moscow for the gas shortages currently facing much of Europe. Russia has dismissed the claims, stressing that it is prepared to sign new long-term contracts with its partners, and ready to start deliveries via the new Nord Stream 2 pipeline as soon as Berlin and Brussels certify the project.

The construction of a major new Russian gas pipeline to China poses a threat to Europe and is a sign that Russian President Vladimir Putin has “outsmarted” the EU on energy policy, UK and US media fear.

Last month, Putin and his Chinese counterpart, Xi Jinping, held a video call to discuss a range of bilateral and global issues, including the Power of Siberia 2 – a major new energy infrastructure project promising to increase Russia’s gas export capability to China by up to 50 billion cubic meters of gas per year.

Putin told reporters last month that the pipeline’s proposed route (which includes a stretch through Mongolia), its length and other features have already been agreed upon, and that a study on feasibility will be completed soon. Putin also met with Mongolian President Ukhnaagiin Khurelsukh in Moscow on 16 December to discuss the project.

Energy industry observers told Nikkei Asia that the pipeline, which looks to be nearing approval, would be a win-win for both Russia and China. Beijing would receive access to much-needed gas supplies amid a global gas crunch and its shift away from coal power, while Moscow would reduce its dependence on the fickle European Union, which has complained about shortages and spiking spot prices while simultaneously dragging out the certification of Nord Stream 2 – the new gas pipeline was completed last fall with the capacity to provide up to 55 billion cubic meters in additional gas to the region.

Power of Siberia 2 would complement the existing Power of Siberia pipeline, which was commissioned in 2019, and will have a maximum capacity of up to 38 billion cubic meters of gas per year when fully up and running in the year 2024. That 2,200 km project has an estimated price tag of about $14.5 billion US, with the Power of Siberia 2 expected to cost in the neighbourhood of $10-$13.6 billion.

One important difference between the two projects is that while Power of Siberia takes its gas from fields in eastern Siberia, Power of Siberia 2 will be able to pump gas from Yamal – the massive fields in western Siberia which have provided gas to western Russia, Belarus, Ukraine and Europe for decades.

Depending on the state of negotiations, Power of Siberia 2 could be built and come online as soon as 2027, with a projected full completion date expected by 2030.

Russia’s 'Terror' Pipeline

Britain’s tabloid press have sounded the alarm about the Power of Siberia 2 project, with the Daily Express running back-to-back stories with the provocative headlines “Putin outsmarts EU as new China gas deal to pump ‘same amount’ as banned German pipeline” and “China tipped to copy Russia’s Ukraine tactics with Taiwan as pair link up to cause terror.”

“Experts” cited by the articles claim, incredulously, that Russia may be deliberately “tinkering with gas supplies” to put pressure on the EU to approve Nord Stream 2, while at the same time looking east to China to give Moscow “more options about who gets the gas and at what price”. These “options,” they fear, may exacerbate Europe’s gas shortages.

The more highbrow Telegraph expressed similar concerns, with its article, “Russia looks east as China link threatens to inflame Europe’s gas crisis,” warning that the gas which has heated European homes and provided much-needed energy to European industry for so many years may soon be sent eastward instead.

“Experts warn of the impact on European energy security and prices, and of Moscow’s growing grip on global markets at a turbulent time for energy supplies in the push to slash carbon emissions,” the outlet suggested.

Worse yet, the Telegraph bitterly asserted, while European countries’ preference for short-term contracts for gas has forced them to pay through the nose as spot prices on wholesale supplies have jumped over 800 percent over the past year, China “can afford to buy greater amounts”, since “it has been purchasing pipeline gas through long-term contracts linked to oil prices”.

The outlet estimated that in October 2021, China paid between $4-7 per Mmbtu for its gas even as Europeans shelled out over $20 per Mmbtu during the same period.

'Opportunities to Turn Supplies Off and On'

Voice of America, the US government-funded broadcaster, called the Power of Siberia 2 negotiations a sign of a coming Russian ‘gas pivot’ to China which “poses a challenge to Europe”.

The State Department mouthpiece accused Russia of deliberately “worsening” the European energy crunch, claiming that Gazprom has “shrugged off urgent European requests for more natural gas”.

One anonymous senior European diplomat worriedly told the outlet that Russia’s diversification of supplies to China will “give the Kremlin more opportunities to turn off and on supplies to Europe but reduce considerably any financial risks for Russia.”

Among English-language reporting on Power of Siberia 2, only Bloomberg called for calm, with contributor David Fickling penning a piece for the business outlet entitled “A gas pipeline won’t turn Russia and China into buddies.” In it, the author assured readers that historically, “China and Russia have rarely seen eye-to-eye for very long,” and recalled the 60-year-old dispute between Nikita Khrushchev and Mao Zedong, Soviet-Chinese border conflicts, and “rival spheres of influence in Central Asia”.

Fickling did not specify how a new, commercially viable gas pipeline with positive energy security implications for both countries impacts any “buddy” relationship Moscow and Beijing might have. Russia and the US-allied European Union aren’t considered “buddies” by foreign policy observers, but that hasn’t stopped Gazprom from selling the Europeans about 180 billion cubic meters of gas per year, accounting for about 40 percent of the region’s demand.

Gazprom reiterated last month that it remains ready to sign new long-term gas contracts with European countries. The company has rejected “groundless” claims that it was withholding supplies to the European market, pointing out that its sales to Europe have increased by double digits in 2021 compared to the previous year.

Russian officials have pointed to Europe’s over-dependence on short-term contracts, failure to stock up reserves after a cold winter and spring of 2021, lavish spending on wind and solar energy whose returns proved more meagre than expected, and growing competition between Europe and Asia for limited supplies as the causes for the current energy shortages.