MOSChinese President Xi Jinping and Russian President Vladimir Putin shake hands during the signing ceremony at the Grand Kremlin Palace, on March 21, 2023 in Moscow, Russia. Credit - Getty Images
There was one awkward moment at this week’s closely-watched summit between Vladimir Putin and Xi Jinping. The Russian and Chinese presidents, who have met 40 times in the last decade, exchanged plenty of warm words. Xi reassured Putin of his continuing support for Russia’s stance on Ukraine, and the pair signed a dozen collaboration agreements aimed at building a “multipolar world” with a diminished West. But on Tuesday, after Putin boasted that the countries had “practically” finalized a deal for a major natural gas pipeline, Xi left him hanging.
The Power of Siberia 2 is a planned pipeline that, by 2030, could carry up to 98 billion cubic meters of natural gas from northeastern Russia into China via Mongolia. That’s enough to supply a quarter of China’s current gas needs. Moscow considers the project a crucial part of its strategy for safeguarding the Russian fossil fuel industry in a global market roiled by the energy transition and Putin’s warmongering. The summit’s joint statement, however, included only an anemic pledge to “make efforts to advance work on studying and agreeing” the project.
The rebuff matters to Russia, and to the climate. Russia relies on fossil fuels for 66% of its exports and 45% of its federal budget. The war has led Moscow to cut off natural gas supplies to the E.U. for political reasons; at the same time, the E.U. has enacted sanctions on the import of Russian oil. As a result, Russia’s oil and gas revenues have cratered in the short term. By February, they were only half of what they were a year earlier. Meanwhile, the war has also hastened the long-term structural decline of those industries, according to The International Energy Agency. With nations accelerating renewables rollouts in the name of energy security, demand for fossil fuels is now expected to peak within five years. For climate advocates, that’s a win. For Russia, which has been dragging its feet on diversifying its economy, it’s a very black cloud on the horizon.
China could chase that clouds away. The country has already helped Russia recoup some of its losses by boosting its spend on Russian oil, coal, and natural gas from $52.1 billion in 2021 to $81.3 billion in 2022. China saved an estimated $5 billion in discounts negotiated on the back of the E.U. sanctions, per Reuters. If approved, the Power of Siberia 2 would help Russia permanently reorient its gas industry to the east, compensating for the now-stranded fields and pipelines that were built to serve Europe. Some fossil fuel opponents fear that such an alliance between the world’s two largest emitters would cancel out the progress that the E.U. has made in its moves towards a greener economy as a result of the war.
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But China doesn’t seem willing to commit yet, says Erica Downs, a senior research scholar at Columbia University’s Center on Global Energy Policy, focusing on Chinese energy markets and geopolitics. “Chinese refiners are happy to buy Russian oil on the cheap in one-off transactions,” she says. “But we have not seen China do anything that sort of permanently deepens their ties to Russia in a way that might be trickier to reverse.”
Downs says Chinese companies are likely wary of signing major deals with a country in the midst of a messy military conflict. China may also be carefully weighing the energy dependence risk of making Russia such a major supplier. (The joint capacity of both Power of Siberia pipelines would be almost as much as the total amount of natural gas China currently imports from the rest of the world.) Others believe China is simply holding out for better financial terms.
Xi may yet give Putin what he wants. China, which imports almost three quarters of its oil and almost half its natural gas, considers its resource-rich neighbor as vital to national energy security. And, though China’s rollout of renewable energy is happening at a shocking pace, it will be decades before its economy can run off that clean domestic infrastructure alone. For now though, faced with the uncertainty engulfing Russia’s future, Putin will have to put on a brave face.