Gas Pipeline Signals Subordination To China

The spectacular displays at the 2025 Shanghai Cooperation Organization summit in Tianjin were carefully crafted to showcase the evolution of Xi Jinping’s Beijing-centric political bloc which aspires to rival Washington. The U.S. administration is embracing an “America First” agenda and using tariffs as a foreign policy battering ram. Meanwhile, President Trump may be on to something in writing “Please give my warmest regards to Vladimir Putin and Kim Jong Un as you conspire against the United States of America.”

Founded in 2001, the SCO has often been heavy on declarations but light on substance. This year, however, marked a significant shift, with member states, led by China, touting economic competition as the primary path to challenging U.S.-centric post-World War Two arrangements. The Chinese leader promised to open the Chinese BeiDou global navigation system to SCO members to compete with GPS. More importantly, Xi announced the launch of the SCO Development Bank, a China-backed initiative aimed at funding infrastructure in Eurasia. This project was long in the works — Moscow had blocked it, clinging to the idea that the region is its backyard.

Now Moscow has reversed its position, embracing Beijing’s initiative. This is the latest in a long line of Kremlin concessions in the increasingly one-way Sino-Russian relationship. Russia needs China more than China needs Russia. Both parties are aware of this, and Beijing is eager to deepen Russia’s strategic dependence. Arms supplies and energy deals Moscow was pushing for earlier might have put Russia in a position to win against Ukraine soon after its 2022 invasion decisively but were deliberately delayed by China. Instead, Xi let Moscow bleed so Beijing could secure a better negotiating position. This dynamic is at play in every sphere of Sino-Russian cooperation. It is most obvious now in energy. Russia used the summit to tout progress on its flagship Power of Siberia 2 gas pipeline to China. However, reading between the lines, it is clear this deal is yet another sign of Beijing’s ascendancy.

The Power of Siberia 2 Pipeline and Russian Strategy

The energy deals announced around the SCO summit revealed the real price of Russia’s pivot East. Just before the meeting, Gazprom signed a memorandum with Mongolia confirming Ulaanbaatar’s role as a transit country for the PoS-2. Days later, Gazprom’s long-serving CEO Alexey Miller unveiled a “legally binding memorandum” with China’s CNPC to build the pipeline. The PoS-2 will deliver 50 billion cubic meters of gas annually from Western Siberia to northern China via Mongolia. Together with the expansion of the Power of Siberia 1 (from 38 to 44 bcm) and the smaller Far Eastern route (to 12 bcm by 2027), Russia’s annual gas flows to China could approach 100 bcm, totaling roughly two-thirds of its former European export volumes. But there is a catch, and it is not to Russia’s advantage.

The Siberian pipelines are more than infrastructure. They are a lifeline for a country that has been cut off from its largest energy market. Sanctions and European gas supply diversification are bringing Russia’s European gas trade down to a fraction of its previous volume. The PoS-2 enables Russia to repurpose West Siberian gas once destined for Europe. Politically, the deal signals that Moscow has abandoned hope of a reset with the West. Konstantin Kosachev, Deputy Chair of the Russian Federation Council and chair of the Council’s Foreign Affairs Committee, put it bluntly: “The Western direction has been recognized as unpromising, and Moscow no longer expects any sobering-up in Europe.” Russia may also be walking away from its 300-year-old engagement with the West, which started when Tsar Peter the Great famously “broke the window” to Europe by defeating the Swedish Empire and signing the Treaty of Nystadt in 1721.

For Russian President Vladimir Putin, who first proposed a western-route pipeline to China in 2006, the PoS-2 is a personal project long delayed by economics. Talks stalled in 2008 when Gazprom and Beijing failed to agree on mutually acceptable terms. Instead, Russia built PoS-1 after annexing the Crimea in 2014, and began shipping gas to China in 2019. Since 2022, Russia repeatedly urged China to act quickly to save its economy from inevitable privations stemming from the collapse of its Western market. China, for its part, has repeatedly demurred, preferring to extract more concessions from Moscow instead. The new PoS-2 agreement does revive Putin’s earlier vision, but now out of necessity rather than choice.

Russia Bears the Costs as Beijing Benefits

Analysts estimate the PoS-2 will cost approximately $25 billion to construct. Keen to demonstrate momentum, Gazprom has already started building a 410-kilometer stretch, awarded in a 2023 tender worth 11.9 billion rubles (about $125 million). Yet unlike many Chinese overseas projects, Beijing will not finance the Russian section. The burden falls on Gazprom, whose recent financial performance has been abysmal. Russian consumers will also feel the pinch. Domestic gas prices are set to rise by more than 50% over three years, effectively subsidizing exports to China.

Pricing remains opaque but tilted in Beijing’s favor. Under PoS-1, Gazprom is already earning 45–50% less per cubic meter than it did from Europe. For the PoS-2, Beijing reportedly pushed hard to pay rates close to Russia’s subsidized domestic prices. Putin admitted that the deal offered “competitive advantages for our Chinese friends;” though he attempted to put a positive spin on the development.

China’s negotiating style has consistently been slow, methodical, and relentless in seeking better terms, as evidenced by talks over the PoS-2 stretching for over a decade. Only after Russia’s European market collapsed did Beijing agree to move forward. Even then, details remain vague, as the project memorandum leaves the final pricing formula and financing structure for a later date.

China’s official messaging underscored the better hand that Beijing brought to the table. While Russian state media trumpeted a breakthrough, Beijing’s initial statements briefly mentioned 20 bilateral cooperation documents across several sectors. More tellingly, Foreign Ministry spokesperson Guo Jiakun declined to confirm the PoS-2 deal.

Russia Has Become the Junior Partner

For Moscow, the pipeline cements its subordinate role in its partnership with China. This is a direct reversal of the Moscow-Beijing axis under Stalin and Mao, when the USSR was clearly on top. Once, Russian elites considered turning East with great caution, preferring Europe for education, investment, vacations, and more. However, Russia’s aggression and the resulting sanctions have closed off those avenues. Now the Kremlin leans heavily on Beijing not only for trade but also for components for military equipment and diplomatic cover. In return, it is accepting Chinese leadership within the SCO, conceding economic terms on energy, and tolerating second fiddle status.

This was reinforced with a Chinese concession unrelated to gas: a new 30-day visa-free regime for Russian citizens. While Beijing framed this as a goodwill gesture, it further underscores the growing imbalance in the relationship, with Moscow accepting projects with limited profitability and Beijing extending visa-free entry that will benefit its tourism trade. The contrast is a study in asymmetry. Moscow incurs tangible costs in return for symbolic gestures from Beijing that will ultimately help fill China’s coffers.

The SCO summit and the PoS-2 agreements reveal the China-bound trajectory of Russia’s foreign policy and its growing dependence. Moscow has effectively closed the door on Europe and bought a one-way ticket to Beijing, without enough leverage to benefit equally from the Chinese engagement, such as by partaking in its high tech or investment. The PoS-2 deal may secure markets for Russia’s stranded West Siberian gas, but at deep discounts and with heavy financial burdens. It also binds Russia more tightly to Beijing’s orbit and reduces its ability to maintain an independent foreign policy.