Commentary: Why China keeps pulling the rug on Putin’s pipeline
The official readout from Chinese state news agency Xinhua highlighted agreements on sports exchanges and forestry, but had nothing to say on the US$95 billion construction project that Russia is so ardently seeking as a replacement for its vanished European markets.
That silence is a little odd. China is the world’s biggest importer of liquefied natural gas (LNG) and the biggest consumer of gas after the United States and Russia. With Xi’s commitment to reach a peak in carbon emissions before its 2030 start-up date, the gas provided by Power of Siberia 2 could go some way to reducing the country’s dependence on dirty domestic coal reserves.
THE IMPORTANCE OF PERCEIVED ENERGY SECURITY
One hard lesson of the past few years, however, has been that the importance of perceived energy security is higher than it has been in decades. That’s not good news for Power of Siberia 2, which would roughly double the scale of Russia’s gas pipeline exports to China and give it more than half of the country’s import market – a similar level of dominance to the one it enjoyed in Europe in 2021.
There’s better ways to solve this problem, and China is enthusiastically embracing them. In contrast to Beijing’s reticence about the proposed Russian pipeline, in September 2022 it announced the start of construction of a 30 bcm pipe to Turkmenistan, an often unreliable supplier that’s nonetheless easier to push around than Moscow.
Shipped gas is even more attractive since – as Europe found over the past year – it allows gas importers to be highly flexible in their supply relationships, in contrast to the fixed connections necessitated by a pipeline.
Since 2021, China has been signing contracts for LNG at breakneck speed. The International Energy Agency believes its existing agreements will leave China oversupplied out to 2030, with some 45 bcm of its import contracts likely to end up diverted to other markets.