Mongolia, through which the 2,500-kilometer pipeline was
supposed to pass, has not included Gazprom’s pipeline in its national
development plan through 2028, The
South China Morning Post reports.
According to the report, Russia offered Mongolia not only
transit revenue but also the opportunity to receive gas from the pipeline with
a projected capacity of 50 billion cubic meters per year. Moscow failed to
reach an agreement with Beijing, said former Mongolian Security Council member
Munkhnaar Bayarlkhaag.
“We are entering a long pause, as Moscow no longer believes
it can get the deal it wants from Beijing, and the project is likely postponed
until better times,” he said.
In 2022, Putin proposed to his Chinese counterpart Xi Jinping to increase Russian
gas purchases to 100 billion cubic meters per year to replace the European
market lost by Gazprom. However, the Chinese leader did not give the green
light for construction. The sticking point was the price of the gas: China demanded
it be lowered to the domestic Russian level, around $60 per thousand cubic
meters. This is four times cheaper than the Russian gas currently costs China:
$260 per thousand cubic meters through the Power of Siberia-1 pipeline.
By late 2023, Russian authorities claimed that the Power of
Siberia-2 project was in a high state of readiness and that project
documentation would be approved in the first quarter of 2024. “After that,
construction could begin,” said Victoria Abramchenko, who was then serving as
deputy prime minister.
Mongolia had hoped for an influx of investments from the
pipeline, estimated to cost between $8 billion and $15 billion. However, “Russia
has no money, and China is in no hurry to build,” notes Li Lifang, an expert
from the Shanghai Academy of Social Sciences. Additionally, Beijing may fear
increased Russian influence in Mongolia, he suggests.
The new Chinese contract is desperately needed by Gazprom,
which has lost two-thirds of its exports since the start of the war with Ukraine
and last year sold the lowest volume of gas abroad since 1985.
This resulted in the first annual loss in a quarter-century,
amounting to 629 billion rubles. Without the ability to sell gas, Gazprom was
forced to cut production to its lowest level in history. In the first half of
2024, according to RAS reporting, the company’s gas business loss could amount
to another 480.6 billion rubles.
As of June 3, 2024, the agreement on the Russian-Chinese gas
pipeline has reached an impasse due to Beijing’s stringent demands.