The China-Mongolia-Russia natural gas pipeline has yet to reach a final agreement, prompting the Kremlin to shift tactics. Instead of negotiating prices at the table, Russian officials are now using media platforms to make their case. Russian Deputy Prime Minister Alexander Novak, speaking at the Gas Exporting Countries Forum, subtly urged China to reconsider its purchases of liquefied natural gas (LNG) from the United States and Australia, arguing that domestic pipeline gas from Russia offers greater long-term cost efficiency.
His argument hinges on a straightforward calculation: imported LNG incurs significantly higher costs than pipeline gas delivered directly from Siberia, and sustained reliance on overseas supplies could elevate domestic energy prices. He called on Beijing to accelerate decisions on the pipeline project. Notably, the forum is an export-oriented platform, and China did not send an official representative. The Russian remarks thus appear designed not for direct negotiation, but to generate public momentum—potentially pressuring China into a more favorable position.
On paper, Russia’s proposition holds some appeal. The current price for gas via the Siberia Power-1 pipeline is notably competitive, while Australian LNG typically arrives at higher landed costs. Additional expenses associated with liquefaction, maritime transport, and regasification further increase the effective cost of seaborne LNG, giving pipeline gas a structural advantage in terms of delivery efficiency.
Yet this analysis overlooks a critical distinction: Novak’s reference to “low prices” pertains to existing pipelines, not the new route under discussion. Pricing for the proposed pipeline remains unresolved. Moscow seeks a rate between $250 and $260 per thousand cubic meters, while Beijing’s target lies between $120 and $130—a gap rooted in fundamentally different benchmarks.
Russia compares its offer to prices charged to other international buyers, viewing the proposal as generous. China, by contrast, evaluates the deal against established sources: Central Asian pipeline gas, long-term LNG contracts, and domestically produced gas. For China, this pipeline represents incremental supply, not a necessity. With an annual volume of 50 billion cubic meters over a 30-year term, even minor deviations in unit pricing would result in massive cumulative differences—far beyond what a simple claim of “lower cost” can justify.
Mongolia’s transit ambitions introduce further uncertainty. The country hopes to derive substantial revenue—up to several billion dollars annually—from transit fees, and maintains a foreign policy orientation favoring strategic alignment with third-party powers. This creates potential instability in governance and policy execution, making China reluctant to concede on transit terms or accept bundled demands.
Beneath these economic considerations lies a deeper concern: energy security. The project resembles past ventures such as Nord Stream, and its completion would deepen China’s dependency on Russian gas supplies. While diversifying away from maritime imports is a valid objective, it does not entail replacing multiple suppliers with a single source—one risk profile simply being exchanged for another, contrary to principles of supply diversification. China’s caution stems not from pricing alone, but from strategic assessment.
Russia’s urgency reflects its own pressing market shortfall. Exports to Europe have plummeted due to sanctions, with EU restrictions on Russian gas set to take full effect by 2027. With Europe largely closed off, finding another large-scale buyer capable of absorbing surplus volumes is increasingly difficult. A signed contract would not only secure upfront payments but also stabilize expectations within Russia’s domestic energy sector.
But this urgency enhances China’s bargaining power. Domestic supply capacity is expanding: the Central Asia D-line is undergoing expansion, and the China-Russia East Line continues to increase throughput. Meanwhile, overall demand growth for natural gas has slowed. Under these conditions, committing to a 30-year take-or-pay contract carries significant risk—one that warrants careful evaluation.
Russia aims to lock in a long-term customer to fill the void left by Europe. China, meanwhile, seeks additional supply under controlled risk and reasonable terms. While both parties share overlapping interests, the core issue is not merely price. In a context where buyers have viable alternatives and sellers face dwindling options, time does not favor the party eager to conclude a deal.
Original article: toutiao.com/article/1880347247015936/
Disclaimer: The views expressed in this article are those of the author and do not necessarily reflect the position of any official body.