Putin ‘playing chicken’ with gas supplies as Russian economy
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Russia has announced the Nord Stream 2 pipeline, the £8billion project set to pump gas to Europe through the Baltic Sea, will now be replaced by a new pipeline that will export huge amounts of gas to China. The 750 mile-long Nord Stream 2, would have bypassed Ukraine and Poland and doubled Russia’s gas exports to Germany. Now, Moscow’s Energy Minister Alexander Novak announced the scrapped pipeline is to be replaced by the Asian Force Siberia 2.
When asked in an interview with Russian television channel Rossiya-1 whether Moscow would replace the European Nord Stream 2 with the Asian Force Siberia 2, Mr Novak said: “Yes.”
During a visit to Uzbekistan yesterday, the energy minister noted that Russia and China, which have deepened ties over the past year, will soon sign an agreement that would deliver about 50 billion cubic metres (bcm) of gas per year through the future Force 2 pipeline in Siberia.
This new pipeline, also known as the Power of Siberia 2 pipeline, will almost completely replace the maximum capacity of gas of the Nord Stream 1 pipeline, at 55 bcm.
Since the start of this month, Russia has completely and “indefinitely” halted flows through this pipeline, citing maintenance work following a leak.
Gazprom claimed the shutdown was due to a leak found in the pipeline, although supplies had been cut following the G7’s decision to impose a price cap on Russian oil. Experts have accused Putin of weaponising the pipeline.
Plans to build the Force Siberia 2 pipeline received a major boost as Russian President Vladimir Putin held a meeting with his counterparts from China and Mongolia on Thursday, where they discussed the major project.
While Moscow is actively looking for customers to replace their massive energy exports to the European Unions, industry experts have noted that negotiations between Chinese premier Xi Jinping and Putin may be tricky, as China is not expected to need additional gas supply until after 2030.
This pipeline would harness huge gas reserves from the Yamal peninsula in west Siberia, which is the main source of gas supply to Europe, and divert them to China, currently the world’s largest energy consumer, and rapidly increasing its demand.
Mr Novak added that Russian gas exports to the EU “will drop by around 50 billion cubic metres” in 2022, which could either be a reference to the Nord Stream 1 pipeline currently under “maintenance”, or could be a veiled threat to cancel further flows to Europe.
While Putin has previously threatened to “freeze Europe” in response to sanctions, the EU has been scrambling to shore up gas supplies, fearing a cold winter.
Mr Novak also noted that Gazprom, which has operated the Power of Siberia 1 pipeline since 2019, would “increase its deliveries” to reach “20 billion cubic metres of gas” each year.
The pipeline, which currently links gas reserves from the Chaiandina field to northeastern China, would secure those additional flows by connecting the Kovytka field, near Lake Baikal early next year.
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By 2025, the pipeline will reach its maximum capacity, pumping 61 bcm of gas a year, dwarfing Nord Stream 1, out of which 38 bcm will reportedly be delivered to China according to a 2014 contract between Gazprom and its Chinese counterpart CNPC.
Beijing and Moscow have also signed agreements to build new transit routes from Vladivostok in Russia’s Far East to northern China, which would bring an additional 10 bcm of gas, according to the Russian energy ministry.
However, the Power of Siberia 2 pipeline could be year off, as an industry expert in Beijing said: “Fundamentally we see little support for Power of Siberia 2 to materialise before 2030 as China has secured enough supplies by then.
“It will be a tremendously complex negotiation which could take years, as it carries huge political, commercial and financial risks.”
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