A new shift in the global energy balance: What does the Russian-Chinese gas deal mean?

In a surprising move, it sent shockwaves across global energy markets, signaling green light from Moscow and Beijing for a massive natural gas pipeline project. According to the agreement signed by the two presidents during the Shanghai Cooperation Organization meeting in Tianjin, the “Siberia 2” pipeline will move forward, a project whose negotiations had been on hold for years due to disagreements over prices and costs.

The Real Motivations Behind the Deal

The project has multiple strategic objectives. For Russia, it serves as a vital alternative to the European markets lost due to the Ukrainian crisis. The planned annual capacity is 50 billion cubic meters—equivalent to one-third of China’s natural gas imports—making it a partial solution to the Russian export crisis. For China, the political message is clear: reject Western pressure and maintain independence in energy policy.

But there is another implication: a clear rejection of American dominance over fossil fuel markets, especially as Washington seeks to expand its influence as a primary source of LNG.

Market Implications and Reshaping the Global Map

Economic indicators point to profound impacts. According to the International Energy Agency, between 2025 and 2030, an additional 300 billion cubic meters of new LNG export capacity will be added globally—an amount close to what the European Union consumed entirely in 2024.

This additional capacity will be distributed among several countries: about 50% will come from the United States, while the other half will be shared by Canada, Qatar, Malaysia, Mozambique, Mexico, Argentina, Senegal, Nigeria, and others. However, importing large quantities of gas via pipelines will weaken the economic viability of these new projects with high capital costs, especially in the United States.

Why Does China Prefer Pipelines Over LNG?

The answer lies in pure economics and geopolitical risks. Pipeline gas is much cheaper and more stable in price, providing protection against regional LNG market volatility. Moreover, security concerns related to long-distance maritime gas transportation and crossing strategic choke points like the Suez Canal and the Strait of Hormuz increase the risk of disruptions.

China’s current demand for natural gas is about 80 billion cubic meters annually, making Beijing the largest importer worldwide. Demand is rising as China seeks cleaner alternatives to coal for power generation, heating, and industrial applications.

Obstacles That Have Persisted for Years

Despite signing the memorandum, the deal’s details remain complex. The main sticking point that previously delayed negotiations was the volume: Russia wanted to sell 50 billion cubic meters, while China was cautious about committing to such a large quantity. The second issue concerns pricing—Beijing argued for subsidized local prices, while Gazprom (the Russian state gas company) insisted on linking prices to Asian markets, which are typically about double.

How these disagreements will be resolved is still unclear, but the political will is now stronger.

Mongolia’s Strategic Role

The pipeline will pass through the heart of Mongolia, a point that cannot be ignored. The Ulaanbaatar government has given its ongoing support for the project, with its current president confirming this in a trilateral meeting. For Mongolia, the project offers an opportunity to earn transit fees and secure gas supplies that support its economic growth, providing an alternative to its current reliance on local coal.

The Real Trump Card: Chinese Self-Sufficiency

Perhaps the most overlooked factor is China’s domestic gas production capacity. Currently, up to 60% of its needs are met domestically, and this percentage has been steadily rising since 2017.

While much of the traditional drilling has been undertaken, China has strategically prioritized developing massive unconventional sources: shale gas, tight gas, and coalbed methane. According to forecasts, production from these unconventional sources will surpass traditional production by the end of this year and continue to grow.

This means China actually holds stronger cards than it appears. While Russia relies on Beijing for about half of its oil exports, this only accounts for 17.5% of China’s imports. Diversification of sources and self-produced capacity give China real leverage in negotiations and contracting, which is the core of modern energy risk management strategy.

Natural gas forecasts indicate that this agreement is just one chapter in a longer story of reshaping the global energy map.