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Russia-China Power of Siberia 2 Pipeline Deal: A New Horizon

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Power of Siberia 2 Pipeline Deal
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It is worth noting that the signing of the Power of Siberia 2 pipeline deal between the heads of state of Russia and China was, as a matter of fact, the biggest news to come out of the meeting of the two leaders earlier in September 2025. It also happens to be a deal that may as well make the new global natural gas flow order permanent, to say the least, thereby potentially interfering with the energy dominance ambitions rolled out by President Trump.

The fact is that the Power of Siberia 2 project has been in the works for some years now. It was China that took its time to decide to commit to it. Now that the decision has been made, and though the details are yet to be tailored, the signal is crystal clear—China is all set to source more natural gas from Russia, and by that one means a lot more. The yearly amount of gas that Russia is going to be selling to China once the second Power of Siberia is finished setting up will go beyond 100 billion cu m.

As a matter of fact, this is a similar amount to that which Russia had been sending to Europe after the completion of the Nord Stream pipeline’s second branch. This will not be taking place now, not at least as the EU leaders are pledging to suspend all their imports of Russian energy in the next couple of years. Although the fact still remains that they keep buying Russian gas from TurkStream so as to enhance their LNG imports from a country that’s the most sanctioned in the world. Apparently, all this will have to stop if the EU is serious in terms of ending all the Russian energy imports.

They say as luck and geopolitics would have it, the EU happens to have a ready and willing alternative supplier. The point is that the U.S. gas producers have been on a roll, enhancing their production for the liquefaction plants that lie in the Gulf Coast, and have been eyeing the European market as being a long-term demand source. Interestingly, the Trump administration has been encouraging this as part of the energy dominance goal. For both, the Russia-China pipeline deal is indeed a major problem. Factually, it happens to be a bigger problem for the EU as compared to the US.

It is well to be noted that European businesses happen to have a competition problem. It crops up from the very high energy expenditures that drive up the final prices for things that are produced in Europe. China happens to have lower energy costs, which go ahead and boost the competitiveness of Chinese-made products. And then there is the innovation issue; however, it’s a different topic. Hence, China happens to reap benefits of low-cost energy so as to elevate the competitiveness of its products when it comes to international markets, while on the other hand, Europe struggles with the effect pertaining to high-cost energy when it comes to its competitiveness. Notably, the struggle is now all set to become chronic.

There is no shred of doubt when we say that Europe already happens to be the largest market for U.S. liquefied natural gas. This is perhaps good in terms of supply security; however, it is not so good when it comes to price. There is no way in this physical world that the U.S. LNG would go on to become cheaper for European buyers as compared to Russian crude or even, for that matter, the Norwegian pipeline gas for much more obvious reasons that are related to geography as well as the production costs in terms of gas liquefaction. This automatically happens to put LNG-dependent Europe at a level of disadvantage vis-à-vis China.

The fact is that this situation happens to be somewhat problematic for the Trump administration too, since the energy cost troubles when it comes to European businesses are going to eventually begin to have an effect on their purchasing power and also the purchasing power of governments which are actually responsible for securing the energy supplies—for instance, the heating season. This is not at all good for governments that plan to dedicate billions in terms of subsidies to certain specific industries along with financial aid to the households that are in a way unable to afford the present energy prices. The point is that there is not enough money so as to cover all the Europe expenses.

From the U.S. standpoint, the Power of Siberia 2 pipeline deal is indeed quite negative news, as it means China is going to be importing less LNG, such as the U.S. LNG, as Ron Bousso from Reuters pointed out in one of the recent columns. Still, the fact is that China has not gone on to import the U.S. LNG for months. It went ahead and stopped importing U.S. LNG in early spring because of the tariff spat which took place between Washington and Beijing. On the other hand, the U.S. LNG exports went on to hit an all-time high in August 2025, which itself suggests that the producers are not really in need of the Chinese market as such.

The fact is that the future may, on the face of it, look somewhat uncertain for both the U.S. LNG producers and the European buyers. The European governments have already gone on to insist that they are looking forward to reducing and eventually phasing out hydrocarbon consumption. The point is that this is going to take decades, if ever that happens. Notably, the reality of energy has gone on to help to motivate the growth across new U.S. LNG capacity, which is anticipated to come online in the next few years. Although there happen to be limits to how much new export capacity can get created, as the demand for gas happens to be on the rise in the U.S. itself.

Due to the boom when it comes to data center construction, U.S. domestic demand is surging for the first time in more than a decade. As soon as this goes on to push the prices high enough, there will be more gas that will be getting pumped into the domestic market, hence making LNG even more costly for the European buyers. In a way, it is indeed time that the leadership from Europe started to look into pipeline gas alternatives from, probably, Central Asia.

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