Oil & Gas

ECONOMY: The announcement highlights China’s appetite for steady and affordable natural gas supplies, with Gazprom agreeing to lift deliveries through the existing Power of Siberia pipeline to 44 bcm annually, up from 38 bcm. An additional 20% boost in supplies from Sakhalin Island will further diversify China’s energy intake. While the expanded flows could ease China’s reliance on spot LNG markets where prices are volatile they also raise questions about whether Beijing truly needs this volume, given its rising domestic production and long-term LNG contracts, including with U.S. exporters.

BUSINESS: For Gazprom, securing a binding memorandum on Power of Siberia 2 is a breakthrough after more than a decade of stalled negotiations. If realized, the 2,600-km project would add 50 bcm per year in export capacity, potentially generating billions in revenue and giving Russia greater leverage in global gas markets. Yet the economics remain uncertain: pricing remains unresolved, and Chinese buyers are expected to push for cheaper rates than what Europe historically paid. Moreover, Beijing’s ongoing investments in renewables and domestic output could limit future demand, casting doubt on the project’s profitability.

GEOPOLITICAL: Strategically, the growing flow of Russian gas into China strengthens the Beijing–Moscow axis at a moment of heightened rivalry with Washington. The alignment underscores Beijing’s readiness to ignore U.S. sanctions pressure and Trump’s attempts to extend American energy dominance. However, the deal also raises strategic dilemmas for China: doubling Russia’s share of its gas imports by 2030 could expose Beijing to overdependence on Moscow. For Russia, pivoting energy eastward helps offset the loss of European markets after the Ukraine war, but it risks locking the country into a junior partner role, with China dictating terms.