During the opening of the Winter Olympics in Beijing, one of the highlights was the announcement of the new deal between China and Russia on constructing the “Power of Siberia 3” and Russian Far Eastern route pipelines.
At the same time as the signing of the second contract for the supply of Russian natural gas to China, the feasibility study for a project to build a natural gas pipeline from Russia to China through Mongolia was completed. The study was signed by the Deputy Prime Minister of Mongolia Amarsaikhan.S and the CEO of the Russian oil giant, Gazprom Alexey Miller. According to the study, the project is technically and economically feasible. The initiative for constructing a natural gas pipeline through Mongolia was first initiated by Mongolia about 30 years ago. However, the project was stuck for years at the initial stage of research and the current progress is the closest it has come to realization.
Strategic pressure from the U.S and the clean energy initiatives by the European countries have shrunk Russia’s dominating position in Europe’s natural gas market, thus, Russia has started shifting its focus towards China and Southeast Asia. The first agreement was the “Power of Siberia-1”. The pipeline became operational in 2020. Russia is a new competitor in China’s market. But the above-mentioned “Power of Siberia-3” shows that the country is rapidly expanding its market share in China. Russia’s need to expand its natural gas market exports and revenues and China’s increasing demand for the commodity and the necessity to diversify its import sources, as well as ensuring the safety of transportation are raising the significance of the Power of Siberia-2 pipeline that will run through Mongolia. Until now, China has never expressed a position on the pipeline except that “more studies are needed”.
No specific deal or agreement was reached between its two neighbors on this project. The project isn’t specified in any policy documents of the two neighbors, only outlined in Mongolia’s Vision 2050. But in recent years, there has been significant progress on the project between Mongolia and Russia. Both sides signed two memoranda that set the route and carried out the feasibility study. The part of the pipeline within Mongolia is called “Soyuz Vostok”. Mining Insight magazine has covered the situation surrounding the Power of Siberia 1, 2, and 3, also known as Putin’s pipelines, as well as the overall natural gas industry in our February edition. However, it is difficult to predict how political and regional tensions will change the course of our lives and leave its mark in history.
The tensions heightened between Russia and Ukraine as Russia launched an attack on Ukraine and western countries are tightening their sanctions on Russia. Among those, Germany, which has been providing consistent support to Russia’s “Nord Stream-2” pipeline, decided to terminate the project, freezing a significant opportunity for Russia in the European market. Furthermore, Russia could be completely cut off from the global financial and economic system after the smoke is settled.
