The Kremlin is exaggerating the significance of gas supplies to China
Against the backdrop of Xi Jinping’s visit to Moscow, Russian media reported a new daily record in gas supplies to China. Supplies are undertaken within a bilateral long-term gas purchase and sales contract between Gazprom and Chinese CNPC. As reported by Gazprom on March 20th, the Chinese side’s demand for supplies through the Power of Siberia pipeline significantly exceeded contractual obligations.
The information about the scope and resilience of China-Russia cooperation in the gas sector is largely a propagandistic myth. Firstly, Russia supplied only 1.5 billion cubic meters of gas to China in 2022, less than 5% of China’s needs. Even with the increase in pumping to planned levels - up to 38 billion cubic meters in 2025 - this would amount to around 10% of the Chinese market. Secondly, the cost of gas for China is significantly lower than market quotes and contract prices for Europe. Gazprom is pumping gas to China at approximately $290 per thousand cubic meters. This is more than three times less than what European customers pay under contract terms: by the end of December, it was roughly $1000 per thousand cubes. Thus, the discount for CNPC stands at around 70%. In the first quarter of 2021, the price of gas in China even dropped below $120 per thousand cubic meters. Even in Belarus, Russian gas was sold with more expensive rates - $128.5. At the same time, Tajikistan sold fuel to China for $187, Kazakhstan - for $162, and Uzbekistan - for $151. Due to high construction costs and low contract prices, the “Power of Siberia” project will be virtually impossible to recoup. For the Russian government, this is not a commercial but a political project from the outset.