China Refuses To Sign New Gas Contract With Putin

The Kremlin was left without a key decision that it had been waiting for for many years.

Chinese President Xi Jinping's pompously staged visit to Moscow ended without a key decision that the Kremlin has been waiting for years, writes finanz.

Despite Russian President Vladimir Putin calling Xi “dear friend” and speaking Chinese toasting his health, the Chinese delegation did not sign a new contract to buy Russian gas and build the Power of Siberia 2 pipeline.

Putin offered China 100 billion cubic meters of gas annually — 6 times more than Gazprom pumps now, and said that the project for a new gas pipeline with a capacity of 50 billion cubic meters per year was practically agreed upon.

But the joint statement signed by Xi does not mention the pipeline, and only talks about “strengthening the partnership” in energy. In a press statement, Xi said nothing about Russian gas.

Gazprom desperately needs the Chinese contract since it lost the European market and more than half of its exports last year. Gas pumping to Europe has fallen to the levels of the last years of the USSR, and this year it will return to the times of Leonid Brezhnev and Yuri Andropov.

“Gazprom found itself in a catastrophic situation with exports,” a source close to the company told Reuters. China will buy 22 billion cubic meters of gas this year —7 times less than the European Union consumed before the war. The cost of these deliveries is $290 per thousand cubic meters, while contract prices for Europe are $1,000 in December, BCS analyst Ronald Smith estimates.

The discount reaches 70%. But the problem is that China “just doesn't need the extra gas”, says Batt Odgerel, senior analyst at the Energy Policy Research Foundation.

China does not want to repeat Europe’s mistake, and intends to diversify suppliers, especially since there are no problems with this — the United States, Qatar and Australia want to sell gas, he points out: “This is a buyer's market. And unless Russia comes up with an extremely attractive offer, China can wait as long as it wants.”