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The writer is a research fellow at the Center on Global Energy Policy at Columbia University

Russia and China have just reshaped the global gas game without signing a single supply contract. The proposed Power of Siberia 2 (PoS2) pipeline would deliver up to 50 BCM of gas per year from the Russian Arctic to northern China via Mongolia. The deal marks a geopolitical pivot and the signal it sends — to Washington and LNG markets — is already echoing far beyond the negotiating table.

Vladimir Putin seems to have weighed Donald Trump’s rumoured offer in Alaska — sanctions relief, recognition of Crimea, a frozen front line — and chosen long-term strategic alignment with China over tactical gains from the west. China, in turn, abandoned its studied ambiguity. By signing PoS2, it has signalled its readiness to escalate confrontation with the US amid a deepening trade war.

Since it invaded Ukraine, Russia has courted China as a major gas customer. Beijing responded with caution, maintaining commodity purchases but freezing direct investment and joint projects from 2022 onwards. That has now changed.

The PoS2 deal could reshape demand forecasts, investment decisions and contract strategies across global gas markets. Expectations of growing Chinese demand underpin today’s LNG investment cycle. A pivot to piped Russian gas — even a gradual and conditional one — undermines assumptions of tight markets in the 2030s. The message to LNG exporters — especially those in the US who see China as a growth market in the 2030s — is clear: China will need less gas, and on better terms.

The Russian-Chinese memorandum formalises intent but defers substance. The real negotiation over the gas supply agreement will rest on four key parameters: price, take-or-pay obligations, financing and timing. On all four, Beijing holds the stronger hand. On price, China is unlikely to accept anything close to European or market-based Asian benchmarks. Instead, it will push for a price somewhere between Russian domestic rates and the oil-linked formula used in Power of Siberia 1, already the lowest-priced pipeline gas in China’s portfolio. That would secure a cheap long-term supply for China and offer minimal margins for Gazprom. It also provides China with bargaining power while reinforcing its industrial and energy security.

Long-term gas contracts typically require buyers to pay for a minimum volume whether or not they take delivery. Looser terms would give Beijing maximum flexibility and growing influence over global spot prices and contract design. Combined with the expansion of Chinese trading houses and demand-side flexibility, this positions China as a swing player in the global gas market — capable of shaping prices, arbitrage flows and investment cycles.

Russian pipelines have typically been funded solely by Gazprom. But the $14bn PoS2 could change that. Gazprom’s CEO Alexei Miller recently referred to “discussing financing mechanisms”. China’s provision of loans or capital could alter the project’s economics, easing Gazprom’s financial strain and making the pipeline more viable. It would also mark a turning point in bilateral economic ties. Since 2022, Chinese companies have largely withheld investment in Russia’s energy sector. A Chinese financial stake in PoS2 would reopen that door.

China’s leverage is most visible with regard to the project’s timing. The supply agreement can be delayed indefinitely; PoS2 gives China the right — but not the obligation — to draw on discounted Russian gas in the future. Russia, by contrast, has already made its alignment public, with no guarantee of commercial returns. This asymmetry reflects the broader power dynamics. Russia seeks to project resilience and re-anchor its gas exports eastward. For China, the pipeline is a hedge, an option to be exercised at its convenience.

The strategic implications extend well beyond China and Russia. For the US and the LNG industry, the impact will be immediate. Even though PoS2 gas will not flow until the 2030s, it is already altering expectations. Buyers, project developers, and banks are all watching closely; if China relies more on Russian pipeline gas in the next decade, that reshapes LNG portfolio math today. A shift towards Russia — with flexible volumes and lower prices — could derail some projects before they reach final investment decisions.

A prolonged LNG oversupply could depress prices into the next decade and delay new capacity. Meanwhile, China’s new role as a swing player gives it unprecedented market influence and signals a new phase in the China-Russia-US energy triangle.