The summit between Vladimir Putin and Xi Jinping on May 20, 2026 produced a high-profile declaration of cooperation but did not produce a finished contract for the contested Power of Siberia 2 project. Leaders publicly endorsed a common understanding of the pipeline’s routing and construction approach, yet negotiators still must resolve a number of commercial and timing issues. The proposed artery — a roughly 2,600 km corridor carrying about 50 billion cubic meters of gas per year — remains technically feasible but commercially unresolved.
The summit language underscored a political will to deepen ties while allowing space for more detailed bargaining. Moscow and Beijing said they had reached agreement on the principal route through Mongolia and on broad construction responsibilities, but Kremlin and Chinese statements both acknowledged that pricing, financing terms and an operational timetable are outstanding. Observers note that such public alignment on core parameters often signals progress, yet it is also diplomatic shorthand for unfinished negotiations.
Technical feasibility and timeline
From a purely engineering standpoint the pipeline is achievable. Gazprom has experience with transcontinental lines and the earlier Power of Siberia (POS-1) demonstrates the firm’s capacity to execute long-distance projects. That initial line was agreed in 2014, started deliveries in 2019 and reached full capacity by 2026, providing a real-world benchmark. However, POS-2’s route across a third sovereign territory and colder, variable terrains raises logistical and permitting complexities. Industry analysts estimate that, once construction begins, reaching full throughput could still take several years — potentially up to a decade — due to permitting, construction sequencing and ramp-up of supply arrangements.
Commercial sticking points
Price is the central obstacle. Beijing has reportedly sought terms linked to its domestic gas benchmarks — figures widely cited in reporting as materially lower than what Moscow historically obtained from the European market. Russia, for its part, aims for a price closer to the terms it secured under POS-1, which would better justify the huge capital outlay. Negotiators are therefore wrestling with a classic trade-off: China seeks a low-cost, secure overland supply to reduce reliance on seaborne liquefied natural gas (LNG), while Russia needs netbacks that sustain state revenues and offset pipeline construction costs. Financing and risk-sharing arrangements — who funds pipes, compressors and transit fees through Mongolia — also remain unresolved.
Why pricing matters
Every dollar difference in the agreed price affects Moscow’s fiscal receipts and Gazprom’s profitability, while shaping China’s incentive to lock in a long-term, high-volume buyer-seller relationship. Beijing’s leverage stems from Europe’s withdrawal as a major Russian market since the 2026 invasion of Ukraine. With European demand down and pipeline exports to that region much reduced, Russia is eager to monetize reserves originally destined for Europe. That urgency weakens Moscow’s negotiating position and gives Chinese negotiators room to push for a significant discount.
Geopolitical and market implications
Beyond energy economics, POS-2 would cement a deeper Russo-Chinese strategic alignment and reshape regional gas flows. For China, a large overland supply reduces exposure to maritime chokepoints such as the Strait of Hormuz and the Strait of Malacca and lessens reliance on volatile spot LNG markets. For Russia, the pipeline would replace some lost European demand but would also concentrate a large share of exports to a single customer, raising the risk of becoming a price-taker. At a global level, 50 bcm diverted to pipeline supply could reduce China’s marginal LNG imports and, over time, exert downward pressure on spot prices and reshape trading patterns toward more regionally anchored agreements.
Risks and strategic trade-offs
Analysts warn that the deal would lock both sides into mutual dependencies. Russia risks surrendering pricing leverage; China risks overconcentration of supply from a politically sensitive producer. For transit Mongolia, the route offers substantial fees and economic benefits but also places it at the center of a major geopolitical corridor. The final outcome will therefore reflect a balance of strategic priorities, fiscal needs and commercial compromise rather than a simple engineering decision.
What to watch next
Negotiators will now move to technical and commercial working groups to hammer out the outstanding items — price formula, financing commitments, transit arrangements through Mongolia and a phased timetable for construction and ramp-up. Observers should watch announcements from state energy companies and any legally binding agreements that follow the political understanding announced on May 20, 2026. Until those details are formalized, the project remains a politically significant plan with sizeable economic and strategic implications but without the commercial closure needed to begin construction at scale.
