Putin and Xi met in Beijing as the U.S.-Iran war reshapes global energy flows. Power of Siberia 2, long stalled over pricing, is back on the table, but unresolved terms and strategic caution suggest a deal remains distant.

Key Highlights

  • Moscow and Beijing signed a legally binding Supply memorandum in September 2025, but pricing, financing, and a delivery timeline remain unresolved.
  • The U.S.-Iran war has disrupted nearly a third of China's LNG supply and half its oil imports via the Strait of Hormuz.
  • China holds roughly 92 days of crude inventory, limiting short-term urgency to accept Moscow's pricing terms.
  • Russia's European gas export volumes reportedly fell 44% last year, making China its most consequential remaining energy market.
  • Twenty of the 40 expected bilateral agreements were signed in the presence of both leaders, though Power of Siberia 2 was not explicitly confirmed among them.

A Pipeline Revival Timed to Geopolitical Turbulence

Russian President Vladimir Putin arrived in Beijing on Wednesday for a state visit with Chinese President Xi Jinping, with energy cooperation framed as the centerpiece of an already expansive bilateral relationship. The long-delayed Power of Siberia 2 Natural Gas pipeline, a 2,600-kilometer infrastructure project that would carry 50 billion cubic meters of gas annually from Russia's Yamal fields to China via Mongolia, was prominently on the agenda, even as key commercial terms remain unsettled.

The timing of the visit carries unmistakable strategic significance. The U.S.-Iran conflict, which began in late February, has effectively closed the Strait of Hormuz and disrupted approximately half of China's oil imports and close to a third of its liquefied natural gas supply. For Beijing, this represents the most acute maritime energy supply shock in decades. For Moscow, it offers a rare window to press the case for overland supply infrastructure that bypasses maritime chokepoints entirely.

Pricing Remains the Central Fault Line

Despite the Kremlin's optimism, the commercial impasse that has stalled Power of Siberia 2 has not visibly narrowed. China has reportedly sought pipeline pricing aligned with Russia's domestic rate of approximately $120 to $130 per 1,000 cubic meters. Moscow, in contrast, is seeking terms closer to those underpinning Power of Siberia 1, a figure analysts estimate would more than double that level. The gap is not merely commercial. It reflects the asymmetric Leverage each side holds in the negotiation.

China's position is reinforced by several structural factors. Its domestic gas output rose 2.7% in the first four months of the year. Central Asian pipelines provide supplemental supply independent of the Russian system. And the country maintains onshore crude inventory estimated at approximately 1.23 billion barrels, sufficient to cover roughly 92 days of refining needs. Together, these buffers reduce the urgency with which Beijing must close a deal on Moscow's preferred terms.

Kremlin spokesman Dmitry Peskov acknowledged as much, confirming that while there is a general shared understanding on the project, specific terms remain to be agreed and no delivery timeline has been set. Notably, Putin himself made no direct reference to Power of Siberia 2 in his public remarks. Gazprom has been conducting a feasibility study on the project since 2020 and already announced a binding 30-year supply memorandum, but a feasibility study and a final Investment decision are structurally distinct milestones.

Strategic Codependency and Its Discontents

The bilateral energy relationship is already substantial. China's imports of Russian oil rose 35% year over year in the first quarter, according to official customs data. The existing Power of Siberia 1 system delivered approximately 38 billion cubic meters of gas to China last year, with both governments agreeing to expand its annual capacity further. A second pipeline, at the scale proposed, would deepen that interdependence considerably.

Analysts have noted the structural risks embedded in that outcome. A completed Power of Siberia 2 would leave Russia highly exposed to a single customer for a large share of its gas revenues, a dependency compounded by the near-collapse of its European export market following the 2022 invasion of Ukraine. For China, the project would shift one form of vulnerability, maritime supply disruption through the Strait of Hormuz, into another: dependence on a politically volatile bilateral relationship with Moscow.

The geopolitical context adds further complexity. Xi's willingness to host both Trump last week and Putin this week signals a deliberate posture of strategic centrality, positioning Beijing as the indispensable interlocutor in a fragmenting international order. The two leaders issued a joint statement advocating for multipolarity and a new framework of international relations, with Xi stating that both countries should oppose "all unilateral bullying and actions that reverse history." The language is calibrated: firm in principle, precise in its ambiguity about specific adversaries.

What the Deals Signed and Unsigned Reveal

Of the roughly 40 bilateral agreements expected to be signed during the summit, 20 were formalized in the presence of both leaders, covering broad economic cooperation and joint development commitments. Almost all Russia-China trade settlements are now conducted in ruble-yuan, a structural shift away from dollar-denominated trade that has been accelerating since 2022. Xi specifically noted planned acceleration in cooperation on artificial intelligence and technology innovation, areas that diversify the Partnership beyond its traditional energy and defense axis.

The energy discussions also took place against the backdrop of Trump's own Beijing visit the previous week, during which China confirmed a purchase of 200 Boeing aircraft and signaled willingness to seek reciprocal Tariff reductions exceeding $30 billion. The juxtaposition underscores Beijing's operating principle: parallel engagement across strategic competitors, with commercial leverage preserved on multiple fronts simultaneously. China is not choosing sides. It is managing the price of alignment with each.