China and Russia sign largest natural gas pipeline deal in history (March 1, 2022)

As the west fights over who can execute the most impressive sanctions against Russia, China took the opportunity to make a deal with the Russian government. Russia's energy powerhouse Gazprom said on Monday that it signed a contract to design a new natural gas pipeline to China. It also said the pipeline would deliver up to 1.8 trillion cubic feet of natural gas a year via Mongolia. Bloomberg reported that if plans for the pipeline were to go through, it could be Gazprom's biggest ever deal with China.

Bloomberg also reported that Gazprom could build an interconnector between its westbound and eastbound pipeline systems, allowing it to divert gas from fields that currently supply only Europe to China. Gazprom said that Alexey Miller, the chair of the Gazprom Management Committee, and Sainbuyan Amarsaikhan, the deputy prime minister of Mongolia, discussed the Soyuz Vostok project at a meeting on Monday. The Soyuz Vostok project is also known as the Power of Siberia 2 pipeline. The Power of Siberia 1 pipeline has been pumping natural gas from Russia to China since 2019 as part of a 30 year long deal worth $400 billion.

European gas prices have risen sky high as sanctions on Russia have been tightened over its invasion of Ukraine and amid fears of supply disruptions. Gazprom, which has a full monopoly on Russian gas exports via pipelines, said on Monday it was still shipping gas to Europe via Ukraine in line with their customers' requests. German energy company E.ON then told the Rheinische Post it had rejected calls to shut down the Nord Stream 1 pipeline, which carries more than a third of Germany's gas imports as well, to make sure Russian gas keeps flowing in. Nord Stream 1 has been transporting natural gas from Russia to Germany via the Baltic Sea since 2011. It's made up of two parallel pipelines, each around 750 miles long, and Nord Stream says it's able to transport up to 971 billion cubic feet of natural gas a year.

"Although bilateral oil and gas contracts are mainly to be settled in foreign currencies, we are pleased to see that the enterprises of both sides are actively studying the feasibility of using yuan settlements." Chinese Ambassador Zhang said. In line with the elevation of their bilateral ties to a "comprehensive strategic partnership", Chinese President Xi Jinping and Putin witnessed the signing of more than 10 deals last month, including an additional supply of 100 million metric tonnes of crude oil from Rosneft Oil Company, as well as the new gas supply deal with Gazprom.

Lu Xiang, a senior fellow with the Chinese Academy of Social Sciences, expected that China’s cooperation with Russia would not be disrupted, regardless of how the international situation changes, and he estimated that China could become the largest destination of Russian energy exports.

Sources: https://www.businessinsider.com/russia-china-gas-pipeline-sanctions-ukraine-putin-gazprom-soyuz-vostok-2022-3 https://www.businessinsider.com/nord-stream-1-eon-gas-pipeline-germany-gazprom-russia-ukraine-2022-2 https://www.bloomberg.com/news/articles/2022-02-28/gazprom-paves-way-to-new-china-gas-deal-as-sanctions-hit-russia https://www.scmp.com/news/china/diplomacy/article/3168490/us-reportedly-sought-chinas-help-avoid-ukraine-invasion?module=perpetual_scroll_0&pgtype=article&campaign=3168490