A blow of paramount proportion was delivered on
September 2, 2025 when Russia entered into an agreement to supply Yamal gas to
China. Originally this was intended for mainly European users. The geoeconomics
blow cannot be easily stomached by Europe, though.
For many years Putin has been negotiating with his
Chinese counterpart regarding the opening of “Power of Siberia 2”
pipeline traversing Mongolia to North-West China. This 2,594-km-long pipeline
would add capacity to export of 50 billion cubic meter gas from Russia to
China.
In a ceremonial setting both Vladimir Putin and Xi
Jinping exchanged signed documents in front of the cameras in Beijing where the
news has torpedoed all those hopes western Europe had in acquiring cheap gas
from Russia. One thing is
clear, Russia is now bent on redirecting gas out of Europe to Asia.
Russia was hoping for this kind of deal for more
than two decades now. After quite some speculation along with bargaining on
pride, duration and other terms, both leaders finally agreed to formalize understanding
such that this turns into a formal and binding bilateral agreement.
Does that mean
Europe would be deprived of the Russian gas? As regards to cheap Russian gas,
yes it is. Europe can still buy gas at fairly high price once the Nordstream is
repaired and start functioning. Besides, existing pipelines via Ukraine would
also be re-opened once the Special Military Operation (SMO) undertaken by
Russia in Ukraine is successfully concluded.
Alexey Miller who is Deputy Chairman of the Board
of Directors and Chairman of the Management Committee of Russian energy company
Gazprom opined that it took a
long time to prepare, negotiate with Chinese counterparts to bring into fruition
this epoch making agreement over the Power of Siberia 2 pipeline.
In nutshell, Europe's fate is sealed as regards to continuity
of buying cheap gas. China gets low-cost and dependable supply of Russian gas. Mongolia stands to benefit
from transit fee at present and be able to tap in, on pipeline gas as
she develops, in time to come.
Incidentally, Russia is moving away from export of LNG towards pipeline.
In fact today, 75% of her gas exports are channelled thru pipeline which
ensures safety & facilitates easy transport as well as pricing lower than
in the case of LNG.
The Russian coup on the gas exports indicates how her business strategy is crafted as against all these sanctions imposed on her. Navigating business strategy amid geoeconomics, Gazprom is a top line gas exporter globally. On the one hand America and her sanctions are rubbished. On the other hand Russia continues to cherish her clout in geoeconomics in e global south with particular reference to China, Eurasia and time to come towards the coastal regions of East Asia.
Cheers!
Muthu Ashraff Rajulu
Business Strategist
Mobile: + 94 777 265677
E-mail: cosmicgems@gmail.com
Blog: Business Strategist
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