"Gazprom Can No Longer Be Saved
- 2.09.2025, 14:24
Russia has signed a memorandum of full understanding with China.
Gazprom shares perked up on Tuesday after a long period of gloom. The head of the Russian company, Alexei Miller, announced that he had signed a legally binding memorandum on the construction of the Power of Siberia 2 gas pipeline. However, the optimism of Gazprom shares is likely to be short-lived for a long time. Because memorandums cannot save Russia's national treasure, writes planbmedia.io.
"Power of Siberia 2" is designed to supply 50 billion cubic meters of gas a year. According to Alexei Miller, once the pipeline is built, China has promised to buy Russian gas through it for 30 years.
Gazprom has also agreed to increase supplies through the existing Power of Siberia 1 pipeline from 38 to 44 billion cubic meters per year. And to add another two billion through the Soyuz-Vostok pipe. All in all, if you look with the naked eye, Gazprom's shares are happy for a reason. But, as always, there are some nuances.
Because there is mutual understanding between Russia and China. There is no gas pipeline between them. And the first time they agreed on mutual understanding was in 2021, when Gazprom still had a place to put its gas. In 2022, when gas exports to Europe had already halved, Deputy Prime Minister Alexei Novak promised that final agreements would be reached in the near future.
About six months later, Putin already said "in the near future". The "Siberian Power" was to be finally started in 2024. And all this time, Russia and China had a complete mutual understanding.
But even if the most definitive agreements are reached in the very near future, the construction will take another five years. And it is necessary to save Russia's national treasure now. Last year Gazprom suffered losses worth a trillion rubles. The national wealth already has to be saved by the whole Russian world.
And most importantly, even after the hypothetical completion of the hypothetical gas pipeline construction, the problem will not be finally solved. Because the loss of the European market has left Gazprom with an extra 155 billion cubic meters of gas per year. And Power of Siberia 2 can take only a third of these volumes.
And then there is the delicate issue of price. Miller delicately did not say anything about it. Now Gazprom sells gas to China at a 30-40 percent discount from the European price. In exchange for agreeing to build the Power of Siberia 2, it asks for an even bigger discount.
And unlike Gazprom, China has nowhere to hurry. Because China has a lot to choose from. The project to build a gas pipeline from Turkmenistan competes with the "Power of Siberia 2". And so far the competition is in its favor.
So even full mutual understanding does not guarantee the result. Especially here and now.