Active Conflicts & News Megathread September 01, 2025

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[u/teethgrindingaches]

Gazprom caught a break today with the signing of Power of Siberia 2. Took them a decade of painstaking negotiations with CNPC, but the 50 billion cubic metre pipeline is finally going forward.

Russia's energy giant Gazprom and China's state-owned CNPC signed a binding agreement on Sept. 2 to build the Power of Siberia-2 pipeline, set to deliver gas from Russia's Yamal fields to China via Mongolia for 30 years, Gazprom CEO Alexei Miller announced. The deal, long delayed by Beijing's hard bargaining over prices and volumes, cements Moscow's pivot to Asia as it loses access to European energy markets. Supplies through the new route are expected to reach 50 billion cubic meters annually.

Moscow and Beijing also agreed to boost deliveries through the existing Power of Siberia line from 38 to 44 billion cubic meters per year. Miller announced the breakthrough after trilateral talks in Beijing between delegations from Russia, China, and Mongolia. "This will be the largest, most ambitious, and most capital-intensive gas project in the world," he said.

The exact price was not specified, but Bloomberg says it's lower than what Europe is paying (which shouldn't come as a surprise). CNPC has long been holding out for preferential rates; whether Gazprom caved or whether they accepted higher prices at Beijing's order is anyone's guess.

EDIT: Take this with some hefty salt, but rumour has it that CNPC was previously wary of US sanctions w.r.t. committing to such a big project. CNPC being a fuckoff huge SOE and one of the biggest oil companies in the world means that sanctions (if rigorously enforced) would have major political and economic fallout. Note that last week saw the first sanctioned Russian LNG tanker dock at a Chinese port, a tanker which set sail literally hours after Trump met Putin in Alaska the week prior. Fertile ground for all sorts of rumours, obviously. Make of that what you will.

[u/SuperBlaar → u/teethgrindingaches]

It seems the price hasn't been decided yet and a contract is expected to be signed on the matter before the end of the year. Miller said it would be lower than what Europe is paying (explaining it by shorter logistics strain), but how much lower seems to still be in dispute between Russia and China.

(https://www.vedomosti ru/business/news/2025/09/02/1135804-tsena-postavok ; https://www.vedomosti ru/business/articles/2025/09/02/1135851-izvestno-o-sile-sibiri)

It's alleged that China was asking to pay the same price as gas on internal Russian market (120USD/1000 cubic meters +/-) while Russia wanted pricing similar to POS1 (which is already thought to be at least 25% cheaper than prices for Europe were, and twice Russia's internal price), so it's likely something will be agreed between the two.

[u/Tricky-Astronaut → u/teethgrindingaches]

Everyone knows that Europe paid a premium on Russian gas. Some countries didn't want nuclear or coal. Others specifically wanted to buy from Russia. Gazprom obviously charges whatever it can get away with.

For example, here's Germany's merit order of thermal power plants in 2018. Despite carbon prices, the most expensive coal plant was cheaper than the cheapest gas plant. In India and China, gas has been largely pushed out of the grid, but Germany happily paid the premium.

If we look at the current situation, Hungary has the highest wholesale prices in the EU. That's because Gazprom has a monopoly. Even Germany has lower prices. There's no replacement for Europe's willingness to pay a premium.

[u/PaxiMonster → u/Tricky-Astronaut]

This is a discussion I had a long time ago, as early as 2013, I think, when I ran into my former ETS professor at a conference. The trend was already starting to look obvious back then, even though this was before the whole green deal thing sealed it.

I remarked (one of those polite things you say, I didn't really mean anything by it) that one thing that had stuck with me from his course was the counterintuitive notion that, even though we think of the merit order in terms of demand and supply, everything that happens "to the right of things you can't easily turn off" (i.e. nuclear, coal and so on) is an opportunistic monopoly because, while things to the left of it can drive down their prices, you also need to close the merit order, and the merit order closes only when the people with the gas turbines say it's closed. So while any sound development strategy needs CCGTs, gas turbines and others to cover consumption peaks, it's important for governments to keep that confined as far to the right of the chart as possible, otherwise they lose the ability to regulate markets and whoever has the gas turbines turns into a de facto price arbiter. (Edit: assuming you can afford that kind of diversity, of course, some countries can't). He really lit up and told me, yeah, you'll see that, unless something tremendous happens, fifteen years from now a lot of governments will not be able to regulate their energy markets anymore.

If you look at the 2018 merit order, the coal -> gas transition happens around 52,000 MW, at a marginal price difference of around 2 EUR, so around 5% of the baseline. In 2022, that same transition happens below the 40,000 MW line, at a marginal price difference of like 20%. In four years, Germany had conceded on the order of 20% of its energy market to production capacity that depended significantly on outside sources, to the point where a huge proportion of what powers its industrial base is entirely outside the German government's ability to develop or influence. E.g. if this dependency deepens, the German government doesn't (easily) have the option to invest in additional extraction capacity to curb supply, the best they can do is maybe open additional interconnects and hope whoever's at the other end also wants to pump more gas.

But the bigger problem is that everyone was so busy chasing emmision quotas that they hurried to displace coal because, being domestic, it was faster and easier. But it's way easier to close production capacity than to open new capacity, so more and more of the merit order fell "to the right", where suppliers can basically ask for any price they want, which accounts for the greater marginal price difference, and the increase in prices across the board.

(Edit: to clarify, what I mean here isn't that minimizing emmision figures per se was a problem, I think that was definitely the correct goal to pursue. I think what some European governments failed to do, though, was sufficiently incentivize the replacement of polluting capacities with easily regulable alternatives. Some regulatory models, like MIBEL, worked around that and it was efficient, but it relies on subsidy payments so it's not easily extendable, and worked precisely because the limited transmission capacity of the Iberian network skewed fuel price effects even further, so it would probably not be as efficient if applied EU-wide).

So the German government ceded both energy policy development and regulatory ability -- ironically enough, in the name of cheaper energy.

His opinion at the time, which I now share, was that this was criminally negligent purely from an energy and industrial development perspective, and that there is absolutely no way it could have happened without multiple, well-targeted campaigns to sway high-level officials into acting against their countries' economic interests, despite advice from their own experts. I don't mean to say they were all campagin from foreign actors, though I have no doubt some were, even if indirectly. Most were just from interested internal actors. But it took a long time to convince so many people to act so badly against their own interests, despite advice from their own experts, advice which was not formulated in technical terms, it's always been the kind of things that politicians understand (e.g. it's going to make things more expensive and make it harder to create workplaces). This whole debacle has been equal parts high-level corruption (remember Schroder?) and political myopia.

[u/Infamous-Salad-2223 → u/teethgrindingaches]

So, I heard months ago it was kinda dead cause China wanted cheaper gas prices and Gazprom was not having it given the cost of the project, so I guess they compromised?

Is it known the estimate of what the gas sell price should be to recoup the expenses in let's say a few years?

[u/PaxiMonster → u/Infamous-Salad-2223]

It's kind of hard to say, because the contract hasn't actually been signed, the price of deliveries hasn't been disclosed, and it'll actually take until the early 2030s to reach design transfer capacity, so "a few years" is way into the future (POS-1 was opened in 2019 but I don't think it reached full operational capacity until this year?)

The agreement for POS-2 is on 30 years at a projected transfer volume of 50B m3/year. That's more than the current POS-1, on a shorter route, but construction and exploitation might be more expensive, so amortization periods would be comparable. Not that it means much, since as far as I know that data isn't available for POS-1, either, but in any case, it's not construction cost and amortization that were the main blockers of POS-2 so far, it was disagreements over gas price.

[u/checco_2020 → u/teethgrindingaches]

Are there any details on when the pipeline should Start to deliver gas?

[u/teethgrindingaches → u/checco_2020]

2030 was proposed way back when, but that assumed construction started last year. So figure 2032 or so?

[u/Tricky-Astronaut → u/teethgrindingaches]

Isn't it too late to be meaningful? As the Bloomberg article notes, China's gas demand growth has been slowing. In fact, China's gas imports are down by 7% so far this year.

This could eliminate some of China's LNG imports, but it's an incredibly expensive way to do it (someone has to pay for the pipeline), especially for a stop-gap solution.

[u/Electrical-Lab-9593 → u/teethgrindingaches]

what is to stop UAF hitting this before it is finished, also ditto for current pipelines, is it just the risk that China could start providing lethal aid to Russia ?