Russian company Gazprom has taken a significant step toward potentially the largest natural gas supply deal ever with China, following the severance of economic and political ties by countries worldwide due to Russia's invasion of Ukraine. Gazprom stated in a press release that the Russian gas giant signed a contract to design the Soyuz Vostok pipeline through Mongolia toward China, contingent upon reaching a new supply agreement with China.
The Soyuz Vostok pipeline is set to transport up to 50 billion cubic meters of natural gas annually to the Asian nation, according to Bloomberg, as cited by Al Arabiya.net. A new supply agreement with China would also enable Gazprom to build a link between its westward and eastward pipeline systems, effectively allowing Russia to redirect gas toward China from the fields currently supplying Europe. This could lessen Gazprom's dependence on the European continent, which is currently the largest single buyer of Russian gas.
The pipeline design contract comes at a time when the European Union, the United States, and countries such as the United Kingdom, Canada, and Japan are exerting unprecedented pressure on Russia after President Vladimir Putin ordered the invasion of neighboring Ukraine. Comprehensive sanctions limit Russia's ability to import essential technologies, access foreign debt markets, and even access a significant portion of the $640 billion buffer that the country created to protect its economy.
While Russian energy exports remain unaffected at this stage of the conflict, Europe has been exploring options to wean itself off Gazprom shipments. Gazprom CEO Alexey Miller commented on the Soyuz Vostok pipeline, stating, "Today, the design contract has been signed, which means the project has moved into the practical implementation phase." However, the announcement did not provide details on the progress of supply negotiations with China.
In 2014, Gazprom signed a 30-year, $400 billion deal to supply China directly with up to 38 billion cubic meters of gas annually via the Power of Siberia pipeline, with deliveries starting in late 2019. In recent months, as Gazprom's flow to Europe has been limited, shipments to China have regularly exceeded daily contract volumes. In early February, Russia reached a smaller gas agreement with China for direct supplies over 25 years of up to 10 billion cubic meters annually from fields in the Far East.
