PoS 2 remains central to Moscow's gas development plans, but now it seems, with or without a lucrative Chinese supply deal
President Vladimir Putin was on relatively restrained form at this year's Eastern Economic Forum in Vladivostok, compared with his performance at the same event 12 months ago.
Then, Putin threatened a complete halt to Russian energy exports if proposed G7 price caps on Russian oil and gas materialised. This year, he restricted himself largely to a few swipes against "western elites" in his plenary session address and a brief paean to the "developing multipolar world" — favourite themes for Putin in his efforts to nurture alliances against the west.
A year ago, Putin's threats to cut energy supplies had a certain resonance — Moscow appeared ready for anything in its confrontation with the west over the war in Ukraine and intensifying sanctions on Russia. Gas exports to EU countries through the 55bn m³/yr Nord Stream 1 pipeline had just been halted — after a steady scaling back of supplies on various pretexts — following the earlier halt to deliveries through the 33bn m³/yr Yamal-Europe route in May.
Putin did not make good on his wider threat, but the collapse in Russian pipeline gas flows resulted in a difficult winter 2022-23 for Europe. A judicious combination of demand reduction, increases in LNG import capacity and the removal of European gas grid bottlenecks enabled EU states to weather the storm, while starting to lay solid foundations for a future without Russian gas. An unusually mild winter also helped.
But Gazprom has been left with a lot of idled production capacity at gas fields in western Siberia, developed largely to supply Europe, and it has no immediate options for bringing this output back on line. Russian gas production dropped sharply in 2022 as a result and a further decline is expected this year.
Still waiting
At the 2022 Eastern Economic Forum, Putin highlighted an agreement with China on "pricing parameters" for gas supplies through Mongolia — an apparent reference to the proposed 50bn m³/yr Power of Siberia 2 (PoS 2) export pipeline — but without giving further details. And Putin repeatedly plugged the PoS 2 route during Chinese president Xi Jinping's state visit to Moscow in March — although Xi spoke of energy trade only fleetingly and in general terms.
Perhaps chastened by that experience, Putin referred to PoS 2 only in passing during his speech this week. And at his meeting with Chinese vice-premier Zhang Guoqing during the forum, both hailed rapidly rising Russia-China trade turnover, but with no public mention of gas supplies.
When Putin did refer to PoS 2 in his speech, it was in the context of the need to "integrate Russia's western and eastern gas distribution networks into one" — linking some of Gazprom's shut-in capacity and temporarily stranded reserves in western Siberia to potential new markets. This will allow more "flexibility" on global markets, Putin said — a brief nod to the export diversification agenda.
But he gave equal emphasis to the benefits of extending Gazprom's gas supply network to previously unconnected areas in eastern Siberia and Russia's far east region "to give industry additional resources [and] provide towns and cities with ecologically clean fuel".
Based on the gas development vision outlined by Putin, Russia will press ahead with PoS 2 in the absence of a commitment from Beijing to take gas through it, perhaps hoping that if it builds the pipeline, China will eventually come round to the idea. And in the meantime, by emphasising expansion of the domestic supply network, Putin can at least claim to be doing something for the inhabitants of some of Russia's most far-flung — and poor — regions.
