Vladimir Putin arrived in Beijing on May 20 hoping that the Iran war's disruption to global energy markets would finally give him the leverage to close one of the most consequential — and most elusive — energy deals of his presidency. He left the Chinese capital empty handed.

The state visit comes only days after US President Donald Trump left the city and was charged with signalling. The two presidents signed a new strategic partnership deal and repledged themselves to their “no limits” partnership, in gestures that were clearly aimed at the White House.

They also signed off on a string of agreements on bilateral cooperation and an effusive display of strategic unity. Russian President Vladimir Putin brought a very large delegation of top officials and business leaders, including the heads of Russia’s three major energy companies, Gazprom, Rosneft and Novatek, keen to deepen already strong commercial and political ties.

But despite repeated pledges of friendship and strategic coordination, the summit ended without any public breakthrough on the long-delayed Power of Siberia 2 gas pipeline — the multibillion-dollar project that is supposed to carry 50bcm of gas to China’s underdeveloped northwest regions. That’s about a third of the gas Russia used to sell to the EU and together with the existing Power of Siberia 1 (PoS1) pipeline with a nameplate capacity of 35bcm would go a long way to restarting Russia’s lucrative pipe gas delivery business.

Russia began piping gas to Europe in the 1970s and built up a major pipeline network to deliver gas to the west that worked flawlessly throughout the Cold War. Those pipeline projects culminated in the Nord Stream 2 pipeline, which never went into operation due to political wrangling and was then destroyed in 2022 by an explosion. Some 70% of Russia’s gas export infrastructure runs west as a result, with the two Power of Siberia pipelines intended to diversify its export routes.

The talks on commissioning construction work for POS2 is going slowly, reportedly as the two sides haggle over the price of gas in the pipeline. Kremlin spokesman Dmitry Peskov told reporters that, "the basic parameters of understanding" for the pipeline are in place, including its route and construction method. That is diplomatic language for: but we haven’t settled on the price yet. And the negotiations on the price have already been going on for around a decade. Moscow is in a rush to close the deal. Beijing is not.

The deal Russia needs

The strategic logic driving Moscow's urgency is not difficult to understand. Russia's gas exports to Europe have collapsed since its 2022 invasion of Ukraine, with state-owned Gazprom (MOEX: GAZP) seeing shipments plunge 44% last year to their lowest level since the Soviet era. Power of Siberia 1, the existing pipeline to China, reached its operational ceiling during 2024-25. The Far East pipeline, which will add 12bcm of annual capacity, is scheduled for 2027 but will ramp up progressively. Power of Siberia 2 is the big prize.

The proposed 2,600-kilometre route would run from the Yamal peninsula in northern Siberia through Mongolia into China, carrying around 50bn cubic metres of gas a year — equivalent to around 12% of China's estimated total gas consumption in 2025.

At full capacity, the pipeline would roughly double Russia's current share of Chinese gas imports from around 10% to approximately 20%, fundamentally reshaping Moscow's export geography and reducing its dependence on markets that have sanctioned it.

But Beijing is playing hardball to get the best deal possible. Piped gas deals have been described as getting married: it takes time to woo your partner, but once you have clinched the union, you are locked in for life. Unlike oil which can easily be transported by ship to any market, piped gas deliveries are fixed once the pipelines have been built and decades-long price contracts are immune to fluctuations or crises on energy markets.

Beijing has reportedly asked to pay close to Russia's domestic prices, which are heavily subsidised. Russia's average gas sales price to China last year was $249 per thousand cubic metres. China wants approximately $120. Russia is insisting on an 80% pipeline fill rate guarantee; China is offering 50%, creating a significant risk of idle capacity and stranded capital.

Russia hoped that instability caused by the conflict in the Middle East would see China show greater flexibility in negotiations over pricing. Moscow's calculation was that the Hormuz closure, which has disrupted Qatar's LNG exports and pushed Asian gas prices sharply higher, would make a landlocked pipeline bypassing maritime chokepoints more attractive to Beijing on any terms. While that energy shock creates fresh incentives for Beijing to consider an additional overland pipeline that bypasses maritime chokepoints entirely, analysts remain sceptical that it would alter Beijing's negotiating calculus. China holds around 1.23bn barrels in onshore crude inventory — sufficient for roughly 92 days of refining needs, according to Kpler so it can weather the short-term storms. But ultimately, China always thinks long-term and is looking to lock in a cheap and reliable source of energy for several decades.

China's leverage

The sanctions on Russia make the piped gas business a buyer’s market. China's attitude to the project for years was "if it happens, great, if it doesn't, we'll manage," said Alexei Gromov, head of the Russia-based Institute for Energy and Finance.

Moreover, with China’s drive to become the world’s first electrostate and the explosion of both renewable and nuclear energy capacity, gas is only one part of China’s energy mix – a useful addition, but not critical.

And it already has alternative sources of gas. China's domestic gas output rose 2.7% in the first four months of the year and increasing amounts of gas are being piped from Central Asia. As IntelliNews reported, Turkmenistan has started construction of the TAPI pipeline that is supposed to supply 30bcm of gas to China from the largest gas field on the planet. Kazakhstan also already sends China gas through the Central Asia–China gas pipeline system, which runs through Turkmenistan, Uzbekistan and Kazakhstan before entering China’s Xinjiang region and intends to re-task more of the Soviet-era pipelines to increase the volumes.

During Russian Foreign Minister Sergei Lavrov's April visit to Beijing, Chinese Vice Premier Ding Xuexiang was simultaneously signing agreements to expand gas cooperation with Turkmenistan — a pointed signal that Moscow is not Beijing's only option. If POS2 can supply the equivalent of more than 40mn metric tonnes of China's annual LNG needs, the value of that supply is measured against alternatives, not against Russia's needs.

Despite Western sanctions, China has purchased more than $367bn worth of Russian fossil fuels since the Russia-Ukraine war began in February 2022. Russian oil exports to China grew 35% in the first quarter of 2026, according to Putin's presidential aide Yuri Ushakov. China is buying; it simply prefers to buy on its own terms.

"The first Power of Siberia pipeline took about 20 years or more to come into being, and the Chinese drive a hard bargain on price. On this second pipeline the story will be no different, the cards will all be in China's hands," said Gromov.

A September 2025 memorandum signed between Gazprom and Chinese counterparts on POS2 was portrayed by Russian officials as a major breakthrough, but it did not constitute a binding final agreement and the talks effectively remain up in the air.

Kremlin foreign policy aide Yuri Ushakov said ahead of the trip to Beijing that the pipeline "will be discussed in great detail between the leaders."

For Moscow, the absence of a deal is more than a diplomatic disappointment.

Every year that passes without resolving the pricing dispute is a year in which Gazprom's revenues stay compressed, Russia's strategic exposure to European market closure remains unhedged, and Beijing's bargaining position, if anything, strengthens.