Russia-China Gas Pipeline talks hit impasse over price, supply terms

Three sources told the Financial Times that talks reached a dead end in recent weeks, with China driving a hard bargain by demanding tough conditions that Russia has so far been unwilling to accept.

Negotiations between Moscow and Beijing over a major new gas pipeline have ground to a halt, according to sources familiar with the matter, as the two nations clash over pricing and supply volumes for the multi-billion dollar energy deal.

Three sources told the Financial Times that talks reached a dead end in recent weeks, with China driving a hard bargain by demanding tough conditions that Russia has so far been unwilling to accept. The impasse throws into doubt the timeline for the pipeline project, which was expected to further cement the two countries’ strategic partnership amid increasing isolation from Western nations.

The sources, who spoke on condition of anonymity, said Russia’s invasion of Ukraine and subsequent Western sanctions limiting its energy export markets have given China immense bargaining power. Russia had been counting on this pipeline, capable of pumping 38 billion cubic meters of gas per year, to reroute supplies previously destined for Europe.

Price has emerged as a key sticking point, with China insisting on rock-bottom pricing that could make the pipeline unprofitable based on Russia’s cost calculations. There are also disputes over the annual supply volumes China is willing to commit to.

The Kremlin has been tight-lipped about the status of the talks. When asked about the reported impasse, Kremlin spokesman Dmitry Peskov told reporters negotiations are continuing but Russia would defend its interests.

Sources indicated it is now unlikely the two sides can finalize a deal by year-end as Moscow had hoped. That would delay the proposed 2028 target for beginning pipeline deliveries.

The pipeline, if completed, would bind the two nations together even more tightly through energy ties at a time when both are locked in escalating geopolitical competition with the U.S. and its allies. But the current squabbling demonstrates the inherent tensions in this hot-and-cold relationship between the two giant neighbours vying for clout on the global stage.