The power of Siberia | Armstrong Economics

The sanctions strengthened Putin and forced “unfriendly countries” to form a closer alliance against the West. While the West is suffering from an energy crisis with no way out, Russia is reaping many benefits from it. You may have heard of the China-Russia Eastern Route gas pipeline or the Yakutia-Khabarovsk-Vladivostok pipeline. Construction was approved in 2007, and in 2012 Putin ordered Gazprom to begin construction and renamed the project “Power of Siberia”. In 2014, China and Russia signed a 30-year, $400 billion deal, and by December 2019 the pipeline was operational.

The media focuses on the failure of the Nord Stream 2 gas pipeline due to the fault of German politicians, but forgets that Russia has alternative options for exporting fuel. Shipments through Power of Siberia have reached just $3.81 billion since December 2019, but China and Russia have plans to boost distribution. In 2021, China received 16.5 billion cubic meters of gas from the pipeline. The deal became so profitable that Beijing and Moscow created a second gas pipeline – Power of Siberia 2. This could double Russia’s exports to China with a pipeline that would also pass through Mongolia.

In the first six months of 2022, Gazprom exported 7.5 billion cubic meters of gas to China, increasing the volume by 63.4%. Before invading Ukraine in early February, China and Russia agreed to increase distribution by 10 billion cubic meters. Reuters believes it could increase sales by $37.5 billion over the next 25 years, but that could increase given high demand and low availability.

The West, namely Europe, needed Russian energy; Russia did not need Europe. President Biden has long acknowledged that sanctions don’t work, but in this case they backfired and left the West with no leverage over Russian energy.