Russian Energy Minister Alexander Novak confirmed in mid-November that “We are now potentially considering with our Chinese friends a new route through Kazakhstan, which could also amount to around 35 billion cubic meters of gas.” This builds upon what the Kazakh Ambassador to Russia disclosed in May and would almost equal the maximum capacity of the Power of Siberia I pipeline at 38 billion cubic meters of gas per year, but would be less than the proposed Power of Siberia II’s 50 billion.
About the last-mentioned pipeline, this analysis here covered the reported Chinese-Russian pricing dispute that appears in hindsight to have been why Putin didn’t sign an agreement on this megaproject during his last trip to Beijing in May. It was then followed up a few months later with this one here about how Russia might instead redirect its pipeline plans towards Iran and India. In brief, China wants basement-bargain prices while Russia wants something better, hence why no deal has been reached.
This dilemma hasn’t yet been resolved, thus raising questions about the feasibility of a Russia gas pipeline to China through Kazakhstan. After all, the problem isn’t the Power of Siberia II’s capacity, which could always be reduced upon an agreement on pricing. The persistent problem has precisely been that they can’t resolve their pricing dispute. The only reason why Kazakhstan is being considered either as a complement or an alternative to Mongolia as a transit state to China is for political reasons.
To explain, even though Kazakhstan was just invited to partner with BRICS, this analysis here from mid-October right before that happened enumerated three analyses over the past 15 months highlighting Russia’s concerns about that country’s reliability in the face of Western pressure since February 2022. There’s accordingly a chance that Russia might agree to China’s reportedly requested basement-bargain gas prices if this is deemed required to keep Kazakhstan from drifting further into its rivals’ camp.
Of course, Russia would still prefer to receive better terms, but a much smaller profit margin might be considered an acceptable cost to pay for the aforesaid political dividend. If concerns over Kazakhstan’s reliability are alleviated in the coming year, such as if a ceasefire enters into effect in Ukraine and the West consequently reduces some of its pressure upon that Central Asian country, then Russia might be less interested in this sort of financial-political compromise.
Instead, it might be emboldened to continue refusing China’s reported terms, with the expectation being that the US’ accelerated “Pivot (back) to Asia” under Trump in that scenario could place more stress on China’s energy supply chains and thus coerce it into agreeing to more of Moscow’s terms. This could in turn possibly lead to an eventual breakthrough on the Power of Siberia II pipeline talks, in which case Russia might even be able to get a higher price than it initially bargained for if the circumstances change.
With all this insight in mind, it can therefore be concluded that the latest talk about a Russian gas pipeline to China through Kazakhstan is the Kremlin’s backup plan in case the Ukrainian Conflict continues into the indefinite future in parallel with more Western pressure on that transit country. This could thus help keep Kazakhstan from drifting further into its rivals’ camp while also resulting in more budgetary revenue for Russia from China. For now, however, it’s just a proposal and not a serious plan.
