Will the Iran War Revive Russia’s Power of Siberia 2 Pipeline?

Why It Matters

The revival of Power of Siberia‑2 could reshape Asia’s gas supply dynamics, bolstering China’s energy security while providing Russia a critical revenue stream amid Western sanctions.

Key Takeaways

• Iran-Hormuz blockade spikes Asian LNG prices.
• China eyes overland gas to reduce maritime chokepoint risk.
• Power of Siberia‑2 negotiations hinge on price and cost sharing.
• Russia seeks pipeline to offset lost European gas sales.
• Turkmenistan and Sakhalin projects further diversify China's gas mix.

Pulse Analysis

The sudden closure of the Strait of Hormuz has sent shockwaves through global energy markets, sharply lifting LNG spot prices across Asia and Europe. China, which sources roughly 30 % of its LNG through the Hormuz corridor, now faces a strategic dilemma: continue to depend on a vulnerable maritime chokepoint or accelerate the shift toward overland gas supplies. This urgency dovetails with Beijing’s broader five‑year plan, which explicitly calls for advancing preparatory work on a central China‑Russia gas corridor, signaling a policy pivot toward land‑based energy security.

Power of Siberia‑2, the proposed 2,600‑kilometre pipeline from Russia’s Yamal Peninsula to China via Mongolia, has lingered in limbo for years due to disputes over gas pricing, ownership stakes, and construction financing. The project’s original $400 billion framework for Power of Siberia‑1 set a high bar, and Moscow now seeks a similar scale to compensate for the collapse of European gas revenues after 2022. China, meanwhile, pushes for prices near Russia’s heavily subsidized domestic rates and only 50 % of the pipeline’s 50 bcm annual capacity, a stark contrast to the 80 % threshold typical of such deals. If Moscow concedes on price and cost‑sharing, the pipeline could become a viable hedge against future maritime disruptions.

Beyond the Russian link, China is diversifying its overland gas portfolio with projects in Turkmenistan and the upcoming Russia‑China Far‑Eastern pipeline from Sakhalin, slated for 2027. These alternatives, combined with growing domestic oil production and a rapid electrification push, reduce Beijing’s exposure to single‑source shocks. For the broader Asian market, a revived Power of Siberia‑2 would introduce a new, potentially cheaper gas source, tempering LNG price volatility and reshaping trade flows. The outcome hinges on whether both capitals can bridge the pricing gap and allocate construction costs, a negotiation that will likely define the region’s energy landscape for the next decade.