putin losing gas poker with europe

Why Putin is Losing the Gas Poker With Europe

China’s metropolises are being connected to the Russian gas network for the first time, as recent satellite images show. And yet Russia will not be able to compensate for the loss of demand from Europe in this way.

“Economy from above” is a collaboration between WirtschaftsWoche and LiveEO. This is a translation of the original article written in German by “Thomas Stölzel“. Access the original article here.

Because Germany and Europe want to become independent of Russian natural gas, Russian President Vladimir Putin currently urgently needs new sales markets for his country’s most important product. The great hope: China. Although things are going well for Putin there, as recent satellite images from LiveEO show.

The country is freshly connected via a brand-new gas pipeline called the “Power of Siberia,” pulling the up to 1.40-meter-thick pipes through the countryside at record speed. China, for example, is currently working on connecting Shanghai to the Russian network, following Beijing.

But a closer look at capacity, network and satellite data shows that in the end this will not even begin to be enough to compensate for the loss of the European market. For example, the new pipeline is only connected to the gas fields in eastern Russia, not to those deposits in the northwest that supply Europe.

gas fields

Nor is there any sign of progress on the “Power of Siberia 2” pipeline, which is even more important to Putin and is supposed to change that and one day carry gas to China via Mongolia. A clear signal that Russia’s energy sector is likely to feel the economic consequences of the invasion of Ukraine for years, if not decades.

First, however, Putin can let himself be celebrated by the propaganda. A few days ago, the state-owned gas company Gazprom announced that it would put the new Kovykta gas field near Lake Baikal into operation in the second half of December and begin producing natural gas. The field has two trillion cubic meters of gas reserves and is considered one of the largest in Siberia. So far, it is mainly the Chayandinskoye gas field that supplies gas to China. It had started production in 2019.

Kovykta Gas Field
Kovykta Gas Field, Irkutsk Oblast, Russia
30.05.2022: So far, Gazprom’s giant gas field in Siberia is not yet operational. But that’s expected to change in December, when it will primarily supply gas to China. Image: LiveEO/Sentinel

Almost 3,000 kilometers away, a huge drill is digging a tunnel more than ten kilometers long under the course of the Yangtze River. The gas pipeline that will supply the 26 million inhabitants of the metropolis of Shanghai with Russian gas is to run through this tunnel. Satellite images show how the tunnel construction work is being prepared and started in the port city of Nantong, north of Shanghai. Specialists from the Chinese railroad company have brought the drill bit down through a hole in the ground. Now it is digging its way toward Shanghai.

But it will be some time before the first gas flows through the new tunnel. The pipeline to Beijing still has to be laid. According to industry sources, construction will start in 2023 and the pipeline is scheduled to go into operation in 2025.

  • Yangtze gas tunnel
  • Yangtze gas tunnel
  • Yangtze gas tunnel

Images: LiveEO/Pleiades

With the first section of the pipeline, China has proven that it can lay such a pipeline at high speed. Here, satellite images show how workers did not pull the pipeline through the landscape successively, but with great effort in many places at the same time. Gas has been flowing across the Russian-Chinese border since 2019.

According to media reports, however, this currently amounts to just 16 billion cubic meters per year. The pipeline is not expected to reach its full capacity – 38 billion cubic meters per year – until Shanghai is connected.

Compared to the capacities that can flow from Russia to Europe, however, these are almost vanishingly small volumes. According to an analysis by Oxford Economics, the pipelines through Ukraine, Nordstream 1, Nordstream 2 and Yamal, together total 289 billion cubic meters. In addition, there are pipelines leading to Europe via Turkey.

  • siberia pipeline
  • siberia pipeline 2018
  • siberia pipeline 2019
  • siberia pipeline near heihe 2019
  • siberia pipeline heilongjiang province 2019
  • russia pipeline

Images: LiveEO/Pleiades

Diverting these volumes to China is virtually impossible for the foreseeable future. The planned “Power of Siberia 2” pipeline, which will one day have a capacity of 50 billion cubic meters, will not change this. For the first time, it will also bring gas produced around the Yamal peninsula in northwestern Russia to China.

To do so, the pipeline must cross Mongolia and thus overcome some diplomatic hurdles beforehand. In March of last year, Gazprom Vice President Vitaly Markelov traveled from St. Petersburg to Ulaanbaatar in a Falcon 900 business jet, according to data from the flight information service Flightradar24. Markelov’s mission: to launch the section called Soyuz-Vostok through Mongolia.

A feasibility study is said to have confirmed the feasibility of the project. However, Mongolian Prime Minister Luwsannamsrain Ojuun-Erdene announced in July that he does not expect construction to begin until 2024. Satellite images so far show no signs of preparatory work, for example, in the area where the pipeline is to cross the border between Mongolia and China. The pipeline is to run from the Russian city of Irkutsk on Lake Baikal to Mongolia, and there past Ulaanbaatar to the Chinese border town of Eren Hot. The construction of a new large border crossing on the Mongolian side is evident. But there is nothing to indicate a future pipeline.

mongolian chinese border
Mongolian-Chinese border, Eren Hot, Inner Mongolia Autonomous Region, China.
20.09.2022: Somewhere here, the “Power of Siberia 2” pipeline is expected to reach China and then deliver gas from fields that previously supplied Europe.
Image: LiveEO/Sentinel

The tube also has to cross mountainous terrain and steppe in Mongolia. A seismically active area where there was an 8.7 magnitude earthquake as recently as January 2021. A risk factor that is likely to make the pipeline more expensive.

Now, in the middle of this month, Putin met with Chinese leader Xi Jinping and Mongolian President Ukhnaagiin Khürelsükh to push the project forward. But experts see little pressure from China to complete the pipeline before 2030. China has too many long-term supply contracts for natural gas with the U.S. and Qatar, among others. Also, only a small part of China’s energy hunger is satisfied with gas. Nuclear power, renewable energies and coal still have a higher priority there.

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