“The three-body problem”: Reviving the $25 Billion Pipeline
The seventh trilateral meeting between the heads of state of Mongolia, China, and Russia took place in Beijing on Tuesday. The previous meeting had been held three years earlier, in 2022, in Samarkand, Uzbekistan.
The highlight of this year’s summit was the agreement to implement a long-discussed project: constructing a pipeline to transport natural gas from Russia to China through Mongolian territory. Although the idea has been raised for more than 20 years, it has never materialized. The project is estimated to cost around $25 billion, and the 2,600-kilometer pipeline is expected to deliver 50 billion cubic meters of natural gas annually.
The pipeline, named “Power of Siberia-2,” will run 960 kilometers across Mongolia, from its northern border to its southern border. According to sources, Mongolia could earn at least $1 billion annually from the project. In addition, the construction phase is expected to create 12,000 jobs, while the operational phase could generate about 1,000 permanent positions. More importantly, the use of natural gas, a cleaner and cheaper source of energy, could modernize Mongolia’s energy system and help reduce air pollution.
On the other hand, analysts warn that the project carries immense geopolitical risks. Public opinion remains deeply divided, which becomes evident each time the issue is raised. Nevertheless, Prime Minister G.Zandanshatar described the gas pipeline as a “project of the millennium” when speaking to reporters.
It is also worth noting that following the announcement, the share price of “Gazprom,” the project operator, dropped by 3.1 percent. Investors emphasized that the deal so far is only a memorandum of understanding, with no clear answer as to who will finance the project or from where.
Facing Western sanctions due to the war in Ukraine, Gazprom has come to depend heavily on the Chinese market as a “lifeline.” Fully aware of this, China is reportedly seeking to purchase gas through the “Power of Siberia-1” pipeline at prices 25-30 percent lower than before.
