ECONOMY
Was Putin’s Visit to Mongolia Really About a New Gas Pipeline to China?
September 6, 2024
Mikhail Krutikhin
Oil and gas market expert
Oil and gas market expert Mikhail Krutikhin says the lack of interest from China in the Power of Siberia 2 project rendered Putin’s recent visit to Mongolia largely meaningless.
The original text in Russian was published in the Moscow Times and is being republished here with the author’s permission.
President Putin and the President of Mongolia Ukhnaagiin Khürelsükh during Putin's official visit to Monglolia. September 2024. Source: Kremlin.ru
If you listen to the pundits, both pro- and anti-Kremlin, you might get the impression that the main goal of Putin’s recent visit to Ulaanbaatar was to persuade the Mongolians to agree to the construction of the Power of Siberia 2 gas pipeline to China through their territory. Yet there are two issues with this.
First, what is the point of negotiating for a section of the gas pipeline when there is nothing doing on the Chinese side, the main intended consumer of the gas? With the Chinese unwilling to take this gas, why troubleshoot with the Mongolians? Even for Putin, with his often-illogical behavior, this makes no sense.
Second, all the issues around the construction of Power of Siberia 2 through Mongolia have long been resolved and approved. Were it not for the Chinese, work on the Mongolian section of the pipeline could have already been underway. Sure, the Mongolians did not include the project in their updated national energy strategy until 2028, but the reason for this was China’s refusal to participate in the Gazprom venture – not some challenge that they supposedly threw down to the Russian leader. Blaming them for the absence of Power of Siberia 2 in their strategy document would be unfair.
In fact, Gazprom’s plan to lay the gas pipeline through Mongolia was met with great enthusiasm by the Mongolians. They did not need to be persuaded. Ulaanbaatar’s response to all Russia’s proposals for the project was immediate and positive.
In December 2019, the Mongolian government signed a memorandum of understanding with Gazprom for the project, while a special-purpose vehicle called Soyuz-Vostok Gas Pipeline was registered in Mongolia in January 2021. It carried out the design and survey work and completed a feasibility study with unprecedented speed. The start of construction was scheduled for 2024, with the gas pipeline to be launched in 2027-28.
Mongolia was counting on the project. Here is what Mongolian Deputy Prime Minister Sainbuyan Amarsaikhan said in January 2022: “in order to have a source of natural gas in our country, we intend to build, first of all, one or two power plants, possibly along rail lines, and new settlements next to the gas pipelines, [and to] create the conditions to supply them with gas for [the country’s] further development and gradual transition to gas consumption.”
All that was left to do, they said in Ulaanbaatar, was to draw up and sign a trilateral agreement between Mongolia, Russia and China.
But the plan hit a snag.
First, what is the point of negotiating for a section of the gas pipeline when there is nothing doing on the Chinese side, the main intended consumer of the gas? With the Chinese unwilling to take this gas, why troubleshoot with the Mongolians? Even for Putin, with his often-illogical behavior, this makes no sense.
Second, all the issues around the construction of Power of Siberia 2 through Mongolia have long been resolved and approved. Were it not for the Chinese, work on the Mongolian section of the pipeline could have already been underway. Sure, the Mongolians did not include the project in their updated national energy strategy until 2028, but the reason for this was China’s refusal to participate in the Gazprom venture – not some challenge that they supposedly threw down to the Russian leader. Blaming them for the absence of Power of Siberia 2 in their strategy document would be unfair.
In fact, Gazprom’s plan to lay the gas pipeline through Mongolia was met with great enthusiasm by the Mongolians. They did not need to be persuaded. Ulaanbaatar’s response to all Russia’s proposals for the project was immediate and positive.
In December 2019, the Mongolian government signed a memorandum of understanding with Gazprom for the project, while a special-purpose vehicle called Soyuz-Vostok Gas Pipeline was registered in Mongolia in January 2021. It carried out the design and survey work and completed a feasibility study with unprecedented speed. The start of construction was scheduled for 2024, with the gas pipeline to be launched in 2027-28.
Mongolia was counting on the project. Here is what Mongolian Deputy Prime Minister Sainbuyan Amarsaikhan said in January 2022: “in order to have a source of natural gas in our country, we intend to build, first of all, one or two power plants, possibly along rail lines, and new settlements next to the gas pipelines, [and to] create the conditions to supply them with gas for [the country’s] further development and gradual transition to gas consumption.”
All that was left to do, they said in Ulaanbaatar, was to draw up and sign a trilateral agreement between Mongolia, Russia and China.
But the plan hit a snag.
“The Chinese have repeatedly refused to discuss the Power of Siberia 2, despite Putin’s desperate attempts to persuade them at the highest level.”
They remain convinced that they simply do not need additional gas from Russia. They have already mapped out their energy supply and demand for decades to come without this pipeline, while they are categorically against being dependent on Mongolia as a transit country.
The Mongolians, who welcomed the project and did everything in their power to get it done, are probably sore at their Moscow friends, who assured them of the feasibility of Power of Siberia 2 and stated that the Chinese, supposedly very interested in the project, were about to green-light it.
This was not just misrepresentation but downright deception.
During his visit, Putin again tried to convince the Mongolians that the project was moving forward, that the documentation was supposedly being reviewed by government agencies, that an environmental impact assessment of the pipeline was underway, and so on.
The Mongolians find these assurances hard to believe. There is still no Chinese go-ahead. Moreover, Gazprom, having realized that Putin’s plan is dead, has decided to act as if the project does not exist. It no longer counts on a gas pipeline from Yamal to China through Mongolia to save the current Power of Siberia, which looks set to breach its supply agreement with the Chinese (the Kovykta and Chayanda fields cannot provide the agreed volume for 30 years). Tellingly, Gazprom has decided to connect two nearby fields, Tas-Yuryakhskoye and Verkhnevilyuchanskoye, to Power of Siberia.
The Mongolians, who welcomed the project and did everything in their power to get it done, are probably sore at their Moscow friends, who assured them of the feasibility of Power of Siberia 2 and stated that the Chinese, supposedly very interested in the project, were about to green-light it.
This was not just misrepresentation but downright deception.
During his visit, Putin again tried to convince the Mongolians that the project was moving forward, that the documentation was supposedly being reviewed by government agencies, that an environmental impact assessment of the pipeline was underway, and so on.
The Mongolians find these assurances hard to believe. There is still no Chinese go-ahead. Moreover, Gazprom, having realized that Putin’s plan is dead, has decided to act as if the project does not exist. It no longer counts on a gas pipeline from Yamal to China through Mongolia to save the current Power of Siberia, which looks set to breach its supply agreement with the Chinese (the Kovykta and Chayanda fields cannot provide the agreed volume for 30 years). Tellingly, Gazprom has decided to connect two nearby fields, Tas-Yuryakhskoye and Verkhnevilyuchanskoye, to Power of Siberia.
“Thus, the company seems to have signed away all hope for Power of Siberia 2 – no matter what Putin tells the Mongolians.”
When the Russian president visited Mongolia exactly a decade ago, in September 2014, the set of documents inked by two countries was, to put it mildly, rather meager. The recent visit was only slightly more productive.
Given the absence of a real, constructive agenda, Putin’s sole task in Mongolia seems to have been to demonstrate personal courage in the face of the International Criminal Court warrant out for his arrest as a war criminal.
Given the absence of a real, constructive agenda, Putin’s sole task in Mongolia seems to have been to demonstrate personal courage in the face of the International Criminal Court warrant out for his arrest as a war criminal.
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