Russia Fails to Secure Major China Energy Deal in Beijing Summit
0h ago|4 min readStandard
Fazen Markets Editorial Desk
Collective editorial team · methodology
russiachina
Fazen Markets Editorial Desk
Collective editorial team · methodology
Trades XAUUSD 24/5 on autopilot. Verified Myfxbook performance. Free forever.
Risk warning: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. The majority of retail investor accounts lose money when trading CFDs. Vortex HFT is informational software — not investment advice. Past performance does not guarantee future results.
Russian President Vladimir Putin concluded a state visit to Beijing on May 21, 2026, securing declarations of strategic partnership but failing to finalize the major natural gas supply agreement Moscow sought. The two nations inked ten bilateral documents covering areas from trade to agriculture, yet the critical Power of Siberia 2 pipeline deal remained unsigned. The outcome underscores the pragmatic limits within the much-touted Sino-Russian alliance, leaving a significant gap in Russia’s strategy to pivot energy exports eastward following European sanctions.
The failure to secure the Power of Siberia 2 deal represents a critical setback for Russia's energy-dependent economy. Following the imposition of sweeping Western sanctions after its invasion of Ukraine in 2022, Russia lost its primary natural gas market in Europe, which accounted for over 70% of its gas export revenues. China has been the logical but challenging alternative, demanding significant price concessions and favorable terms. The last major energy deal, the Power of Siberia 1 pipeline, was finalized in 2014 and became operational in 2019, transporting up to 38 billion cubic meters (bcm) annually.
Current global LNG spot prices trade near $12 per MMBtu, providing China with ample alternative suppliers and significant bargaining power. Russia’s Urals crude trades at a persistent discount of approximately $15 per barrel to Brent, reflecting the cost of its geopolitical isolation. This macroeconomic backdrop empowers Chinese negotiators, who are under no pressure to offer Russia a financial lifeline. The primary catalyst for this summit was Russia’s urgent need to lock in long-term revenue streams to offset its strained fiscal budget.
The tangible outcomes of the summit were limited to ten memoranda of understanding, lacking the financial heft of a major energy contract. The existing Power of Siberia 1 pipeline delivered 22.7 bcm of gas to China in 2025, falling short of its nameplate capacity. The proposed Power of Siberia 2 pipeline would have added a capacity of 50 bcm per year, a volume nearly equivalent to the now-idled Nord Stream 1 pipeline to Germany.
Russia’s budget deficit widened to 2.1% of GDP in Q1 2026, pressured by elevated military expenditures. China remains Russia’s largest trading partner, with bilateral trade reaching $240 billion in 2025. However, that figure is heavily skewed toward Chinese exports, including $90 billion in machinery and electronics. Russian energy exports to China are largely paid for in yuan, and its holdings of the Chinese currency exceed $45 billion. The Moscow Exchange USD/RUB rate was 91.5 on the day of the summit.
| Metric | Before Summit Expectation | Summit Outcome |
|---|---|---|
| Major Pipeline Deal | Probable | Not Achieved |
| Bilateral Agreements Signed | Several | 10 MOUs |
The stalemate is a net negative for Russian energy giants like Gazprom (OGZPY) and Rosneft (RNFTF), which are desperate to secure new export routes. Their market valuations, already depressed, face continued pressure from stagnant production and limited market access. European gas markets, tracked by the TTF benchmark, may see reduced long-term price volatility as Russian gas remains largely excluded, supporting alternative suppliers like Cheniere Energy (LNG) and Tellurian (TELL).
Chinese energy importers CNOOC (CEO) and Sinopec (SHI) benefit from maintaining a buyer’s market, allowing them to secure LNG cargoes at competitive global prices rather than being locked into a long-term pipeline contract. A key counter-argument is that the deal is delayed, not dead, as both sides affirmed their commitment to continue negotiations. Flow data indicates speculative long positions on European gas futures have increased, while the Market Vector Russia ETF (RSX) saw net outflows of $15 million in the week preceding the summit.
The next formal negotiation round is scheduled for the St. Petersburg International Economic Forum in June 2026. Market participants should monitor monthly Chinese customs data for shifts in LNG import volumes from Russia versus other suppliers like Qatar and Australia. A sustained drop in global LNG prices below $10 per MMBtu could force Russia’s hand to accept less favorable terms.
The USD/RUB pair will be a key indicator of market perception; a sustained break above 95 could signal heightened concerns over Russia’s external balances. The EUR/RUB cross is also critical for gauging European energy security pricing. The G7 summit in late June may produce new statements on enforcement of the oil price cap, another variable impacting Russian fiscal health.
The failure reduces the immediate likelihood of a significant diversion of Russian gas away from Europe and toward Asia, a scenario that would have tightened global supply. Europe’s continued reliance on diversified LNG imports and stable pipeline flows from Norway and Algeria is reinforced. This supports the investment thesis for European regasification terminal operators and spot market traders.
The result is a minor setback for yuan internationalization efforts. A mega-deal would have significantly increased yuan-denominated energy trade, bolstering its use as a settlement currency. Without it, the pace of accumulation of yuan reserves by Russia may slow, temporarily denting one driver of demand for the currency outside China.
Historical contracts, like the Power of Siberia 1 deal, have been heavily discounted and linked to the price of oil, unlike European contracts that often reference gas-on-gas competition. China has consistently secured prices estimated to be 30-40% below what European customers paid prior to 2022, a discount Russia was likely unwilling to deepen further in this round of talks.
Russia’s need for a Chinese energy deal far exceeds China's willingness to provide one on favorable terms.
Disclaimer: This article is for informational purposes only and does not constitute investment advice. CFD trading carries high risk of capital loss.
Vortex HFT is our free MT4/MT5 Expert Advisor. Verified Myfxbook performance. No subscription. No fees. Trades 24/5.
Navigate market volatility with professional tools
Start TradingSponsored
Open a demo account in 30 seconds. No deposit required.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.