Brian McDonald: Power of Siberia 2: the EU’s greatest self-own
By Brian McDonald, Substack, 9/3/25
There are moments in history when you can almost hear the hinge creak and Tuesday’s news that Russia and China have finally signed a binding agreement on the Power of Siberia 2 (a 50 billion cubic metre pipeline through Mongolia carrying Arctic gas eastward) is one of them.
Unlike the existing line out of Irkutsk, which feeds off reserves to the north of Mongolia, this new artery will carry the Yamal fields, the same gas that helped keep Germany’s factories humming for half a century. What once fuelled Western Europe’s rise will now stoke Beijing’s ambitions as a scheme long stalled by Chinese wariness suddenly becomes reality. Maybe Beijing has finally decided to heed its own ancient proverb: distant water cannot quench a nearby thirst.
Putin, closing out his China trip on Wednesday, underlined the point. Gas through Power of Siberia 2, he said, will be sold at market rates, with no “friendship discounts” for Beijing, whatever the Western press insists. Of course, “market rates” in Beijing’s lexicon are a different animal and the Chinese will try to drive them down toward their own domestic benchmarks.
It’s hard to exaggerate how much the map tilts with this shift, because for decades Russian gas was the bedrock of Germany’s might as an exporter and the hidden muscle that gave Western Europe its edge. For example, this fuel ran at an average of €13–22 per megawatt hour in the last “normal years” of 2018 and 2019. By contrast, in the first half of this year, the same benchmark was €41. Brussels can roar about values and thunder on about sanctions till its lungs give out, but numbers don’t bend to rhetoric.
Nevertheless, the sceptics have a point because fifty billion cubic metres is a sliver beside the 150-odd bcm Gazprom used to pump west each year. China won’t fill the EU’s shoes overnight, but the real shift here is in leverage. Western Europe has lost not just the gas but its standing as Moscow’s anchor customer and that mantle now slips easily to Beijing; on terms Berlin would have killed for. It’s another old proverb brought to life: hoist a rock in rage, only to let it fall on your own foot.
None of this means the deal is a bonanza for Russia because, in an ideal world, its companies would have sold to both east and west, playing them off to drive up returns. The EU’s decision to tear up that balance means Moscow forfeits income; but it loses far less than Western Europe does. For Russia, Power of Siberia 2 offers stability: a guaranteed outlet, even if the prices end up being close to Chinese domestic levels. For Western Europe, the outcome is instability: with higher bills, weaker security of supply, and vulnerability to every winter storm or accident that might close an LNG port in Texas or Qatar.
Even with the advent of Power of Siberia 2, Russia will sell in total about 106 bcm a year to China; still a long way shy of the 150–160 bcm Western Europe once bought. While European countries always paid premium prices, China drives harder bargains so the new project simply won’t bring the profits the old westward flows once did.
Bloomberg put it plainly on Wednesday: the pipeline “will turn the global LNG market upside down” and imperil Washington’s dreams of global energy dominance. If Chinese demand winds up being met by fixed Russian volumes, that will mean up to 40 million tonnes of LNG Beijing will no longer require; half of last year’s imports, although that remains a projection. It is hard to overstate the significance for US exporters, who had counted on China as their growth market.
Of course, the timing’s no accident here given Trump has swung around tariffs like a golf club while Xi has answered in kind, slapping levies on American LNG. And while the White House fumes, Beijing openly takes delivery of its first cargo from Russia’s sanctioned Arctic LNG-2; a move as brazen as it is calculated. China realises that betting on tankers through the Strait of Hormuz is gambling on a choke point the US Navy could close at any moment. And if there’s a fight over Taiwan, that artery will get cut, which leaves only one supplier able to promise steady lifeblood: Russia, with its pipelines over land and its immense reserves.
That truth has finally outweighed Beijing’s old nerves about leaning too heavily on Moscow, and leaving itself vulnerable to any political changes in the Kremlin. Something obviously altered the calculation, maybe it was Brussels’ latest lectures or perhaps Trump’s renewed threats but either way, EU leverage has drained away, and China walks off with a hell of a deal.
And here’s the bitterest irony: a project that started with Willy Brandt in the 1960s (Ostpolitik, the dream of tying East and West together by trade) now lies dead in the ditch. What’s left now is a cut-down continent, severed from the eastern pipe that kept its factories competitive, run by leaders who’d rather wave their fists than accept the facts staring them in the face. Moscow, by contrast, has read the weather and understands that when the wind shifts, you’re better off erecting windmills rather than stacking up sandbags.
And when you look at the frontline players today it can only make you wonder how a region which has produced some of humanity’s greatest ended up with this lightweight bunch of leaders. Von der Leyen, Macron and Merz talk like knights on a crusade but as most of Western Europe’s economies struggle, all they’ve achieved is spiralling costs and a half-continent shackled to LNG at twice the price
While Beijing quietly inks its contracts, Brussels keeps itself busy with morality plays. And nobody’s bills get lighter for all the posturing. Like an old man yelling at a cloud, to borrow a famous Simpsons’ line.
The EU has managed to pull off one of the greatest self-owns you could ever imagine. It’s tossed away the thing that carried its post-war prosperity; the quiet certainty that tomorrow’s power would be there, steady and affordable, same as today’s. That assurance has now crossed to Beijing and it’ll be only when the lights stutter, or bills climb higher, that Western Europeans feel the weight of what their leaders cast overboard in zeal.
