By Eurasianet
China has suddenly halted a Russian proposition to transport additional amounts of natural gas eastward through Kazakhstan, exacerbating the economic difficulties faced by the once-dominant Russian energy company, Gazprom.
The Russian government-backed organization, which was previously a key tool for Moscow’s diplomacy, has lately had to scrap initiatives in Central Asia and Latin America because of financial constraints.
Gazprom has been hastily exploring eastern markets to increase its export volumes following the significant
loss of market share
in Europe. One idea promoted by Gazprom representatives was exporting an additional 35 billion cubic metres (bcm) of gas to China via Kazakhstan’s existing pipeline network.
On April 15, China’s ambassador to Russia, Zhang Hanhui, punctured Gazprom’s proposal. He stated, “Supplying additional gas from the Russian Federation via Kazakhstan isn’t feasible since there is only one pipeline which is currently at full capacity. To increase Russian gas flow using this path would require constructing an entirely new pipeline, which is very costly. While the Russians are examining this possibility, it is impractical and won’t actually happen.”
Interfax
news agency
quoted
Zhang as telling Russian journalists. Zhang insisted that to facilitate additional Chinese gas imports, the already planned Power of Siberia 2 (PS-2) route via Mongolia would be a better option.
Construction of PS-2, which has a projected capacity of 50 bcm, was originally slated to start last year, but the project has
faced delays
due to unresolved financing questions and political factors. Russia and Gazprom’s lack of resources to fund the cost of new pipeline construction appears to be one of the major obstacles facing the country’s energy industry.
Once a cash cow for the Kremlin, the Russia-Ukraine war has caused Gazprom’s gas unit to haemorrhage money since the company lost most of its lucrative European gas markets. The entity reported a loss—of about
$7bn
—in 2023 for the first time in its history; annual losses grew to around
$10bn
in 2024. The red ink is expected to expand from a puddle into a lake in the coming decade; according to some media reports, Gazprom losses are projected to total
$179bn
over the next 10 years at current exchange rates.
The Moscow Times
reports
There are plans for significant changes within Gazprom, involving asset sales and potential job cuts affecting as many as 40% of employees at their main office. “The natural gas division of Gazprom is experiencing massive financial losses, leading to a shortage of funds in the Russian budget—around 40% of which Vladimir Putin allocates towards warfare,”
The
Moscow Times
noted.
So far, Gazprom has been required to
cease involvement
in energy development projects in Bolivia, India, Tajikistan, Uzbekistan and Venezuela, due to the heavy losses they were incurring. For instance, Gazprom walked away from the “Shahpakhty” project in Uzbekistan after a production sharing agreement expired.
Recently, Central Asian countries have benefited from purchasing.
comparatively large volumes
of Russian gas at heavily discounted prices. But political factors, in particular Russia’s ongoing crackdown on Central Asian guest workers, are prompting officials in Central Asian capitals to rethink their purchasing approach.
On April 15, Kyrgyzstan’s Foreign Minister, Zheenbek Kulubaev, stated that Bishkek intended to decrease imports of Russian natural gas. He suggested that this move toward supplier diversity among Kyrgyz stakeholders could be attributed to developments involving Russia.
rough treatment
of Kyrgyz nationals rounded up in a raid of a Moscow bathhouse, the
TASS
reported
. Kulubaev, speaking during a session of parliament, urged would-be Kyrgyz labour migrants to avoid Russia.
This article first appeared on Eurasianet
here.
