Power of Siberia 2 pipeline agreement signed at Shanghai Cooperation Organization (SCO) summit
Russian President Vladimir Putin and Chinese President Xi Jinping signed a memorandum of understanding for the long-delayed Power of Siberia 2 pipeline project on September 1 at the close of the Shanghai Cooperation Organization (SCO) summit in Tianjin. The MOU leaves undecided the most important commercial details—including pricing and “take-or-pay” obligations—but represents a commitment to continue negotiations toward those terms and not to shift efforts toward a different potential off-taker. The agreement also reflects China’s growing concerns about the risks of becoming overly dependent on seaborne supplies of liquefied natural gas (LNG).
U.S. LNG supplies were halted in February due to the trade war with the incoming Trump administration and China’s retaliatory 125% tariff on U.S. LNG. Supplies from Qatar must transit the Strait of Hormuz, whose vulnerability was underscored by the recent Iran-Israel war. Those two countries are by far the world’s largest LNG suppliers. The arrival of a sanctioned Russian LNG cargo from Arctic LNG 2 during the SCO summit further demonstrated China’s increasing unwillingness to be influenced by U.S. secondary sanctions—a stance also reflected in the Power of Siberia 2 deal. The signing of the MOU is also a signal to Washington that the Russia-China partnership is solid, and that no American machinations will succeed in driving them apart.
Whether the MOU will lead to a final deal and construction of the pipeline remains uncertain. Russia needs this sale more than China needs the gas, placing Beijing in a very strong negotiating position. China will seek to avoid a “take-or-pay” commitment on the full proposed annual volume of 50 billion cubic meters (Bcm), as such an obligation could push its dependence on Russian gas above 40% per year. At the same time, China will want the flexibility to increase imports up to that level if needed. Beijing is also well-positioned to secure a price per unit well below what it pays for gas through the existing Power of Siberia pipeline, which currently supplies 38 Bcm annually and is set to expand to 44 Bcm per year under a separate agreement signed at the SCO summit.
China vows to continue oil purchases from Russia and Iran despite U.S. pressure
Chinese officials recently reiterated that they will continue purchasing oil from Russia and Iran despite U.S. secondary sanctions and the threat of punitive tariffs. “China will always ensure its energy supply in ways that serve our national interests,” the Chinese Foreign Ministry posted on X following trade negotiations in Stockholm with U.S. Treasury Secretary Scott Bessent. The statement came after the U.S. and China had made progress toward a broader trade and tariff deal, but Washington threatened Beijing with an additional 100% punitive tariff on its goods in response to the continued oil purchases. Many outside analysts are skeptical that the U.S. will follow through, given the potential economic fallout and President Trump’s political need to secure a trade deal with China. Several bills are pending in Congress to impose further penalties on China over its trade with Iran and Russia, but it is unclear whether any will advance.
Iran coordinating with Russia and China to block snapback sanctions
Iranian Foreign Minister Abbas Araghchi said on August 15 that Iran was coordinating with Russia and China before responding to moves by the UK, France, and Germany—the “E3”—to impose “snapback” sanctions. The snapback provision, enshrined in UN Security Council Resolution 2231, allows for the automatic resumption of UN-backed sanctions lifted under the JCPOA. Iran argues that the E3’s recent call for “zero enrichment” effectively amounts to an abrogation of the JCPOA, leaving them without legal standing to trigger the snapback mechanism. Tehran’s position mirrors its stance in 2018, when President Trump reimposed unilateral U.S. sanctions and sought unsuccessfully to trigger snapback.
While the E3 and other UN Security Council members have rejected Iran’s argument, Russian and Chinese officials have publicly voiced support for Tehran’s position. The E3 acted early enough to ensure sanctions would take effect before the end of September, rather than waiting until the October 18 expiration date—when Russia will hold the rotating presidency of the Council. The E3 have also floated the possibility of a six-month delay to the snapback deadline, but this would require Iran to restore full access for the International Atomic Energy Agency (IAEA) to its nuclear sites and materials, as well as to account for its existing stockpile of 60% highly enriched uranium. A preliminary agreement announced in Cairo on September 9, following talks between Araghchi and IAEA Secretary General Rafael Grossi, marks a step in that direction—but falls short of resolving the issue.
Iran seeks access to China’s BeiDou satellite navigation system
Iranian officials have reportedly sought access to China’s BeiDou satellite navigation service as an alternative to the U.S. GPS system. According to local Iranian media, Deputy Communications Minister Ehsan Chitsaz said Iran is pursuing alternatives to GPS partly because of its and others’ use of GPS jamming during the June clashes with Israel and the United States. The conflict highlighted the acute vulnerability of Iran’s reliance on Western information and communications technologies. During the fighting, Iranian authorities instructed citizens to stop using the WhatsApp messaging platform after allegations that it had disclosed users’ locations in a way that could be retrieved by Israel for targeting purposes.
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