Powerless Siberia: Beijing Keeps the Kremlin on a Tight Economic Leash

From the “Spirit of Anchorage” to the “Spirit of Beijing”: The Kremlin’s New Fetish

Kremlin diplomacy has long suffered from a peculiar psychological fixation — an obsession with mythical “spirits.” First, at Sergei Lavrov’s prompting, the Kremlin elders began worshipping the self-invented “Spirit of Anchorage,” a concept virtually unknown even in the United States itself. Now, Putin aide Yuri Ushakov has solemnly proclaimed the birth of a new geopolitical phantom: the “Spirit of Beijing.” In reality, however, this latest “spirit” smells less like strategic triumph and more like the growing stench of desperation wafting from Russia’s collapsing gas sector.

Putin’s 25th trip to China, accompanied by an entire squadron of oligarch-owned business jets, was supposed to culminate in the grand signing of an agreement on the Power of Siberia 2 gas pipeline. During the previous visit in September 2025, Moscow triumphantly claimed that a “legally binding memorandum” on the project was already in place. Gazprom chief Alexei Miller used precisely that wording while proclaiming that the pipeline would become “the largest and most capital-intensive gas project in the world.” Beijing, notably, never officially confirmed any such agreement.

At the time, many observers dismissed the discrepancy as merely another example of classic “Eastern subtlety.” But subsequent events revealed a far simpler reality: China has no intention of expanding imports of Russian gas on Moscow’s terms. By May 21, 2026, following yet another Putin visit to the Celestial Empire, even the Kremlin’s rhetoric had grown noticeably bleak. Beijing once again reminded Moscow of its actual place within China’s geopolitical food chain.

Chronicles of a 20-Year Unrequited “Siberian” Love Affair

To understand the current impasse, it is worth revisiting the long — and increasingly one-sided — history of Putin’s efforts to persuade Xi Jinping to commit to the Power of Siberia 2 pipeline project.

The story began exactly twenty years ago. In the spring of 2006, during a visit to China, Putin announced that Russia could, by 2011, construct export pipelines capable of delivering up to 80 billion cubic meters of gas annually to the Chinese market. At the time, Moscow was considering two potential routes: one from Western Siberia and another from Eastern Siberia.

Ultimately, however, the Kremlin approved only the eastern route in May 2014, paving the way for construction of the original Power of Siberia pipeline.

After Western sanctions were imposed on Russia, however, Power of Siberia 2 gradually evolved into something approaching a geopolitical obsession for the Kremlin. Putin traveled to China in February 2022, October 2023, May 2024, and September 2025, and on every occasion the pipeline project was promoted as one of the central pillars of bilateral negotiations. Yet despite more than a decade of intensive discussions, Putin and Xi still have not reached agreement on the two issues that matter most: the price of the gas and the scale of Chinese investment in the project.

At one point, Beijing reportedly demanded that Russia sell gas at prices comparable to Russia’s own domestic rates — roughly $50 per thousand cubic meters, nearly ten times lower than prevailing European market prices at the time. Even today, China purchases Russian gas at approximately $258 per thousand cubic meters, which is already around 40% lower than the average price paid by Gazprom’s other foreign customers, estimated at roughly $420.

Last year, Russia supplied China with around 49 billion cubic meters of gas through pipeline deliveries and LNG shipments combined. Yet even that volume remains roughly four times smaller than Russia’s former annual gas exports to Europe, which once approached 200 billion cubic meters.

That imbalance explains why Power of Siberia 2 has ceased to be merely a Kremlin prestige project and increasingly resembles a critical lifeline for Russia’s energy sector.

And yet, despite being publicly described in advance as “one of the main topics” of the Putin–Xi negotiations, the pipeline project was entirely absent from the list of agreements and joint statements later published on the Kremlin’s official website. Beijing — along with Chinese state media — effectively ignored the issue altogether.

Even Russia’s decision to slash gas prices for China to their lowest level in six years immediately before Putin’s visit failed to change the situation. Moscow lowered the price to just $223.9 per thousand cubic meters — the cheapest rate since 2021, when China was purchasing Russian gas at roughly $145. Yet nothing appears capable of persuading Beijing, not even a ninety-minute private tea session between Putin and Xi.

How Much Is Russia Paying for Its “Partnership” with China?

The logic behind China’s behavior is relatively simple. First, Beijing simply does not need additional volumes of Russian gas on the scale Moscow hopes to sell. Second — and far more importantly — if China has the opportunity to continue tightening the screws on a so-called “strategic partner” that is increasingly isolated and economically vulnerable, there is little reason not to exploit that leverage to the fullest.

Russia has effectively drifted into the role of an “economic province” of China. Since 2022, Moscow’s dependence on Beijing has deepened dramatically, creating what is arguably one of the most asymmetrical relationships among major powers in contemporary geopolitics. By the end of 2025, China accounted for approximately 27% of Russian exports and nearly 39% of Russian imports. In practical terms, more than one-third of all goods imported by Russia now come from China.

Nor is this dependence confined to trade alone. Increasingly, it extends into strategically vital sectors, including military production in the first place. Russian sources openly acknowledge that China now supplies approximately 92% of Russia’s military electronics, 87% of its high-tech machine tools, and 76% of the chemical precursors required for explosives manufacturing.

Following its partial exclusion from the Western financial system, Russia also redirected a significant share of its foreign trade into yuan-denominated transactions and Chinese financial infrastructure. While this helped reduce Moscow’s exposure to the dollar and Western sanctions mechanisms, it simultaneously deepened Russia’s dependence on decisions made in Beijing. Xi Jinping understands this imbalance perfectly well — which is precisely why he sees little reason to rush into meaningful concessions.

The final communiqué issued after Putin’s visit once again consisted largely of broad geopolitical platitudes: familiar rhetoric about a “multipolar world,” a “deep strategic partnership,” and opposition to sanctions. Notably, however, China still pointedly avoids referring to Russia as an “ally.” Beijing continues to maintain the same cold, transactional, and carefully calibrated distance from Moscow that it preserves in relations with Washington — plenty of rhetoric, but virtually no binding commitments.

The crucial difference is that for the United States such ambiguity is manageable. For Russia, it is steadily becoming existential.

Even within Moscow’s own political circles, officials reportedly share the “persistent impression that Xi was not so much discussing the prospects of an alliance with Russia as methodically measuring the depth of Russia’s growing dependence — how much longer it can endure, where its vulnerabilities lie, and what price it is willing to pay to preserve Chinese ‘support.’” That, in many ways, explains Beijing’s cold pragmatism: China sees value in Russia as a strategic rear base and a geopolitical counterweight to the West, but not as an equal partner.

“For Beijing, we are not even a ‘junior brother,’ but merely a useful raw-material appendage,” voices in Moscow increasingly lament. Putin himself effectively reinforced that perception when he dutifully declared on camera that “Russia is ready to continue serving as a reliable supplier of energy resources to China.”

The cost of such a resource-based “partnership” increasingly resembles a geopolitical sentence.

According to the Gaidar Institute, Russia supplied China last year with 91.4 million tons of crude oil, 72.4 million tons of coal, and natural gas worth $12.6 billion. At the same time, Russian oil exports to China declined by 8% in physical volume, while the average sale price remained roughly 8% below the prices paid to alternative suppliers. As a result, China saved approximately $2.2 billion in 2025 alone — and nearly $12 billion since the beginning of Russia’s full-scale invasion of Ukraine.

Because of this heavily discounted trade relationship, Moscow is estimated to be losing between $4 billion and $6 billion annually in gas revenues alone.

China also imported 7.8 million tons of Russian timber, 245,000 tons of ferrous metals, 2.1 million tons of aluminum, and 88,000 tons of nickel — all purchased at discounted rates. Under ordinary market conditions, without politically motivated discounts, Russia could theoretically earn an additional $7–11 billion annually from trade with China. But therein lies Moscow’s real problem: if Russia attempted to charge full market prices, Beijing would simply reduce purchases or source those commodities elsewhere.

For the Kremlin, the real dilemma is therefore no longer “cheap or expensive,” but rather “cheap or unsellable.”

Against this backdrop, the Kremlin is left clinging to increasingly fantastical geopolitical fetishes: a tunnel to Alaska under the mythical “Spirit of Anchorage,” or a gas pipeline built in the equally imaginary “Spirit of Beijing.” And the only thing these “spirits” truly smell of is desperation.

 Max Meltzer