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Just imagine: a gigantic natural gas project that promises to change the energy balance in Central Asia and, on top of that, make Mongolia go from protagonist to supporting actor. Yes, the new natural gas pipeline project between China and Kazakhstan is on the horizon, and it could replace the long-standing plan that involved Mongolia, causing a geopolitical and energy upheaval in the region. After all, who needs Mongolia when you have Kazakhstan?
Four years ago, Russia and China signed a cooperation agreement to build the ambitious Power of Siberia 2 pipeline, which would carry Russian natural gas to China, passing through Mongolian territory. With an estimated annual capacity of 50 billion cubic meters of gas, the project promised to strengthen ties between the two countries and turn Mongolia into a key transit point for this coveted energy. However, construction, which was supposed to start in 2024, has been facing significant obstacles.
Recently, Mongolia did not include Power of Siberia 2 in its action plan for 2024 to 2028, suggesting that the country has not reached a consensus on the project. The decision to hold back may be related to Mongolia’s strengthening relations with the West, particularly with the United States, which further complicated negotiations with China.
New Natural Gas Pipeline Project Between China and Kazakhstan
In light of these uncertainties, the new natural gas pipeline project between China and Kazakhstan emerges as a promising solution. In September of this year, Kazakhstan approached China with the proposal to build a direct pipeline, linking the two countries without the need to go through Mongolia.
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The negotiations advanced quickly, and this new pipeline could supply up to 40 billion cubic meters of natural gas per year to China, becoming a powerful alternative to the original Russian-Mongolian project.
The Impact on Mongolia and Russia
If the new natural gas pipeline project between China and Kazakhstan is realized, Mongolia may be left out, losing a lucrative opportunity to generate up to US$ 1 billion in annual revenue through transit fees.
Mongolia was positioned to be a key player in supplying gas to China, but its recent political maneuvers, aligning more closely with the West, may have cost it that opportunity.
For Russia, the impact is also significant. The country, which relied on Power of Siberia 2 to expand its influence in Central Asia and strengthen its presence in the Chinese market, now faces direct competition from Kazakhstan.
The Kazakh proposal not only attracts China by eliminating Mongolia’s transit fees but also offers China a natural gas supplier less entangled in political tensions with the West.
Why Was Mongolia Left Aside?
China’s decision to move forward with the new natural gas pipeline project between China and Kazakhstan reflects its desire to avoid geopolitical risks. Mongolia, by tightening ties with Western countries and adopting a more neutral stance, has created uncertainties about the reliability of its territory as a transit route. China, in turn, prefers to ensure the stability of its energy imports by opting for more direct and secure routes.
Additionally, Russia’s own natural gas market is under pressure due to Western sanctions, leading China to seek to diversify its suppliers. Kazakhstan, with its reserves of 3.8 trillion cubic meters of gas, may not have the gigantic volume of Russia, but it is a stable and close alternative.
New Natural Gas Pipeline Project Promises to Transform the Sector
The new natural gas pipeline project between China and Kazakhstan promises to transform the energy dynamics of the region, leaving Mongolia out and positioning Kazakhstan as a new important player in supplying gas to China.
With advanced negotiations and the prospect of an agreement soon, the scenario is changing rapidly. Meanwhile, Russia and Mongolia may need to reevaluate their strategies to remain relevant in an increasingly competitive market.
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