Shares of Russian energy giant Gazprom slumped on Tuesday after it announced that it had signed a\u00a0\u201clegally binding\u201d memorandum with China to advance construction of the long-delayed Power of Siberia 2 pipeline.<\/p>\n
Gazprom\u2019s stock closed down 3.1% on the Moscow Exchange at 130.7 rubles, erasing more than 100 billion rubles ($1.2 billion) in market value.<\/p>\n
The decline was the steepest among all companies listed on the exchange\u2019s benchmark index, more than doubling the index\u2019s overall drop of 1.4%.<\/p>\n
The proposed Power of Siberia 2 pipeline, with an annual capacity of 50 billion cubic meters, has been on the Kremlin\u2019s wish list for nearly two decades. The project has taken on new urgency as Moscow seeks a way to offset the collapse of Gazprom\u2019s once-lucrative sales to Europe.<\/p>\n
But investors were quick to note that the deal signed in Beijing was only another memorandum of intent, not a binding supply contract.<\/p>\n
Sergei Kaufman, an analyst at the investment firm Finam, warned that the project could weigh on Gazprom\u2019s already strained finances if it does move forward.<\/p>\n
The 2,600-kilometer Power of Siberia 2 pipeline is expected to cost the company about 2 trillion rubles ($25 billion, according to spot foreign exchange market data published by Reuters), and China has not committed to provide funding.<\/p>\n
Gazprom chief Alexei Miller told reporters in Beijing that price terms would be set later.<\/p>\n
Earlier reporting\u00a0suggested<\/a>\u00a0that Beijing sought to commit to only part of the pipeline\u2019s capacity and at heavily discounted Russian domestic rates, which stand at around $120 to $130 per thousand cubic meters, according<\/a> to energy expert Alexei Gromov.<\/p>\n Moscow, for its part, wants to charge the same rate as it does for the existing Power of Siberia 1 line, currently about $265 to $285 per thousand cubic meters.<\/p>\n That would still represent a roughly 30% discount compared with current European prices.<\/p>\n Industry analyst Mikhail Krutikhin estimated<\/a> the project\u2019s price tag at around 2 trillion rubles ($24.8 billion) and warned that Russia risked subsidizing Chinese consumers at its own expense.<\/p>\n \u201cGiven the enormous costs of pipeline construction and field development, Russia will in fact continue subsidizing Chinese gas consumption to its own detriment,\u201d he said.<\/p>\n For shareholders, the implications are sobering.<\/p>\n Although Gazprom reported 1.2 trillion rubles ($14.8 billion) in net profit last year and nearly 1 trillion rubles\u00a0($12.4 billion) in the first half of 2025, its core gas business remains loss-making, with a 1.1-trillion-ruble ($13.6 billion) deficit in 2024.<\/p>\n The company\u2019s cash reserves have dwindled from 2 trillion rubles<\/a> at the start of 2022 to just over 537 billion rubles<\/a>\u00a0($6.6 billion) by mid-2025.<\/p>\n