Sunday, May 31, 2026 · 10:16 AM
Bilateral trade between Russia and China fell 7% to $227.6 billion in 2025, marking the first decline since the pandemic year of 2020. Russian exports to China dropped 3.9% to $124.8 billion, while Chinese shipments to Russia fell more sharply, declining 10.4% to $103.3 billion. When Putin landed in Beijing this week touting "no-limits" cooperation, the numbers told a different story. The market's been pricing Russian crude like Moscow has infinite Chinese demand at whatever discount Beijing offers. That assumption just died.
Putin has insisted that gas supplied through the Power of Siberia 2 pipeline should be priced using a market-based formula similar to the mechanism previously used for Russian gas exports to Europe, yet Chinese counterparts did not show willingness to move the project forward, with the goal as of mid-2026 still to agree on a gas price by September. Russia needs China far more than China needs Russia, and the pricing negotiations are making that brutally clear. Power of Siberia 2 would add 50 bcm of annual capacity and could double Russia's share of China's gas supply from about 10% to roughly 20% of total Chinese consumption. Without it, Russia's massive gas reserves in Yamal—which once fed European markets—risk becoming stranded assets.
Russian oil shipments to China were already slowing down by April to an average of 2.2 million barrels per day, still higher than a year earlier, but below first-quarter 2026 levels. Meanwhile, pipeline gas exports are already running at maximum infrastructure capacity, while the long-delayed Power of Siberia 2 project remains years away from completion. And because energy accounts for nearly all Russian exports to China, Moscow has little else to offer the Chinese market. Russia's entire China strategy is a one-trick pony running out of tricks. The energy surplus that looked like a geopolitical masterstroke in 2022 now looks like a pricing trap.
China's cautious stance stems from a deliberate strategy of supply diversification, with Chinese state oil companies continuing to pursue alternative sources—in April 2026, as Russian Foreign Minister Lavrov was in Beijing promoting Power of Siberia 2, Chinese Vice Premier Ding Xuexiang was in Turkmenistan signing deals to expand gas cooperation with China's second-largest supplier of pipeline gas. Beijing learned from Europe's energy dependence mistake. They're playing Russian desperation against Turkmen, Qatari, and Iranian alternatives. Every month Moscow delays costs leverage.
Think back to 2014 when Putin pivoted east after Crimea. The $400 billion Power of Siberia deal looked visionary—lock in Chinese demand for thirty years at oil-indexed pricing. Russia's pipeline gas exports to the European Union plummeted from approximately 157 bcm before the 2022 invasion of Ukraine to just 18 bcm in 2025, contributing to a 7% drop in Russia's gas-related tax revenues. That European collapse was supposed to be offset by Chinese growth. Instead, China's sitting on the bid, watching Russian fiscal stress mount, and offering spot pricing at steep discounts. Moscow traded a premium European customer for a monopsony buyer with infinite patience.
The consensus thinks this is temporary friction in a strategic partnership. Wrong. Analysts say the two countries may be approaching the limits of what the relationship can deliver economically. Russia's Economic Development Ministry forecasts retail trade turnover of just 0.8% in 2026, down from 4.1% a year earlier, indicating weaker consumer demand and limited capacity to absorb additional Chinese imports. Russia's import capacity is collapsing while its export dependence on energy deepens. That's the definition of a price taker. China knows it. The discount widens.
Watch two things. First, whether Gazprom capitulates on Power of Siberia 2 pricing by September—if they accept spot-linked pricing instead of oil-indexed formulas, Russian gas just became a buyer's market for a generation. Second, Russian oil flows to China in Q3—if volumes drop below 2 million bpd while Brent stays above $80, you'll know Beijing is rationing purchases to pressure Moscow on gas pricing. This isn't a partnership. It's a patient extraction of maximum discount from a seller with no alternatives.