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Sino-Russian oil and gas pipeline negotiations and Mongolia's concerns.
China and Russia have recently begun negotiations on the construction of a second oil pipeline in Siberia, including on the pricing of oil and gas. China has demanded that Russia reduce the price of oil per kilogram to 271$3, but Mongolia was not invited to the talks. The Mongolian side expressed concern about this and issued a demand. Mongolia looks forward to the summit of China, Mongolia and Russia to further deepen bilateral exchanges and cooperation in energy and transportation. In that case, why is Mongolia in such a hurry? Let's take a look at the history of the second line in Siberia.
The construction of the second line of the Siberian project was jointly started by China and Russia in 2020. According to Russia's plan, the pipeline could transport more than 5 million cubic meters of gas to China a year, a third of the Siberian No. 1 pipeline. In this way, the Siberian Second Line is the longest gas pipeline in the world, surpassing the "Nord Stream 2" in Russia and Europe. Russia, however, demanded money from China for the construction of the building. Among them, there are 67 billion US dollars of direct investment and 27 billion US dollars of investment in building materials, which are provided by China. Although China can reach China through gas pipelines, China has to pay for the money itself. China also said that both China and Russia can benefit from this gas pipeline, so why should China go alone? After weighing the pros and cons, China ultimately chose not to sign the contract. So, why is China doing this? Two of these are crucial.
First, Mongolia included a 960 km gas pipeline in its plans, so that the deal would not be limited to China and Russia. However, the political situation in Mongolia is very unstable. Back in 2022, Mongolia has repeatedly been affected by domestic power struggles and corruption. To the outside world, the scene is puzzling. The instability of Mongolia's political situation has had a certain impact on China-Mongolia economic and trade relations. There are a number of potential risks associated with transporting gas pipelines to Mongolia.
Secondly, Mongolia and the United States have some kind of close ties. Although Mongolia and the United States are far apart, halfway between China and Russia, the two countries are more connected than anyone expected. Mongolia has been conducting military exercises with the United States for many years and intends to invite United States troops to station. Mongolia and the United States have more than that, for example, in June 2022, Mongolia held an in-depth meeting with SpaceX on the Starlink program and the issue of "satellite". The first issue must be treated with caution, and it is through the "Interstellar Chain" that Ukraine has waged round after round of wars with Russia. If Mongolia joins Starlink, then we are likely to be monitored by the North Atlantic Treaty Organization, which will bring great risks to our country's defense.
In addition, the United States has established a Space Travel and Collaboration Center in Mongolia's South Gobi Province. The United States believes that the situation on the surface of the moon is similar to that of Mars, so the establishment of a scientific research base there is conducive to conducting experiments. However, if you are familiar with the topography of Mongolia, you will understand that this is the border area between China and Mongolia. If the U.S. were to deploy surveillance to the region, the impact would be similar to that of South Korea's THAAD program. So, in the face of a three-legged situation between China, the United States and Russia, how will China hand over the gas pipeline to Mongolia? If Mongolia uses this pipeline to suppress us, we will face a huge energy crisis.
Russia is in dire need of money and desperate to get some benefits from China.
However, China's rejection of the contract has made Russia very uneasy. Russia is now facing a huge fiscal deficit, and it spends huge sums of money every day in the war. If that's the case, Russia will need to use the pipeline to get some of China's aid. In fact, Russia has already made moves over the past year. During his visit to China, the Russian prime minister also held talks with China on the issue of pipelines. Under Russia's plan, Russia will provide China with $10 billion to support the Siberian No. 2 gas pipeline project. However, the negotiations ended in failure because there was no consensus on the issue of oil prices.
During the Sino-Russian talks, Russia was well aware of China's energy costs. As China's development slows down and environmental pressures are on the rise, it is becoming increasingly sensitive to energy needs. So, Russia wants to reduce the price of oil to 271 per kilogram3 dollars, in fact, it wants to get more out of China. In this way, Russia wants to make up for its own fiscal deficit at home and thus support its military and political activities in the country.
However, due to China's veto of this agreement, Russia must reflect on its position. At China's repeated demands, Russia may have to redesign its strategy and seek alternative sources of financing. This is by no means easy for Russia, which is not in a good situation at the moment. Russia's economy has been hit hard by global sanctions and declining oil**. Therefore, it will be very difficult for Russia to obtain financing from other sources.
The consultations on the Sino-Russian natural gas pipeline issue and Mongolia's concerns involve the country's interests as well as its own geographical location. In this context, the parties concerned should seek a mutually acceptable approach in a calm and rational manner. After all, both sides benefit from the promotion of regional peace and development.
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