NEED TO KNOW

• Russian oil exports to China grew 35% in Q1 2026, per Kremlin readout.
• Putin pressing Xi to finalize Power of Siberia 2 pricing after September's binding memorandum.
• China still buying Russian crude at discounts created by Western sanctions.

BEIJING (TDR) — Russian President Vladimir Putin arrived in Beijing Tuesday for a state visit with Xi Jinping, making the energy relationship between two sanctioned suppliers and the world's largest buyer the centerpiece of two days of talks.

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The big picture: Russia comes to Beijing needing China more than China needs Russia. The trip lands five days after Trump's Beijing summit produced a 200-Boeing-jet order and little else.

• Russia's oil exports to China rose 35% year-over-year in Q1 2026, Kremlin aide Yuri Ushakov said.
• China is now Russia's top trading partner and leading buyer of Russian crude and gas.
• Beijing buys at sanction-driven discounts while maintaining alternative suppliers in Turkmenistan and Central Asia.

Why it matters: The Power of Siberia 2 pipeline, mooted for two decades, was finally signed as a legally binding memorandum in September 2025. The commercial details that matter to both governments still aren't settled.

• The 2,600-kilometer pipeline would carry 50 billion cubic meters of gas annually from Russia's Yamal Peninsula through Mongolia to China.
• Pricing, financing, and the start date remain unresolved. China wants Russian domestic rates near $120 per thousand cubic meters; Russia wants European-style indexing near $265.
• If completed, the pipeline could supply more than one-fifth of China's projected 2030 gas demand.

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Driving the news: Putin is using Iran-driven energy instability to push Beijing toward finalizing terms it has resisted for years.

• The Strait of Hormuz disruption has increased Chinese exposure to Middle East supply shocks.
• Kremlin aide Ushakov told Bloomberg the pipeline is "on the agenda" for "serious" discussion.
• Putin and Xi are expected to issue a joint declaration on a "multipolar world" Wednesday.

What they're saying:

• Vladimir Putin, in his pre-trip video address — "Russia-China relations have reached a truly unprecedented level."
• Wang Zichen, Center for China & Globalization — "The Trump visit was about stabilizing the world's most important bilateral relationship; the Putin visit is about reassuring a long-standing strategic partner."

Yes, but: China is the buyer that can wait. Chinese gas demand growth has slowed, and Beijing has steadily diversified through Central Asian pipelines and LNG imports from the US, Qatar, and Australia.

• Beijing's negotiating position has only strengthened as Russia lost European customers after 2022.
• The Center on Global Energy Policy at Columbia notes Russia needs the pipeline for strategic export reasons, not profitability.
• Even completed, the pipeline would deliver Russia roughly $2.5 to $4.3 billion in annual rent, a fraction of the $20 billion Moscow earned from European gas before the war.

Between the lines: Both Western sanctions and US foreign policy converged on the same outcome: China sitting in the buyer's seat for Russian energy with no real competition. Sanctions removed Russia's leverage to demand European-equivalent prices. Trump's tariff posture and the Iran war reduced China's confidence in seaborne LNG. Beijing now negotiates from a position no rival can match, with no urgency to close.

What's next:

• Putin and Xi are expected to issue formal joint statements Wednesday, with energy cooperation as the centerpiece.
• Whether the joint communique includes a Power of Siberia 2 pricing announcement is the practical test of who blinked.
• Trump faces a separate decision on whether to lift sanctions on Chinese "teapot refineries" processing Iranian crude.

If sanctions were meant to isolate Russia, and tariffs were meant to pressure China, what should Washington have expected when the two countries built the largest energy partnership in the world together?

Sources

This report was compiled using reporting from CNN, NBC News, NPR, Al Jazeera, CNBC, CSIS, Columbia's Center on Global Energy Policy, The Moscow Times, and Graphic News

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