Why did China reject Russia’s pricing demands and instead signed a 20-year LNG supply deal with the U.S.?

The core conflict boils down to one word: money. Russia insisted on pricing the ‘Power of Siberia 2’ pipeline according to the same rate as ‘Power of Siberia 1’—$250–260 per thousand cubic meters. China, however, sought pricing aligned with Russia’s domestic industrial gas rates—$120–130 per thousand cubic meters, or even lower. Based on an annual throughput of 50 billion cubic meters over a 30-year contract, the cumulative price gap between the two sides amounts to hundreds of billions of dollars. Russia aimed to replicate its high-price model previously applied to Europe, while China sought a discount close to Russia’s domestic production cost—making agreement fundamentally impossible. China’s confidence in holding firm to its own pricing stems from its already diversified natural gas import portfolio, with no overreliance on any single source. Pipeline gas comes from Russia, Turkmenistan, Kazakhstan, Myanmar, and others; seaborne LNG originates from over twenty countries, including Australia, Qatar, Malaysia, and the United States. Even if ‘Power of Siberia 2’ is never built, the existing ‘Power of Siberia 1’ delivers roughly 38 billion cubic meters annually—less than 10% of China’s total annual consumption. For China, this is merely icing on the cake; for Russia—which has lost its European market—it is a lifeline. Signing long-term LNG contracts with the U.S. also offers greater commercial and strategic flexibility compared to being locked into pipeline infrastructure. Pipelines are dedicated assets: once constructed, both gas source and destination are physically fixed, shifting bargaining power and initiative overwhelmingly toward the supplier.

Is China’s 20-year LNG purchase agreement with the U.S. intended to signal goodwill toward Trump—or primarily to safeguard energy security?

Please remember to like and share! If you haven’t yet subscribed, please follow the account ‘Sanlang Macroeconomics’. Thank you! Summary: China’s 20-year LNG procurement agreement with the U.S., though appearing to be an ordinary commercial contract, reflects deeper shifts—including Middle Eastern energy supply volatility, disrupted Qatari exports, and America’s expanding energy footprint across Asia. For China, increasing LNG imports from the U.S. may convey economic goodwill, but more importantly, it serves to diversify supply risks. I. American LNG—once effectively phased out—has re-entered Chinese enterprises’ long-term procurement radar. Chinese firms have signed a 20-year contract to purchase 500,000 tons of U.S. LNG annually. This year, Iran’s escalating conflict in the Middle East has reshaped global—and especially China’s—energy supply landscape. As China heavily relies on imported natural gas, the impact has been pronounced. From February to April 2026—the three months when the Strait of Hormuz was at its most unstable due to the Iran war—China’s liquefied natural gas (LNG) imports plummeted from $7.29 billion year-on-year to $4.55 billion, a sharp decline of 37.6%. After the U.S. shifted focus from airstrikes to sanctions and port blockades against Iran, relative calm returned to the Strait of Hormuz between May and July. During that period, China’s LNG imports surged to $10.47 billion—a 28.5% year-on-year increase. It was precisely then that U.S. LNG re-emerged in Chinese energy companies’ long-term procurement considerations. On September 14, China Gas Holdings signed an agreement with U.S.-based Venture Global to procure 500,000 tons of U.S. LNG annually for 20 consecutive years, beginning in 2030. Adding this to previously signed agreements, China Gas’s total long-term procurement volume from Venture Global will reach 2.5 million tons per year. The timing of this contract also warrants careful attention and interpretation. II. Was this U.S. LNG procurement timed ahead of a potential Sino-U.S. presidential summit to signal goodwill toward Trump? Superficially, it appears to be just another routine commercial contract—but within the context of current U.S.-China relations and the evolving global energy landscape, it is far more nuanced. On one hand, the announcement coincided with expectations of a possible Sino-U.S. presidential meeting later in September, and U.S. energy exports have long been a key pillar of the Trump administration’s push for trade cooperation. Thus, interpreting this move as a signal of goodwill from Chinese enterprises toward the U.S. is not unreasonable. On the other hand, what deserves greater attention is that this is a contract commencing in 2030 and lasting 20 years. If the sole purpose were short-term goodwill, there would be no need to lock in procurement for two full decades. A more plausible explanation is that enterprises are reassessing the global natural gas supply landscape over the next ten to twenty years. In 2025, China imposed additional tariffs on U.S. energy products, effectively halting U.S. LNG imports. Yet this did not mean U.S. natural gas vanished entirely from China’s long-term supply planning. This new contract underscores precisely that—following shifts in the global energy supply chain, U.S. LNG has regained viability as part of China’s long-term supply mix. Especially after this year’s dramatic developments in the Middle East, energy security has risen sharply in priority. The Strait of Hormuz is a critical conduit for global LNG supply. According to the International Energy Agency, approximately 19% of global LNG trade from Qatar and the UAE passes through the Strait of Hormuz—and about 90% of that volume ultimately flows to Asia.

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