Russia is discussing a major new infrastructure project to bring gas to China via Mongolia, President Vladimir Putin said on Wednesday, as Moscow seeks to replace Europe with Beijing as its main gas consumer, Reuters reported.

“We are discussing the possible implementation of a large infrastructure project, I mean the supply of Russian gas to China through Mongolia,” Putin said during a televised meeting with Mongolian Prime Minister Luvsannamsray Oyun-Erdene.

The two leaders spoke at Russia’s Eastern Economic Forum in Vladivostok on the same day Putin threatened to cut off energy supplies if the West approved price caps on Russian oil and gas exports.

For years, Gazprom has been studying the possibility of laying a new large gas pipeline, Power of Siberia 2, through Mongolia, which will transport Russian gas to China.

Gazprom says the proposed pipeline could transport 50 billion cubic meters of natural gas a year, slightly less than Nord Stream 1, which connects Russia to Germany under the Baltic Sea.

The existing Power of Siberia pipeline, which runs from Russia to China, was launched at the end of 2019 with an annual capacity of 61 billion cubic meters per year. It will become a key source of revenue for Russia in the coming years as Europe seeks to wean itself off its historic dependence on Russian gas.

Before Russia invaded Ukraine, Putin signed a new 30-year contract to supply gas to China. In 2021, Russia exported 16.5 billion cubic meters of gas to China.

Before the launch of the Power of Siberia pipeline, almost all of Russia’s pipeline infrastructure was focused on supplying Europe, and now the Kremlin is making a potentially expensive and time-consuming turn to the East.

Putin also said on Wednesday that state-controlled oil company Rosneft had reached an agreement with the Mongolian government to expand cooperation in the supply of petroleum products.

What is currently known about the “Power of Siberia 2” project

Mongolian Prime Minister Oyun-Erdene Luvsannamsray said in an interview with the Financial Times in mid-July that Mongolia expects Russia to begin work on the Power of Siberia 2 gas pipeline through its territory in the next two years.

“The feasibility study of this project has already been completed, and we believe that construction work will begin in 2024,” Luvsannamsrai said.

Preparations for the construction of the Power of Siberia-2 gas pipeline were announced back in 2014.

After several rejected options, the decision was made to lay the pipeline through Mongolia, as it allows for a shorter pipeline length and therefore lower construction costs.

The Power of Siberia 2 pipeline is estimated to be approximately 2,600 kilometers long, and its final route through Mongolia is still under discussion.