The Duran Podcast - Power of Siberia 2. EU faces dark, EXPENSIVE energy future

Episode Date: September 8, 2025

Power of Siberia 2. EU faces dark, EXPENSIVE energy future

All right, Alexander, let's talk about the power of Siberia II, which was announced by the gas prom head, Miller. He was the first one to announce that there has been a legal agreement between Russia and China for the pipeline power of Siberia II, which will go from Russia, transit via Mongolia, and end in China. the interesting part about the power of Siberia 2, what differentiates it from the power of Siberia 1, is that this gas from Russia was supposed to be the gas that was going to power the European Union and specifically power German industry.

Now all of that gas is going to be redirected to China. Mongolia becomes the beneficiary as a transit state. Once upon a time, Ukraine was the beneficiary. as a transit state. And it's going to most likely complete by, be completed by around 2030, I think Miller said would be the launch. And at the time of Miller's announcement, there were a lot of analysts who were saying that this is not real. This is just a memorandum of understanding Russia and China have been talking about the power of Siberia, too, for five, ten years now. Putin talked about it.

Putin talked about it. He even talked about the pricing of it, a little bit about the pricing of it. And when Putin is talking about the power of Siberia too and the agreement that Russia has with China, you can take it to the bank, that this is a done deal. Absolutely. Your thoughts on the power of Siberia too, Alexander. Yes. I mean, this is, this is huge. and it is, by the way, the main big, concrete agreement that came out with the various meetings in China. I mean, there was very interesting meetings in Tianzin and in Beijing.

There were all kinds of world leaders there. But the big deal, the big deal is this one. And it has enormous implications. So let's first of all say something about this pipeline, because, of course, there's been a lot of discussion about this, And a lot of people in the West have been saying for ages that it would not happen, that the Chinese weren't really interested, that it was bogged down with pricing disputes and all of those things. And by the way, we said on the Duran earlier this year that it would be agreed this year. And if you actually go back, we actually talked about it that it would be agreed this year.

Yes, yes, we did. And sure enough, it has been agreed this year. What has held this up, it has nothing to do with pricing disputes. I mean, I'm not saying that there aren't, there weren't discussions and arguments about pricing. But what really held this pipeline up were two events. Firstly, the pandemic. I mean, it was apparently very close to being agreed in 2019, but then the pandemic happened. That threw everything into confusion.

Nobody was going to build a massive pipeline. or commit to building a massive pipeline, whilst that was underway. And then the second thing that happened was the start of the special military operation and enormous sanctions. And because the Chinese are going to be involved in building this pipeline, up to now, pipelines have almost entirely been built by gas from. But it was always understood that China was going to play an actual role in the construction of this pipeline.

Anyway, the point was that the Chinese needed to recalibrate some of their industries to sanction proof them because they didn't want companies that used Western components to suddenly find themselves sanctioned because they were involved in making this. Now, that process, I suspect, has now been completed. The elements to agree this are there and the deal has now been done. And those who said this is just a memorandum of understanding are completely wrong. The way the Russians and the Chinese work is that they only sign memorandums of understanding when 99.99% of the rest of the documentation is agreed and ready, all the big issues are resolved. So as you rightly said, if Putin and C are endorsing this, then you can be. There is no doubt this thing will be built. It will be built, as you rightly say, using Arctic gas,

some of it from fields that were already providing gas to Europe, some of it from Arctic fields, which were intended to be developed and to supply gas to Europe through the YAMAL and Nord Stream pipelines. I mean, the whole purpose of those pipes, lines, the Yarmal pipeline, which was built, Nord Stream 1 and Nord Stream 2 was to feed into Europe that gas from those new developed fields that the Russians were developing in the Arctic. So instead of going to Europe, as you absolutely rightly say, it will be going to China. And it will not flow to Europe again. This is the key thing to understand.

if there is elections in Germany and a new government is formed, which wants to restart Nord Stream, which of course Mautz is making all but impossible. And they come to Moscow and they say, well, we want this gas, we want this gas to come back to us. We are prepared to pay more, much more than the Chinese. it can't be done because this gas is already now contractually committed to go eastwards to China. And I don't think people in Europe understand this, but this is what is going to happen. This is now definite. There's no turning back from this. If Putin is succeeded by someone else, Putin leaves the scene at the end of the

term, whoever replaces him, this is all been agreed, the pipelines are going to be built. It's not going to change. If there's a change of government in Germany, it is not going to change. Europe has once and for all, and forever, lost Russian. pipeline gas. And pipeline gas has, of course, already been going east to China via Power of Siberia 1. Power of Siberia 2 is a much bigger pipeline. It'll carry much more gas than Power of Siberia 2. Pipeline gas, and we've discussed this many times, is inherently cheaper than LNG. the power, the gas supplied to China via power of Siberia 1 is already the cheapest gas by a significant margin,

apparently, within China's gas energy mix. So power of Siberia 2, which is going to start to supply a lot of gas. And bear in mind, after power of Siberia 2, there will probably be power of Siberia 2, there will probably be power of Power of Siberia 3 and all of those others. What that's going to mean is that the market in China for more expensive LNG is going to decline and that is going to have consequences for the global LNG market because China is the biggest growth market for LNG. So it's going to mean that China will import less LNG, which could feed into the LNG industry and might result in lower investment there.

And it's also, of course, ultimately going to make China less dependent on imports of LNG from the United States. Yeah, you know, the Europeans, they wanted to get rid of Russian gas. who would have thought that Russia would get rid of the Europeans, I mean, right? Yeah. They wanted to get rid of the Russian gas. They've been saying this for three, four years. We've got to cut out the Russian gas. We've got to cut out Russian energy.

Well, in Beijing, Putin just cut out the Europeans. Correct. Russia and China. Correct. They said, you know what? We don't want you. You don't want our energy? Yes.

We don't want you as a customer. Exactly. That's what they did. What do you mean when you said that, the Europeans don't understand what's going on. Do you mean the European people? They don't understand that things are going to get a lot worse, especially in relation to the cost of energy and inflation? Or do you mean the European elite have not understood what's going on? Well, obviously, the European public, I think, are oblivious to much of this because

it's never discussed or reported properly. But I mean, the European elite. And I mean, here, including, not just the political elite, but the economic. elite as well. I mean, in Germany in particular, there's been a long-standing historic belief that, you know, Russia would sell its, the only way that Russia can develop economically is by selling its gas and its raw materials and its energy to Germany. There's been much talk about how Russia is Germany's economic, sorry, is its raw materials resource-based, Germany's resource-based German industry has been muttering for some time. You know, we've got to think about reopening the Nord Stream pipelines.

There's been even assertions by some German politicians that when the peace in Ukraine comes, we must work hard to reopen the pipelines and to get Russian gas again. It's not going to happen. I mean, you know, some of the people who are saying these, things are people, by the way, in Germany, whom I actually have some time for. I'm sympathetic to them. But, and they're a lot more realistic than, you know, the barebox and the Oscellos and people like that, who said that Europe can dispense forever with Russian energy. But the point is, to repeat again, the deal, the deal has now been done.

You cannot supply gas by pipeline, which isn't there. Europe can still, if it wants, buy LNG from Russia, which Russia produces quite a lot now. But the great flows of pipeline gas to Europe are gone forever. And whatever happens politically in Europe now, that won't change. And I just, I don't think that people in Germany or Italy, Italy was another massive importer of Russian gas, have internalized this. I think it will take them years to. I don't think they understand the implications of what's happened. And there it is.

I wanted to say a few further things, by the way. First of all, gas pipelines going through Mongolia are going to transform Mongolia. It's a huge country, geographically speaking, it's a vast land area, but it's very thinly populated. And it's quite poor. I mean, now they're going to get the receipts from, you know, the transit fees. I mean, this is going to make a huge difference to Mongolia. I mean, it's going to make Mongolia probably a very rich place, just to say.

And that's, you know, good for them. They play their cards well. but I mean they've done it they've done this very well but the second thing I want to say it and it comes back to your point about a customer and that the Russians have just cut out the Europeans as a customer what I think many people in Europe just don't understand is that the closing of the Nord Stream pipelines which is of course started by the Germans I Schultz suspended Nord Stream, the Nord Stream pipelines in February 2020, closed them down entirely later.

And of course, Nord Stream 2 never really properly operated. And as we know, subsequently, they were blown up. That is only a culmination of, from a Russian point of view, an enormously difficult and angry and relationship with the Europeans. Because Gazprom, in trying to supply Europe with gas, constantly faced criticism. It faced endless legal harassment. Brussels brought anti-competition investigations and legal claims against Gazprom. There were constant attempts to force Gasprom to renegotiate its supply contracts.

as we know, the Ukrainians twice basically stole gas from gas prom's pipelines. And gas prom got blamed for allowing the Ukrainians, for not allowing the Ukrainians to steal that gas and closing off the pipelines. Anyway, this went on year after year and an article after article appearing in the media in the West about the dependence of you on Euro-political. dependence on Russian gas and how Russia used gas as a weapon and all of that kind of thing. Now, we said this in many programs, but it bears repeating again that, yes, China will pay a lower price for its gas than Europe will. But in any long-term business relationship, what you want, First and foremost is trust in your customer. The Europeans have long since forfeited that trust.

From the Russian point of view, they were unreliable, fractures, litigious, argumentative, impossible, partners, constantly critical, constantly making and creating problems, constantly threatening. So, from a Russian point of view, so much easier, so much simpler to do your business with China. You don't have to worry about all of that. You don't have to worry about the endless court cases and the critical articles and the harassment and the constant threats and fears that the whole thing could be closed down and stop from one moment to the next. You now have a strong, reliable, trustworthy partner.

The partner may be paying a little less, but frankly, isn't that a premium? You're happy to give that partner in return for a long-term, stable, ultimately successful business relationship. This is again something the Europeans never seem to get or understand. Yeah, China is going to get low-cost. Dependable and from a business perspective, very predictable energy from Russia. So the businesses are going to benefit greatly from this. Going back to Schultz, I remember a point in time in August, August, early September, when Olaf Schultz was actually thinking of walking back.

And he talks about sanctions against Russia because of Nord Stream. and then it got blown up, right? But I want to say that a gas pipeline, once it connects to two countries, I mean, it could create a stronger connection than even a military alliance in a certain way. And the only way you're going to break that connection is if you do something like blow apart that pipeline, which is what happened, which ultimately led Schultz to go along with all of the sanctioning of Russian energy. But he didn't want to go along with it back in late August, early September. He had his doubts about sanctioning Russia and specifically Russian energy

and the effects it would have on German industry. And then Nord Stream sabotage happened. And that was it. So, I mean, this is going from a geopolitical perspective, not a business perspective, but from a geopolitical perspective, this really solidifies the partnership, the partnership, the connection, the alliance, if you want to call it that, between China and Russia, or it further, it further solidifies the partnership between China and Russia. So your thoughts on that. And also what happens to Europe now? Europe is on the hook, allegedly. They're on the hook for 600 billion in investment to Trump. They're also on the hook for 750 billion in purchasing U.S. energy over the next two years to Trump to the United States. They agreed on all of this in Scotland. That

agreement has been published online, actually, so it's there. What happens to Europe now? There is no pipeline gas. There's only LNG. What's going to happen to the European economies? Once again, this is what they wanted. Or at least this is what they were telling us they wanted. And now Russia has given it to them. Russia and China have given it to them. And they've said, you know what? You don't want what we have? Fine.

We're walking away. We're going to do our own thing. So now Europe has what it wanted. Italy has what it wanted. Germany has what it wanted. France has what it wanted. And all of Europe that has played along with the EU goal of cutting out Russian energy and Russian gas and stopping the funding of Putin's war machine,

and all of that nonsense, they got it now. There's going to be no more Russian energy. What happens to Europe? Because it seems to me like they're in a world of mess. The UK economy is collapsing. The French economy is collapsing. The German economy is deindustrialized. Italy is doing no better.

And I can't think of one country in the EU that is doing well, maybe with the exception of, I don't even know, maybe Slovakia, Hungary, maybe Cyprus. I'm not sure. Europe's in a mess. And this deal, to me, signals that it's not going to get any better. It's actually going to get a lot worse, especially when it comes to European manufacturing and industry and exports and stuff like that. They're not going to be able to compete with China now, never in a million years.

What are your thoughts there to wrap up? Well, absolutely. And if you comment on Schultz and the geopolitics of pipelines. Yeah, absolutely. Well, let's start actually with the geopolitics of this, because you're absolutely correct. I mean, the building of this pipeline now basically, binds together China and Russia as an economic, not just a trade system, but as an energy complex. They're going to be working together. They're creating what is in effect a joint energy

complex. Remember, China needs enormous amounts of energy, especially given that they want to, given their enormous investment in AI, which as we know, it's very, very energy intensive. So they want all the energy they can get. They're going to get new. power? And by the way, who happened to be the leaders in nuclear power engineering? The Russians are. And the Russians are going to be building nuclear power stations in China. But the most tangible thing is these pipelines. And it's now a strategic relationship for China and Russia to build their economists together. I mean, this is, this makes it, this means now that the energy, sorry, the energy futures, and to some extent at least, to a great extent at least, the economic futures of both

countries are now interconnected with each other. And given that we're talking about two great powers, that is inevitably going to have an enormous, enormous effect, in shaping the future of, you know, the world, the geopolitical world. Now, there is an immediate practical effect to all of this, which is, of course, Lindsay Graham and Richard Blumenthal have been going around telling everybody that they want this bill passed in the set by the Senate, which will stop, will tariff every country that buys Russian oil and gas. And this whole thing is premised on the assumption that, that countries like India and China will then stop buying Russian oil and gas.

Well, the Indians have said no. We're going to continue to buy Russian oil. And this appears to have come as a shock in the US. But now the Chinese, who are much more important and who are economically speaking and in trade terms with the United States, have said this too. This announcement in China kills the whole premise, the whole sanctions premise, upon which those prospective sanctions, that entire bill that Lindsay Graham and Richard Blumen told and the European 19th century sanctions package is based.

Because it is now absolutely crystal clear that for the Chinese, this is a strategic necessity to sort out their energy connections with the Russians. They just made this commitment in the face of the threats from Europe and the Graham Blumentzal sanctions bill. And again, this means that the whole sanctions war against Russia specifically has now failed. From this moment on, it cannot succeed. Trade is going to continue to grow. The Russians are increasingly importing chips, for example, from China. China can provide Russia with everything it needs in terms of technologies and manufacturers.

Any idea that you can somehow stop the Russians by applying economic pressure on them. From this moment onwards, that idea is dead. Just to say, that is another point to make. Now, the future of Europe, and this is, of course, for us as Europeans, a particularly sad thing because, you know, we live here. And this is our home and our cultural space as well. Now, Schultz, as you absolutely rightly said, did have some, you know, woke up in some, you know, late watches of the night saying to himself, what did I do? Germany's de-industrialising. We can't continue this way. Maybe we need to rethink about Nord Stream and all that. And as you correctly said, it was then blown up in October 2020. So the point was

that he set up that situation by suspending the Nord Stream pipelines in the first place and by leading the charge to block access to Europe of Russian gas and oil. And it was the reason he did that. It was not just because he thought that this would help Ukraine, but because it was universally assumed across Europe by the Biden administration, by the European leaders. This is what they were all telling each other. at that disastrous security conference in Munich, which took place in February 2022.

But if they did all of those things, Russia would collapse, Putin would fall, they would be able to go back to Russia as victors. They would be able to force the Russians to accept the third energy package. Chevron and Exxon and, you know, BP and Shell, all of them would be all over. Russia, building, operating the pipelines, paying token amounts to the Russians as they've done in other places, and this would fuel the European energy for the future. That was, I'm convinced that was very much the expectation. It didn't happen like that. And now they're facing the consequences because they've lost access forever to Russian pipeline

gas. I said that given that China looked like it would become the major market for LNG, that's now looking unlikely. That means that investment in LNG, including the United States, is likely to fall. The United States anyway is unlikely to be able to sustain current levels of gas production at the point where they are for the, very much longer. So LNG flows will start to reduce costs of LNG will continue to rise. This looks from every conceivable point of view, like an absolutely destructive, suicidal thing that the Europeans did to each other, because one way or the other, they have permanently locked the door on cheap energy. The Chinese have taken steps to secure their energy. The Americans,

to a great extent, are doing the same, or at least they're trying to. The Russians, obviously, are already an energy superpower. And I suspect that before long the Indians will be in on the game as well, because there's some talk already that eventually these pipelines that are being built to China, branches of them will extend to India as well. And there's also a strong likelihood eventually that Iranian gas will also flow through these pipelines as well. I mean, never overlook Iran, which is also a major player in the gas industries. So where does that leave Europe? Well, you know, we have solar panels and things, most of which are made in China.

Weather conditions in Northern Europe are not really particularly good for that. We've flooded the place with windmills. He produces a significant amount of energy. France's nuclear power plants are in decay. I mean, they committed themselves. They invested very, very heavily in nuclear power before. But apparently France's nuclear industry is gradually running down. As we know, France is in the midst of an enormous budget crisis.

And it's very difficult to see how they can continue to build nuclear power stations and invest in their nuclear power industry, which requires long lead times and very, very heavy investment. So they're going to be facing an energy crunch. before very long. Look at it, however you will, spin, you know, the wheel, whatever way you wish. Europe's energy future is bleak. We said earlier that AI requires massive amount of energy. There is no prospect of that coming to Europe from any obvious source.

we're going to fall further and further behind in technology. We are already far behind the leaders, America and China, in technology, in Europe. And we have no plan, no real plan on how to get to equalize opposition, or at least to make up some of that lost ground. The Russians do have plans. We don't. And of course, we're de-industrializing at the same time. because energy costs in Europe are already so high. So look at it however you wish.

It's very, very difficult to be optimistic about Europe's economic future. And increasingly more and more people around the world, investors, people who want to start building businesses and looking for trade links. They're going to start looking at Europe. And they're going to say, not only is this not an economic carbon, a place where we want to invest. It's not even a viable market, really, for the best products in the future either. We have done, our leaders in Europe have done, an enormous economic, well, I would say crime to the people of Europe. Yeah. Ursula destroyed Europe and the leaders around Ursula.

The leaders of each member state country very quickly. two questions. What about Turkstream, Slovakia, Hungary? Are they trying to secure their energy from Turkstream via Turkey as a hub? You can comment on that. And is it possible sometime in the future if you had new German leadership that you could get some gas via Nordstream? Do you see that as a possibility? Or is that not going to happen? Ever. I mean, Nord Stream, I think, is dead. I mean, I even if it was, even if the Germans wanted it, restarted. As I said, the gas is not going to be going there. It's going to be going to China instead.

Now, Turkstream is still a going concern. It's an increasing concern. And you're absolutely correct. Pipeline gas. And we're talking about Russian pipeline gas. Of course, everybody pretends it's coming from Azerbaijan, but it's really Russian pipeline gas. still flows to Europe through the various Turk stream pipelines, and increasing amounts of it are reaching Slovakia and Hungary,

and that is, to some extent, protecting these countries from the Ukrainian attacks on the Drusbukhba pipeline and all of that. And one would like to believe that this will continue. But my own sense is that the Turks, who are very, in some respects, quite canny business people. They built Turkstream, again, in the expectation, they built with the Russians Turkstream, in the expectation that Europe would be the great market for gas, given that Europe is now closing itself down, not just as a market for gas, but for many other things. I can't help to think that the Turks will gradually rethink this and will start to work closer with the Central European, Central Asian states and start to integrate more with the Asian economies, the Asian and Eurasian hubs. And look who was there in Tianzin.

probably he'd been given some advance notice that this deal, Paris, Siberia 2 was in the making. Eder 1 was there. And who did he speak with? He spoke with his dear friend, Vladimir Putin. And by the way, if you read the Russian readout, that's exactly how they addressed each other. My dear friend.

Yeah, Turkey has the luxury to look east as it sees the West decaying. Exactly. It does. It's also, of course, it's also going to continue to receive Russian pipeline gas. So before long, and Turkey, of course, does have an industrial base, which is increasing. So Turkey is going to become more competitive industrially, despite all of the chaos that you see in its financial, the financial part of its economy. But it's going to continue to receive cheap, reliable pipeline gas from Russia. and that I think is going to be there forever. By the way, they've obviously also sorted out the financing arrangements with the Russians

because Russian tourists are traveling to Turkey again in huge numbers. They are apparently the largest single tourist cohort in Turkey again this summer. That must mean that all of the problems with meerkards have now been resolved. I'm not to wear how it was done, but it must have happened somehow that way. So you could see where Turkey is looking towards the rising sun, if you like, not the setting sun. And visa free travel between China and Russia, both directions. How stupid are the Europeans and the European Union and the European member state leaders for going along with Ursula and the European Union in their European Union in their European Union in their European Union. directive to ban Russian commercial flights to cut out Russian tourism and Russian trade.

I'm thinking of Greece and Cyprus and what we've now lost in the tourism and hospitality sector forever. Well, absolutely. But if you give the case to the people like Ursula and Kyakalis, then I mean, you're bringing this on to yourself. I, as I I always come back to that security conference in Munich that they were all in a state of complete intoxication. They'd all taken leave of their senses. And I remember it then. It was the party and Europe and its people are going to have to live with a hangover for a very, very long time. Yeah.

But these people will get promoted. Oh, of course they will. I mean, Ursula is obviously going to become president. of Europe, and Kyakales, no doubt, will be the new head of the European Central Bank. I mean, I think she's a natural for that one. I mean, you know, it's inevitable. I'd like to see that one, or maybe I don't want to see that one. Kaya Kalis, ECB chair.

And, you know, and whatever. So, I mean, and, yeah. Anyway, okay, we'll end the video there at the durand.orgals.com. We're on X and we're on telegram and Rumble. Go to the Durand shop. Pick up some merch like what we are wearing in this video update. There is a link in the description box down below. Take care.