Filenews 3 September 2024 - by Daniel Markind
While Vladimir Putin has focused his attention on advancing Ukrainian troops, in the first military invasion of Russian territory since 1941, Mongolia is inflicting another economic blow on him that he probably did not even expect.
In its economic plan for the next 4 years, Mongolia has not included funds for the Power of Siberia-2 gas pipeline, which would connect Russia to China. According to estimates by Russian energy giant Gazprom, the new pipeline could pump 1.8 trillion cubic feet of gas per year to China, which would help Russia make up for some of the market lost in Europe due to sanctions imposed on Moscow following Russian troops' invasion of Ukraine in 2022.
Russian Foreign Ministry spokeswoman Maria Zakharova recently said that the project is still on track and that various roles are being discussed for Mongolia – including using part of the gas revenues for Mongolia's economic development.
It is certain that the details for the construction of the pipeline are still at a preliminary stage and there is still no final agreement on how -and if- the project will proceed. Putin faces another big problem. With its military forces reeling in many areas due to the Ukrainians' unexpected counteroffensive in Kursk, and with Crimea now almost cut off by Ukrainian bombardment, Russia needs weapons and soldiers now — and not in the distant future.
The first Power of Siberia pipeline began delivering natural gas to northern China in 2019. This pipeline runs through the eastern part of China, passes through Beijing and continues to Shanghai. The last section of the pipeline in the south will begin gas deliveries in 2025. The second pipeline was intended to pass through Mongolia (and its capital, Ulaanbaatar) and enter China northwest of Beijing. However, without Mongolia's participation in the project, the pipeline would have had to be rerouted eastwards, bypassing some important cities in mainland China.
Many say China is concerned about Gazprom's attempt to control the section of the pipeline — about a third of its total route — that is expected to cross Mongolia. Moscow would gain too much control over the region. Beijing believes it won't need the gas until about 2030, so it's not burning to speed up the project. This is second bad news for Putin, as data released earlier this year show that gas sales to China have not made up for lost exports to Europe
And all this is happening while the ruble is limping in global markets, with its exchange rate hovering at 92 rubles per dollar, having lost about 8% of its value in a month to fall to levels seen in late summer 2023. Such as leading his country into war without being honest about his intentions with the people and delaying turning the country's economy into a "war economy". An example of the obfuscation that the Russian president wanted to impose is the euphemistic characterization of the war as a "special military operation."
Unfortunately, as Lyndon B. Johnson (US president from 1963 to 1969) discovered too late, the laws of economics are not broken by rhetoric, especially when the leadership of a state continues to lie to its citizens about its success in suppressing the enemy's "special military operations".
Thus, Russia sees long-term growth rates below 1%, estimating that the revenues it will lose from energy exports will significantly undermine the resources it needs for economic (including war) production.
All in all, things do not look rosy for Moscow. The developments in Kursk and – now – Mongolia's stance show, once again, that Putin has missed his assessment of the military takeover of Ukraine.
Forbes
