Israel-Iran conflict spurs China to reconsider Russian gas pipeline

The war between Israel and Iran has revived Chinese leaders' interest in a pipeline that would carry Russian natural gas to China, according to people close to Beijing's decision-making, potentially jump-starting a project that has been stalled for years.

- Georgi Kantchev & Lingling Wei

The Power of Siberia 2 pipeline project has been mired in disagreements over pricing and ownership terms, as well as Chinese concerns about relying too heavily on Russia for its energy supplies. But the recent war in the Middle East has given Beijing reason to reconsider the reliability of the oil and natural gas it gets from the region, the people said, even as a fragile cease-fire between Israel and Iran takes hold.

China imports around 30% of its gas in the form of liquefied natural gas from Qatar and the United Arab Emirates via the Strait of Hormuz, a maritime chokepoint that Iran threatened to close, according to consulting firm Rystad Energy. Meanwhile, China's independent refineries, known as teapots, have in recent years become hooked on cheap Iranian crude.

More than 90% of Iran's oil exports now go to China, analysts say, even though the U.S. has sanctions designed to prevent Iran from selling its oil abroad. Trump made an unusual acknowledgment of China's Iranian oil imports Tuesday after announcing a cease-fire in the Israel-Iran conflict. "China can now continue to purchase oil from Iran. Hopefully, they will be purchasing plenty from the U.S., also," he said in a post on social media.

A White House official later said Trump was simply calling attention to the fact that the cease-fire prevented disruption to oil flows through the Strait of Hormuz. He continues to call on China to import U.S. oil rather than Iranian oil in violation of U.S. sanctions, the official said.

But, even with a cease-fire in place, the recent conflict has spurred Beijing to cast about for alternatives, the people and analysts say.