The bright afternoon January sun offers little respite from the minus 40C temperature for the pipeline construction workers crunching through the snow in Russia’s Far East region.
In the sprawling pine forests of the country’s eastern wilderness, the cold air burns cheeks and catches in throats, as the thick, grey exhaust fumes from the colossal earthmoving diggers hang like clumps of candyfloss.
The four-dozen engineers near the town of Neryungri are part of an 8,500 crew working all-year round to build Gazprom’s Power of Siberia, a 3,000km pipeline that runs from the gasfields of eastern Siberia to the Chinese border in the south-east.
The pipeline is Russia’s most ambitious, costly and geopolitically critical energy project since the fall of the Soviet Union, and represents a $55bn bet on uncharted territory by the world’s biggest gas company.
Russia’s first eastern pipeline is the most striking physical manifestation of President Vladimir Putin’s diplomatic pivot towards China amid rapidly worsening relations with the west. It is the biggest and most critical element in a suite of energy deals, funding packages and asset sales that seek to warm a once frosty relationship.
For Gazprom, the Kremlin-controlled gas export monopoly behind the pipeline, the mega-project is the largest and most expensive in its history. When the taps are switched on in December 2019, the world’s largest gas exporter will be connected for the first time with its largest energy importer.
“The eastern route has the same strategic importance for Gazprom as the western,” says Alexander Medvedev, Gazprom’s deputy chairman. “Having concluded a single contract, China equalled our largest European consumer. This cannot but inspire hope for more . . . And Gazprom is ready to meet this demand.”
Treacherous cold
Already more than half completed, the pipeline snakes across plains and swamps, rivers and permafrost, creeping across the map at a rate of more than 2km a day.
Part buried in trenches, cut four metres deep into the frozen soil, part built on stilts to navigate rivers or swamps, the pipeline has been engineered to withstand earthquakes and endure temperature swings of 80C, from the blistering Siberian summers to the frigid winter.
Come spring, the treacherous cold will be replaced with another threat to the workers: the wild bears who live along the pipeline’s route.
“This is a very big and difficult engineering task,” says Vladimir Shmatovich, a vice-president at TMK, a Russian steel company supplying Gazprom with pipe. Before construction began, TMK gave Gazprom 20 pieces of the 12-metre-long, 1.4-metre-wide pipeline for stress tests. “We knew these will be destroyed. They torture them,” says Mr Shmatovich. “There are very severe crash tests — they blast it like the military. They need to see at what point it will break.”
“Some might say Gazprom are crazy. But they always think ahead. They plan for the future, for the long-term.”
The sense of opportunity and achievement is palpable. “I’ve been an engineer for more than 40 years,” says Anatoly Titov, head of Gazprom Transgaz Tomsk, the subsidiary tasked with building the pipeline. “This is the largest undertaking in Russia’s energy industry for the past quarter of a century.”
“We take pride in our role,” he adds. “Each participant will talk to their children and grandchildren about being a part of it.”
Economic crunch
If modern Russia is a house that hydrocarbons built, then its network of gas pipelines are the foundations. The gas pipelines that run to Europe have been a bedrock of its economy since the 1960s.
Last year, Gazprom supplied close to 200bn cubic metres of gas to Europe, equivalent to almost 40 per cent of the continent’s needs, and the source of the vast majority of the company’s profit. Oil and gas production accounts for 40 per cent of the country’s fiscal budget.
But while demand for Russian gas in Europe has risen in recent years, prices have fallen amid pressure from competitors. In 2012, Gazprom exported 217.1bn cubic metres of gas for $64.3bn. By 2016, its overseas shipments had risen to 261.5bn cubic meters but brought in just $36.6bn.
Many eastern EU countries, fearful of Russia, want to reduce their reliance on Gazprom, while US sanctions target new pipelines, such as Nord Stream 2 which would double direct supplies to Germany.
“Gas deliveries to the east is the only possibility for Gazprom’s output and revenues to grow in the midterm, in our view,” says Ekaterina Rodina, oil and gas analyst at VTB Bank in Moscow. She estimates the project could be worth about $5bn of the company’s $60bn market capitalisation.
But such a major investment is not without risk. A slump in the oil market or lower than expected demand from China would significantly reduce revenues. Any cooling of the new-found warmth in the traditionally fickle Beijing-Moscow alliance could hurt demand for Russian gas. With depleting gas reserves and pressure to reduce coal use, China sees a dedicated Russian pipeline as a useful part of its future energy security. Yet Beijing is not short of willing suppliers, including pipelines from Central Asia.
As the only potential major customer for the gas — the pipeline is too far east for Gazprom to profitably send gas to western customers — the Chinese took a hard line during the decade-long negotiations. Gazprom gave in to Beijing’s demand that the gas would be pumped to eastern — not western — China.
“The Chinese were very tough,” says one person involved in the talks. “[But] what is a decade for a country that thinks of itself as 5,000 years in the making?”
Poverty of the east
In the small towns and villages along the railway, which connects the Far East to the rest of Russia, wooden cottages and dirt tracks betray the region’s poverty.
Elderly women hawk home-made pastries on broken pavements, in the shadow of Soviet-era apartment towers.
Svobodny, a town alongside the pipeline, is best known as the site of one of the largest forced labour camps in the Gulag network during Joseph Stalin’s rule of the Soviet Union.
Aside from the political and trade benefits, Moscow also hopes that Power of Siberia — the largest investment in Russia’s Far East — will help to regenerate the region.
A new gas plant outside Svobodny will employ 25,000 people in its construction and 3,000 to run it. Other companies, such as ESN Group and petrochemical producer Sibur, are in talks to set up plants nearby.
“There is nothing like this in the eastern part of Russia . . . it is a big shift in terms of focus, from west to east,” says Andrei Belousov, the plant’s deputy director-general.
On the border
Blagoveshchensk, a small city on the Russian side of the border, has had an at times fraught relationship with its eastern neighbour. There were border skirmishes in the 1960s and, more recently, fears over potential large-scale immigration.
But in this city, close to where the pipeline crosses into China, government officials are now reaching out with open arms. Last month, at the behest of the region’s fresh-faced 37-year-old governor Aleksander Kozlov, city authorities built an ice hockey pitch on the frozen river, with its centre line along the international border, for matches between the two countries.
“It is obvious that Moscow believes we should engage more with China in all areas,” says Mr Kozlov. “[And] we believe in this.”
Since Mr Putin and his Chinese counterpart Xi Jinping signed the gas supply agreement in 2014, Chinese banks and companies have poured more than $40bn into Russian businesses, from loans to projects such as a $27bn liquefied natural gas plant in the Arctic and share purchases such as CEFC China Energy’s 14.2 per cent stake in oil company Rosneft.
“Before these projects came, this region was more focused on agriculture,” says Mr Kozlov. “Today we are seeing major steps in the development of the Far East.” A long-delayed bridge to China is finally under construction, and a special economic zone is also being developed.
A statue on Blagoveshchensk’s main street depicts a young man carrying huge bags, in memory of the one-man traders that hauled goods across the border after the collapse of the USSR in the 1990s.
“This reminds us of turbulent times, but now we’re witnessing new projects that elevate our relations and enhance economic co-operation,” says Mr Kozlov. “Just like they say in Alice in Wonderland, ‘in order to stay still, you should run as fast as you can. And in order to get things done, you should run twice as fast as that’. And that’s what we are trying to do here: run twice as fast.”
The vast factories, power stations and towering apartment blocks of China’s biggest cities are a world away from the desolate, empty forests of Russia’s eastern borderlands. But their fates are now intertwined.
In Russia’s highly complex web of diplomacy, foreign and trade policy, the economic logic of the deal compares little with the intangible value of a friend, ally and partner to the east. A few miles from where Chinese engineers are tunnelling under the Amur river to build pipes to carry the gas into China, a dozen concrete pillars are slowly rising up out of the thick river ice, as the long-promised bridge emerges.
“For 25 years we have been attempting to do this, so the decision to go ahead is definitely a historic moment,” says Evgeniy Pisotskiy, head of the company building Russia’s half of the bridge. “It’s a sign that we have buried differences and found ways to work together. It is bringing nations and people together.”
Report: Henry Foy
Photographs: Max Avdeev
Editor: Orla Ryan
Project management: Aleksandra Wisniewska
Storyboarding: Kari-Ruth Pedersen
Development: Cale Tilford
Cartography: Steve Bernard