MW How a natural-gas deal could boost energy stocks and U.S.-China relations

By Paul Brandus

Here's an opportunity for Trump to do what he claims to be good at: making a deal

Chinese President Xi Jinping and U.S. President Donald Trump have something the other wants: natural gas. China needs it; the U.S. has it.

The recent meeting in China among leaders of an "Axis of Opposition" - China, Russia, India and other countries that resent American power and the U.S.-led world order - was heavy on geopolitical symbolism. But for investors, the real story, underneath the photo ops and champagne toasts, concerns energy.

With Russian President Vladimir Putin apparently intending to continue the war he started in Ukraine, he's scrambling to finance it. Oil and gas are what he has to sell, and fortunately for him, India and China - the world's two most populous countries - are energy-hungry buyers. This year, India and China have each been buying about 2 million barrels of crude a day from Russia, according to data from the International Energy Agency. That's 4 million barrels of discounted oil that China and India won't need to buy on the open market.

China and India know they have Putin in a corner, and they're squeezing Moscow. Indian refiners reportedly want even steeper discounts to compensate for the risks they take in dealing with Russia, such as compliance, reputational and banking.

President Donald Trump, angling perhaps for sales of crude from the U.S. - the world's largest producer of oil - doesn't want any Russian oil sales to India. An original 25% tariff on Indian exports to the U.S. was doubled by Trump after New Delhi refused to halt its oil imports.

The problem with Trump's demand is that it's bumping up against a prior American policy, coordinated with other G-7 nations, to allow Russian oil exports to India, China and other buyers such as Turkey, through a price-cap scheme. The idea was to squeeze Putin's war machine by forcing him to sell at lower prices.

Why not really put the screws to the Kremlin by hitting Russia with a total embargo? Because allowing Putin to sell oil maintains an overall equilibrium in global markets while simultaneously preventing energy-price shocks. Such an embargo could drive prices up globally - and raise gasoline prices in the U.S. That's probably the last thing wanted by Trump, who is anxious to keep inflation in check. So far, gasoline prices have risen slightly since he took office, inching up about 6 cents to a nationwide average of $3.26 a gallon, according to the U.S. Energy Information Administration (a federal agency).

But what's interesting here -and perhaps could actually support Trump's idea of a deeper oil embargo against Russia - is that oil prices have fallen sharply since Putin went into Ukraine more than 31/2 years ago. Brent crude (BRN00), for example, traded at about $98 a barrel in February 2022; it's now in the upper $60s. West Texas Intermediate (WBS00)? Similar story: $91 to about $63.

A tighter embargo on Putin now would inflict more pain on the struggling Russian economy - perhaps weakening his position vis-a-vis Ukraine - and would also raise global prices. But since Brent and WTI are priced around a third lower than when the Ukraine war started, Western consumers could endure a modest price hike. Just an idea. This helps explain why Putin is eager, perhaps desperately so, to sell even more oil to China.

Read: Russia and China's gas alliance is a bluff. Will Washington call it?

Energy investors should also keep their eye on Russia's ongoing scramble to find new customers for its natural gas. The European Union says it obtained about 45% of its gas from Putin before the war started; late last year that was down to 19%, and the E.U.'s goal is to phase out Russian natural gas completely by 2027. What was once Putin's biggest customer will soon be gone.

What will Putin do? Running out of customers, Putin is pivoting to China. He's desperate for the so-called Power of Siberia 2 pipeline to be built. It would carry natural gas some 1,600 miles through Siberia, through Mongolia, and into northern China. But like India, which is using Moscow's economic weakness as leverage, China's President Xi Jinping also knows how to squeeze the Russians. He has dragged his heels on the project for years.

The pipeline "could reshape global energy" and supply more than a fifth of China's projected gas needs in 2030, according to a recent analysis by the Washington-based Center for Strategic and International Studies (CSIS). That's if it gets built. Chinese and Russian officials have signed what's described as a "legally binding memorandum" - though the CSIS analysis said that "Reportedly, no agreement has been reached on price, timeline, or builder." It could be years before Russian gas flows to China and money comes to Moscow. That's too bad for Putin. He's playing for time; but that doesn't seem to be Xi's problem.

Once again, there's an American angle. Trump has made no secret of his desire to boost exports of liquefied natural gas $(LNG)$ to the world. Qatar and Australia are now the biggest suppliers of LNG to China, and Trump would love a piece of that action. What might this mean for broader U.S.-Chinese issues, such as the ongoing tariff spat between Washington and Beijing? The world's two economic giants have extended their pause on higher tariffs through early November. Both Trump and Xi have something the other wants. China needs gas, the U.S. has it. Here's an opportunity for Trump to do what he claims to be good at: making a deal.

More: Foreign investors are still buying U.S. assets in 2025 - but there is one catch

Also read: China and Russia vie to dominate in energy. Trump Is handing them the win.

-Paul Brandus

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September 19, 2025 08:43 ET (12:43 GMT)

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