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Home Business “The trend will have a long-term nature”: how Russia has become the number one supplier of oil and gas to China

“The trend will have a long-term nature”: how Russia has become the number one supplier of oil and gas to China

Since the beginning of 2023, Russia has increased crude oil shipments to China by almost a quarter and became the largest supplier of energy resources to the Asian republic. Such data on Monday, March 20, announced the General Administration of Customs of China.

As calculates the agency, from January to February Beijing bought from Moscow 15.68 million tons of oil, which was almost 23.8% more over the same period in 2022. At the same time, purchases of raw materials from Saudi Arabia, Russia’s main competitor on the Chinese oil market, decreased by 4.7% to 13.92 million tons.

“Since the end of 2022, China has gradually but steadily lifted anti-coke restrictions. Against this background, the country is now recovering production and investment volumes. Accordingly, the demand for energy is growing,” Vladimir Kovalyov, an analyst at TeleTrade, told RT.

The expert stressed that China’s existing infrastructure in the form of a system of pipelines allows it to increase imports of Russian oil. For the same reasons the Asian republic today is actively buying natural gas from Moscow, the expert added.

According to the latest estimates of the Chinese customs, in January the volume of gas supplies to China, Russia also managed to take first place. According to Interfax, citing official statistics, in the first month of this year Russia sold 2.7 billion cubic meters of fuel to China and “with a big gap” ahead of other major competitors represented by Turkmenistan and Qatar (2.2 billion cubic meters each), as well as Australia (1.9 billion cubic meters).

“It is also worth noting that due to the reduction of energy exports to Europe, we have a need and an opportunity to partially redirect the released flows to the East. I think that trends observed today will have a long-term character and great importance for the strategic development of our relations with China,” noted Kovalev.

Recall that in 2022, after the start of a special military operation in Ukraine, the EU countries, together with the U.S. and several other states began to refuse imports of Russian oil in turn. The West explained its actions by its desire to put pressure on Moscow and deprive it of profits from the sale of hydrocarbons.

Since December, Europe officially imposed an embargo on oil supplies from Russia by sea and together with the G7 banned its companies to transport Russian raw materials by tankers to other regions of the world at a price above a certain limit. In February 2023, similar restrictions were imposed on trade in petroleum products.

In response to the actions of Western countries, Moscow on February 1 introduced a ban on the sale of its oil to anyone who requires compliance with the ceiling price when entering into contracts. Against this background, Russian companies are now massively reorienting exports and entering new markets.

“This year more than 80% of oil exports and 75% of oil products are planned to be directed to friendly countries. As for supplies to states that support illegitimate price restrictions, our position here is widely known and remains unchanged: such countries will not receive Russian oil,” Deputy Prime Minister Alexander Novak noted earlier in an article for the Energy Policy magazine.

Currently, Russian oil companies are giving large discounts on their products to attract buyers, which was also one of the reasons for the increase in exports to China. At the same time, the cost of gas supplied by Moscow to China today also remains more attractive compared to the prices of other sellers. Igor Yushkov, a leading analyst at the National Energy Security Fund, told RT.

“The volumes of our gas pumped through the Power of Siberia pipeline to China are constantly increasing and will soon reach the design capacity of 38 billion cubic meters. On the contrary, other suppliers have now reduced their gas exports to China. For example, Qatar and the U.S. began to sell more raw materials to the EU, where the fuel is now in short supply and prices are higher. At the same time, while LNG is usually traded with a link to the spot market price, Russian gas is traded with a link to the price of oil, so it is cheaper for China,” Yushkov explained.

It should be noted that along with the rejection of Russian oil in 2022, Europe has sharply reduced the purchase of Russian gas. In particular, the pumping of raw materials through the Yamal-Europe pipeline was completely stopped due to restrictions from Poland, Ukraine halved the transit of fuel from Russia to the EU through its territory, and the transportation of gas through the Nord Stream system became impossible after torture on the main lines.

“Under these circumstances, the construction of the Power of Siberia 2 gas pipeline is now being discussed. It could bring gas to the Celestial Empire from the Yamal fields, from where supplies to Europe used to come, which are now stopped,” said Vladimir Kovalyov.

Note that against the background of the steady growth of energy supplies from Russia to China in 2022, the volume of mutual trade between the two countries grew by almost a third and for the first time reached the range of $ 185-190 billion. This happened for the first time in the history of trade relations between Moscow and Beijing.

Earlier the parties agreed to increase trade turnover to $200 billion by 2024. However, the target can be exceeded as early as 2023. Russian President Vladimir Putin wrote about this in an article for the newspaper Zhenmin Jibao on the eve of a meeting with Chinese President Xi Jinping.

“It is important that the share of settlements in national currencies in mutual trade is growing and our relations are becoming even more sovereign. Long-term joint plans and programs are being successfully implemented. For example, the Power of Siberia gas pipeline between Russia and China has become, without exaggeration, the “deal of the century. The volume of domestic oil supplies has increased significantly,” said Vladimir Putin.

According to Vladimir Kovalyov, further increase of bilateral trade will remain beneficial for both states. So, Beijing will continue to buy energy at affordable prices, and Moscow – to replace the European trade flows with the Asian direction. The expert believes that this will allow Russia to recover faster from the sanctions pressure of the West.

“Along with this, the need for large-scale infrastructure projects may become more important. It is possible that the strengthening of trade and economic cooperation, particularly in the energy sector, will be one of the key topics of discussion during Xi Jinping’s visit to Moscow,” Kovalyov concluded.

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