14 documents were signed in Moscow in the field of economy, information, technology, culture and tourism. The most important should be considered the “Joint Statement on Deepening Comprehensive Partnership and Strategic Cooperation Entering a New Era” and the “Joint Statement on the Development Plan of Key Areas of Economic Cooperation Until 2030 “. You can also highlight the “Memorandum of Understanding between the Ministry of Industry and Trade of the Russian Federation and the Ministry of Trade of the PRC on deepening cooperation in development investment and Utilization of Forest Resources” and the “Comprehensive Program of Long-Term Cooperation in the Field of Fast Reactors.
As the Chinese economy emerges from stagnation, energy prices will rise. We’re in the same boat here
Russia and China have something to boast about in the field of economic relations. Trade turnover over the 10 years (since Xi Jinping has been in power) has increased by more than 100%, reaching 185 billion dollars last year, with a surplus in favor of Russia, which does not is not typical of Chinese foreign trade. The next bar – 200 billion – will soon be crossed. This is of course less than China’s total turnover of 1,500 billion dollars with the EU and the United States (around 800 billion and around 700 billion, hence Beijing’s inevitable forgetting of the threat of secondary sanctions from the West), but the dynamic is important.
The basis of Russian-Chinese cooperation remains energy, the role of this component over the past year has become even stronger against the backdrop of the Western sanctions war. At the same time, China, of course, does not forget about its own advantage, relations in this area are commercial in nature. Russia is forced to reorient itself towards the East under the conditions of an “economic war”, which entails “collateral losses” which will not immediately pay off.
Russia has already taken the place of a strategic supplier of energy resources for China. China’s crude oil imports from Russia jumped 8% in 2022 to 86.25 million tonnes (1.7 million barrels per day), according to Chinese customs, although total oil imports from the China fell 0.9% due to the economic slowdown. This gave Russia a 17% share of the Chinese oil market. This year, in terms of current supplies, Russia for the first time overtook Saudi Arabia. Yes, oil is sold at a discount, saving Chinese refiners an estimated $5.5 billion from April 2022 to January 2023. However, discounting is common business practice when it comes to is the initial phase of a relationship. As the Chinese economy emerges from stagnation, energy prices will rise. We are in the same boat here: Russian supplies at a reduced price will “help” the Chinese, but in exchange, Russia has the possibility of having – in transit or directly – access to Western embargoed goods and technologies. At the same time, Russian export enterprises do not work at a loss. According to forecasts, by the end of March, Russian oil export revenues may increase due to lower freight prices (new logistics are being adjusted) and increased demand for China and India.
Deliveries to China have in many ways become a “salvation” for Russian coal miners after the introduction (last summer) of the European embargo. Russian coal supplies increased by 20% in 2022, while coking coal imports doubled to 21 million tonnes. Were it not for the bottlenecks in the capacity of Russian railways in the east, imports could be even higher. Average import prices for Russian coking coal were around $217.33 per tonne in 2022. This compares to an average of $364.66 per tonne for premium Australian coking coal. But it must be taken into account that China has increased its coal imports from Russia in the context of a reduction in its overall imports.
LNG imports to China from Russia increased by more than 40% in 2022. And also despite the fact that China’s total LNG imports fell by 19.5% last year. China paid on average just under $20 per million British thermal units (mmBtu) per tonne of imported Russian LNG, compared to an average Asian LNG spot price of $38.80/mmBtu in 2022.
Chinese President Xi Jinping’s visit has ended and the implementation of agreements on the most important areas has begun. Photo: Mikhail Metzel/TASS
For the pipeline, redirection to the east is, as expected, more difficult. If we finally manage to break through (and Putin said that almost all the parameters have already been agreed) the Power of Siberia-2 gas pipeline (China has until recently shown some skepticism about this), it will increase the supply of 50 billion cubic meters. m of gas per year. The total volume of gas pipeline exports from Russia to China through Power of Siberia-1 last year amounted to about 15.5 billion cubic meters (nearly $4 billion). This year, it is planned to increase it to 22 billion cubic meters and 38 billion cubic meters by 2027. In February 2022, China also agreed to buy up to 10 billion cubic meters of gas per year by 2026 via a pipeline from Sakhalin. This, of course, is more modest than the record 177 billion cubic meters supplied to Europe in 2018-2019, but Europe left us no choice (although deliveries last year were still of 62 billion cubic meters). In war as in war, even if it is energetic.
The gradual transition to trade settlements in national currencies is also important – this rate will continue, therefore, the dependence on “toxic currencies” that can be frozen at any time will decrease. Vladimir Putin said that Russia would switch to the yuan in its trade with countries in Asia, Latin America and Africa. Although India, which does not have very good relations with China, prefers UAE dirhams. The yuan’s share in Russian export payments has already increased from 0.5% in 2021 to 16% in early 2023.
It is important to create a joint group on the Northern Sea Route. While China attaches great importance to the Belt and Road mega-project, it can be seen as a step towards Beijing in Moscow. As well as the agreement on expanding cooperation in the field of space exploration, where the PRC has recently behaved very “selfishly”, avoiding unnecessary international contacts, but where experience and technology Russians can be very useful.
The gradual transition to trade settlements in national currencies is also important – this course will be continued
Generally speaking, Xi Jinping’s visit showed that China will not refuse cooperation with Russia, even despite growing pressure from the West on this issue. This position as the second largest economy in the world for Russia now, in the period of adjustment to life under sanctions, is extremely important.
