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China And Russia Move To Boost Energy Cooperation

The third most senior Chinese leader is set to meet with Vladimir Putin and discuss energy cooperation at an economic forum in Russia on Wednesday in the most senior-level in-person meeting between China and Russia since the Russian invasion of Ukraine.  

Li Zhanshu, Chairman of the Standing Committee of the Chinese National People’s Congress and the country’s top legislator, will meet with Putin in Vladivostok, where the Russian president is attending the Eastern Economic Forum this week, Russian news agency TASS has reported

The senior-level meeting between the Chinese and Russian leaders signals the growing close relationship between the two U.S. adversaries, including in energy cooperation. 

On Wednesday, China National Petroleum Corporation (CNPC) signed a deal with Gazprom related to the Power of Siberia gas pipeline from Russia to China. Gazprom, for its part, said on Tuesday it discussed with CNPC the progress of the project for Russian gas supplies to China via the Far Eastern route.  

China has been the main beneficiary of the biggest change in energy trade flows in recent memory as Russia pivots to Asia to sell the oil and coal banned in the West and looks to build another major natural gas pipeline to China. 

Russia overtook its OPEC+ partner Saudi Arabia as the top supplier of crude oil to China in recent months, as Chinese refiners have taken advantage of much cheaper Russian crude grades compared to benchmark prices. 

Russia will increase further its shipments of oil to Asia after the G7 finance ministers announced a price cap on Russian oil and fuels, to enter into effect from December 5 and February 5, 2023, respectively. 

“Any actions to impose a price cap will lead to deficit on (initiating countries') own markets and will increase price volatility,” Russia’s Energy Minister Nikolay Shulginov said on the sidelines of the forum in Vladivostok, as carried by Reuters.   

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In natural gas, however, it will take years for China to materially boost pipeline imports from Russia because of a current lack of infrastructure, analysts say. Russia is already sending natural gas via pipeline to China through the Power of Siberia pipeline, with plans for another major gas pipeline, but this will take years to complete and commission.

By Tsvetana Paraskova for Oilprice.com

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