China is ready to work for a closer partnership with Russia in the energy sector, Chinese President Xi Jinping was quoted as saying on Tuesday, days before the EU embargo on seaborne imports of Russian crude oil and the G7-EU price cap on Russia's oil are set to enter into force next week.
"Energy cooperation is an important cornerstone of practical cooperation between China and Russia, and also a positive force for maintaining global energy security," Chinese news agency Xinhua quoted Xi as saying in a letter to a China-Russia Energy Business Forum.
"Xi also said the Chinese side stands ready to join hands with Russia to push for clean and green energy development, and safeguard international energy security and the stability of industrial and supply chains, thereby making new contributions to the long-term, healthy and sustainable development of the global energy market," Xinhua reported.
China is now the biggest outlet for Russia's crude oil after the Russian invasion of Ukraine and the EU bans and embargoes forced Moscow to re-route most of its crude exports to the biggest Asian buyers, China and India.
China's energy imports from Russia, including coal, oil, and natural gas, have reached $60 billion since the Russian invasion of Ukraine, Bloomberg reported earlier this month, up from $35 billion in the same period of 2021.
China has become Russia's biggest energy client alongside India, with both countries refusing to join the Western sanction push against Moscow and instead opting to continue doing business and forging closer political ties with Russia.
Reports have emerged in recent weeks that some Chinese buyers have become wary of purchasing spot Russian cargoes loading after December 5, waiting for details about the price cap and the potential consequences for buyers.
Still, China has no intention of joining any price cap mechanisms, and it is said to be demanding deep discounts from Russia for its crude.
By Charles Kennedy for Oilprice.com
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Comments
China the world’s largest economy based on purchasing power parity (PPP) is wedded to Russia the world’s superpower of energy. China needs a lot of energy (coal, oil and gas) to keep its economy functioning as well as agricultural products and Russia is in a unique position to supply all these as a major net exporter of both energy and key foodstuffs. That is why Russia’s trade with China has risen from $13 bn in 2011 to more than $150 bn in the first 8 months of 2022.
Since the start of the Ukraine conflict, China has emerged as the biggest outlet for Russia’s crude oil, gas and coal exports. China’s energy imports from Russia, including coal, oil, and natural gas, have reached $60 bn so far this year compared with $35 billion in the same period of 2021.
Moreover, Russia’s energy exports address China’s energy security concerns of having its oil imports from the Gulf region pass through the Strait of Hormuz and the Strait of Malacca through which 80% of China’s oil imports pass daily. Russia is capable of shipping gas to China unhindered via the Spirit of Siberia gas pipeline and oil from the Arctic via the Northern Sea Route (NSR), which climate change has made navigable for a longer period every year.
China has already received its second Russian crude oil shipment via NSR dubbed ‘Arctic Silk Road’. The first was in 2019. Other than energy security, the NSR cuts the journey time to china by half versus one from Russia's Baltic ports through the Suez Canal. This will revolutionize energy trade flows from Russia to Asia.
Russian oil shipments via the NSR would top 80 million tons or 1.61 million barrels a day (mbd) by 2024.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert