Belgium, (Brussels Morning Newspaper) China is profiting from EU’s ban on Russian fuel imports as it has access to cheaper coal, natural gas and crude oil.
In Q2, China imported about 50% more liquefied natural gas (LNG) from Russia, approximately 39% more electricity and roughly 6% more coal, according to Reuters reporting on Wednesday.
In the first seven months of the year, China imported 26% more Russian LNG compared to the corresponding period last year. At the same time, China’s exports reached the highest level since 2019, boosted by re-export to the EU and Japan who are phasing out Russian imports.
Saul Kavonic, head of Australia integrated energy and resources securities research at Credit Suisse, pointed out that “China is taking advantage of the disrupted trade flows, including by buying discounted Russian oil and LNG cargoes, while swapping out alternative volumes back into Europe at higher prices, delivering a profitable trade.”
Increased import of cheaper Russian fossil fuels is in line with China’s environmental plan as the country is not planning to start lowering its carbon dioxide emissions before 2030.
China’s import of Russian coal reached a five-year high in July as the EU phased out Russian imports and fully banned them in August.
Mutually beneficial cooperation
Energy cooperation between China and Russia is expected to tighten later this week, when leaders Xi Jinping and Vladimir Putin are to meet in Uzbekistan.
Closer cooperation benefits both countries as Russia is looking for alternative buyers and China is still in the process of scaling up its use of fossil fuels. In addition, intensification of trade in yuan and rouble is lowering reliance on the US dollar.
Higher energy imports from Russia also help China to rein in inflation as the country barely avoided economic contraction in Q2.
S&P Global Commodity Insights’ Zhuwei Wang pointed out that the coming meeting between Chinese and Russian leaders “will likely fortify China’s ties with Russia in energy trade for mutual benefit.”
He noted that Russia is looking for ways to cushion the blow of Western sanctions while China “is in need of low-cost energy to shore up its sagging economy tarnished by COVID lockdowns.”
