How Russia’s invasion of Ukraine will eventually turn out remains anyone’s guess, but one thing does seem clear, which is that Russia’s semi-detachment from much of the world’s economy is not only firming up the Russo–Chinese entente but clearly establishing Russia as the junior partner in that relationship, something that would have been seen by Putin’s predecessors, whether czarist or Soviet, as a humiliation, and one that has doubtless given rise to a few smiles in Beijing — and probably not just for economic reasons.
The latest on this (via Bloomberg):
China is seeking to replenish its strategic crude stockpiles with cheap Russian oil, a sign Beijing is strengthening its energy ties with Moscow just as Europe works toward banning imports due to the war in Ukraine.
Beijing is in discussions with Moscow to buy additional supplies, according to people with knowledge of the plan who asked not to be named as the matter is private. Crude would be used to fill China’s strategic petroleum reserves, and talks are being conducted at a government level with little direct involvement from oil companies, said one person.
Oil has rallied this year following Russia’s invasion of its smaller neighbor, but the price of its own crude has tumbled as buyers step away to avoid damaging their reputation or being swept up in financial sanctions. That’s provided an opportunity for China to cheaply replenish its vast strategic reserves, which are typically tapped during times of emergencies or sudden disruptions.
Refiners in China have been quietly buying Russian crude since the invasion, even as a Covid-19 resurgence dents consumption in the world’s biggest crude importer. Apparent oil demand last month slumped 6.7% year-on-year as strict lockdowns confined millions to their homes. The outbreak has capped further gains in oil prices, although Brent is still up more than 40% this year.
For China this is a win-win. It is gaining increased access to a rich semi-dependent source of raw materials to which, moreover, it is connected by land, and it is doing so when that supplier has lost or is losing many of its regular customers and is thus offering its resources at a favorable price. Thus the progress being made on various Chinese pipeline deals with Russia.
I’ll admit, however, to being surprised by one aspect of all these potential deals. We’re always being told that China is anxious, keen, even desperate to get to net zero, and yet . . .
Doubtless John Kerry, climate Metternich, will be able to sort it all out.