Why a rapprochement with China did not help the Russian economy

Marcel Salikhov gave a comment to The Bell about the energy cooperation between Russia and China.

According to Chinese customs statistics, in the first half of 2022, crude oil exports from Russia to China increased by only 4% (+1.6 million tons, to 41 million), Marcel Salikhov, president at the Institute for Energy and Finance, told The Bell. “It’s not much, and it’s not very drawn to “rescue”. From the point of view of increasing oil supplies from Russia, India was still the main “savior,” Salikhov says. This was partly due to quarantine restrictions and a reduction in oil imports in general, and partly due to fears of Chinese companies regarding secondary sanctions, the expert explains.

For their willingness to increase purchases of Russian oil in the face of sanctions, Asian buyers receive big discounts. But in the past two months, they began to fall: if in March, Russian oil, supplied via the ESPO, was sold on the spot at a $20 discount to the base Middle East brand Dubai, now contracts for the fall are concluded at a parity price, Reuters reported on Friday.

The export of Russian pipeline gas to China through the only gas pipeline in this direction, the Power of Siberia, is growing much more confidently: in 2022 it will amount to 16–17 billion cubic meters (+60–70% compared to 2021), Marcel Salikhov says. But in absolute terms, this is not so much - 10 times less than the pre-war volume of Russian gas sales to Europe. The increase in exports to China is not associated with a reduction in gas supplies to Europe, Salikhov explains - this is a planned increase with reaching the planned volumes of 38 billion cubic meters by 2025.

It is technically impossible to redirect gas that used to go to Europe to China: the Power of Siberia is not connected with the main fields of Gazprom, the gas pipeline has a separate resource base - the Chayandinskoye and Kovyktinskoye fields, says Salikhov. A breakthrough could be the conclusion of a new long-term contract for the supply of gas and the start of construction of the Power of Siberia-2, but nothing is known about this yet. As for Russian LNG, in recent months China has not increased, but reduced its purchases.