Putin saves himself from sanctions with a new gas pipeline that will arrive in China

Russia turns its gaze to Asia in search of new markets to replace those lost due to Western sanctions. Kremlin leader Vladimir Putin knows he can count on two Asian giants, China and India, to revive the Russian economy. The perfect occasion for Moscow was the annual event of the Eastern Economic Forum in Vladivostock, where Putin welcomed several foreign officials and premieres on 7 September to encourage foreign investment in the region. In a parade of dignitaries, the Kremlin leader also shook hands with the Prime Minister of Mongolia, Luvsannamsrai Oyun-Erdene, to seal the agreement for the construction of “Power of Siberia 2”, the gas pipeline that will cross Mongolian territory to bring Russian gas to China.

How Mongolia is ‘crushed’ by China and Russia on gas

The Russian state company Rosneft has reached specific agreements with Ulan Bator to start construction of the new infrastructure in 2024, which will be completed by 2028: it is a 2,600 km long pipeline that will have a capacity of 50 billion cubic meters of gas. year.

The result of a 2019 agreement, the new pipeline will probably be celebrated with a toast between Putin and Chinese President Xi Jinping on the sidelines of the Shanghai Cooperation Organization (SCO) summit, scheduled for 15 and 16 September, in that which will be the Chinese leader’s first trip abroad since the Beijing government closed Chinese borders due to the Covid-19 pandemic.

The Chinese market appears increasingly attractive to Moscow, even if in perspective: in 2021, exports of Russian gas to China reached 16.5 billion cubic meters. Shortly before starting the Russian invasion of Ukraine, the Kremlin leader signed a thirty-year contract with his Chinese counterpart Xi for the supply of gas through a new pipeline, sealing a “friendship without limits”.

What are Putin’s goals

With the new infrastructure project, Russia aims to increase the flow of gas to China. Because Moscow gas has been arriving in China for some time through the “Power of Siberia” pipeline, the result of an agreement signed between Putin and Xi in 2014: the 3,000 km long gas pipeline was completed in 2019 for a total cost of 55 million euros. It is a mammoth infrastructure that gives back the weight of the Sino-Russian bilateral relations. For comparison, the “Power of Siberia” pipeline allows the passage of 38 billion cubic meters of methane per year, while the “Nord Stream”, which connects Russia to Europe, has a capacity of 50 billion meters cubes per year.

Moscow now looks to China: what’s behind the new gas pact

The advantages of Beijing in the gas match

The increase in flows to China will also have repercussions for Europe, since Moscow will draw on the same reserves that were previously directed to the Old Continent. Gazprom can thus redirect its exports to Asia at discounted prices.

Russian exports to China, mostly energy, jumped by 50% in the first eight months of 2022, reaching nearly $ 73 billion. According to the Chinese customs data analyzed since South China Morning Post, the English-language Hong Kong newspaper, in the first seven months of 2022, China purchased a total of 2.76 million tons of liquefied natural gas, worth $ 2.47 billion. The volume of gas imports increased by 27.4% on an annual basis, while according to the SCMP the value would have risen to 161%.

In the first six months of the year, the supply of Russian gas to China increased to 64.3%, for an almost tripled value that reached 1.98 billion dollars, compared to the previous half year. China, according to what he writes Bloombergit seems willing to accept Russian gas, even though it is aware that it is financing the war in Ukraine (which Beijing has never condemned).

China takes Russian gas (and has nothing to do with the war in Ukraine)

The US newspaper, citing anonymous operators, reveals that Russia is selling liquefied natural gas from the Sakhalin-2 project in the Far East to China at a 50% discount, thus continuing to make profits. In turn, he writes Bloomberg, “China appears to be happy to accept Russian LNG cargoes at discounted prices, exchanging alternative supplies which can then be routed to Europe at higher prices.” The Chinese energy majors have in fact intensified sales of liquefied natural gas to the Old Continent, given the weak economic demand from Beijing linked to the Covid restrictions.

India also does business with Russia

Beijing is not alone in helping Moscow recover from the blow of Western sanctions. New Delhi is also doing excellent business with Russia. A recent one investigation of the Financial Timeswho analyzed data provided by Chinese and Indian customs authorities, highlighted how the increase in Russian oil sales to India and China is offsetting much of the decline in exports to Europe.

According to data analyzed by the FT, in the second quarter of 2022, China and India imported 11 million tons of oil more from Russia than in the previous three months, for a value of 9 billion dollars.

Pulling the economic strings is New Delhi, whose oil imports from Russia went from 0.6 million tons in the first quarter of 2022 to 8.4 million in the second. China, which was a buyer of Russian crude oil even before the outbreak of the Russian war in Ukraine, increased its level of imports in May, when it bought two million barrels a day, or 0.2-0.4 million. per day more than the volumes of the first two months of 2022.

Gas, so Russia does without Europe (and even better)

China and India thus benefit from the economic consequences of the war in Ukraine. Alexander Gabuev, a senior fellow at the Carnegie Endowment for International Peace think tank, told al Financial Times that Beijing and New Delhi are “taking advantage of market opportunities”. Theirs, she explained, “is not a voluntary desire to help Putin; it’s just a cynical and pragmatic way of exploiting the situation in their interest ”.

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Putin saves himself from sanctions with a new gas pipeline that will arrive in China

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