China and Russia continue to do business with Russian oil and coal flows to the dragon. New record data demonstrates the strong link between Beijing and Moscow.
China-Russia: the alliance is strengthening according to the latest trade data between the two powers.
Indeed, key Chinese energy commodity imports from Russia rose to an all-time high last month, highlighting the two nations’ growing interdependence as the Ukraine war drags on into its second year.
Asia’s largest economy has proved a vital outlet for Moscow’s oil and coal exports after Western buyers canceled Russian purchases. Beijing, meanwhile, has maintained ties with Russian President Vladimir Putin since he ordered the Ukraine assault last year, refusing to join US-led sanctions.
The updated numbers on the oil and coal trade between China and Russia indicate this strategic alliance is of great significance for the current diplomatic and geopolitical balance.
Chinese oil dependence: record purchases
China imports record volumes of oil despite a weak economy, as it leverages cheap Russian crude to build inventories and export refined products.
The surge in oil imports to their highest levels this year comes against the backdrop of a shaky recovery in the world’s second-largest economy. And it shows how sanctions on Russia are reshaping global oil markets, with the dragon getting a double benefit from cheap crude and the opportunity to boost exports.
For the first half of 2023, China imported 11.4 million barrels per day of crude oil, up 11.7% year-on-year and 15.3% from pre-Covid levels, according to Financial Times calculations based on customs data.
In the first half of 2023, China imported 2.13 million bpd of Russian oil, ahead of 1.88 million bpd from Saudi Arabia, making Russia the top crude supplier to China so far this year.
Customs data from China imply that Russian imports have been cheaper than those from other OPEC countries+ since the start of the Ukraine war. Compared to Saudi Arabia’s crude unit price, Russian oil enjoyed a discount of $9 a barrel at the end of 2022 and $11 a barrel in June.
However, analysts noted that the discount on Russian oil was lower than that on Iranian or Venezuelan products given the growth of non-dollar-denominated opaque trade in Russian crude.
A rotation towards Russia appears opportunistic rather than a systemic change. I don’t think China will go through with Russia. According to Michal Meidan, head of China energy research at the Oxford Institute of Energy Studies:
This is a short-term move away from Saudi commodities. The Chinese are quite eager to keep a balance between their suppliers.
It should be noted that China’s advantage from cheap Russian raw materials is expected to flood the market, putting pressure on Korean and Japanese producers, according to market data provider KPL.
Russian coal to China
Not just oil. Russian coal is also moving towards China.
For this raw material, since mid-May Russia has boosted transportation along the Trans-Baikal Railway linking the Chinese border city of Manzhouli in Inner Mongolia. In addition, another rail route is planned northeast of Mohe in Heilongjiang, according to Chinese consultant GRCoal Research Institute.
Thermal coal imports from Russia increased to 10.6 million mt in June, above the combined total from Indonesia and Mongolia, the other top shippers to China.
Original article published on Money.it Italy 2023-07-20 15:16:06. Original title: Cina-Russia: alleate in nome di petrolio e carbone. I numeri sono da record
