The US oil ban could push Russia and China closer together

The US ban on Russian oil imports will not only cause world oil prices to skyrocket, but may also contribute to pushing Russia and China closer.

Shortly after President Joe Biden announced a ban on oil and other energy imports from Russia in response to the military campaign in Ukraine, the Russian embassy in Washington called this a “future attempt” by Russia. America.

“Russia has room to redirect its competitive and high-quality energy products,” the Russian embassy said in a statement on March 8, but did not specify whether Moscow would redirect energy exports. countries after the US oil ban.

Analysts say that China is the destination for the energy flow that Russia wants to redirect, in an effort to replace the lost market in the US and possibly Europe in the near future.

“If Russia can’t sell oil and natural gas to the US, it will turn east and sell to China. This market transition is already underway,” said Eric Reguly, an analyst with the company. The Globe and Mail, identify.

Russian President Vladimir Putin (left) and Chinese President Xi Jinping in Beijing on February 4.  Photo: AP.

Russian President Vladimir Putin (left) and Chinese President Xi Jinping in Beijing on February 4. Photo: AP.

Amidst waves of criticism and Western sanctions against Russia, Beijing is making moves to show support for Moscow. In a UN General Assembly vote last week, Beijing refused to condemn Russia’s military campaign in Ukraine by abstention.

Speaking at the annual press conference with international media in Beijing on March 7, Chinese Foreign Minister Wang Yi affirmed that the relationship between China and Russia was “as solid as a rock”, not affected. by any third party.

“China and Russia have expanded their economic ties in recent years, and sanctions against Russia have only brought them closer together,” Reguly said.

Trade between the two countries grew 36 percent last year to nearly $147 billion, according to official Chinese data. Trade between the two countries has increased steadily since 2014, when Russia annexed the Crimean peninsula and was subject to sanctions from the West. China is currently Russia’s top export destination, with major commodities being energy and agricultural products.

Reguly believes that any oil that Russia cannot sell to the West will be willingly bought by China, as Russian crude has been trading at a high discount in recent days. The shipping process is also very flexible, as Russian tankers heading to the West can immediately turn to the east.

However, dealing with the flow of gas, which is transported through fixed pipelines, is not as easy as oil. Russia cannot immediately redirect gas flows to Europe to China, because pipelines from the Far East to Europe do not connect to pipelines to China.

“Russia will expand its gas pipeline network to China, but that process will take years,” Reguly said.

The flow of Russian gas to Europe may still be maintained, as the continent cannot find an immediate alternative supply. Despite launching a series of sanctions, Europe has so far not imposed a gas embargo on Russia.

Reguly believes that Russia can also import a lot of Chinese technology, as well as use the country’s financial resources to invest in its energy projects.

“There have been speculations that Chinese companies could buy shares in Russian energy companies that the West wants to give up. One of them is a 20 percent stake in the Russian oil giant Rosneft, which the company claims to be a part of. British company BP wants to sell,” Reguly said.

Observers also forecast other areas where China and Russia could strengthen cooperation. The two countries are likely to set up an interbank payment system of their own, after Russia was excluded from the SWIFT international payment system. They will also work to get the national currency widely accepted, although this may take a long time as the US dollar still dominates international trade.

“Russia and China will be pushing hard to remove dollars from their foreign transactions,” Reguly said.

The US and Europe are trying to impose more sanctions and “isolate” Russia for launching a military campaign in Ukraine. However, these sanctions could also have a heavy impact on the West itself as well as the global economy.

Measures to “tighten the economic noose” with Russia are causing oil prices to skyrocket. Crude oil prices in London have risen to $131 a barrel, up 93% over the past year.

Observers said that oil prices could go much higher if the US and UK were the main importers of oil from Russia. Oil from Russia currently serves about 8% of demand in the UK. Meanwhile, the US Energy Information Administration said the country will only import about 3% of crude oil and 8% of petroleum products from Russia in 2021.

Not only pushing up world prices, the US ban on Russian oil is unintentionally creating an advantage for China, when it has cheap and abundant Russian products, the country is increasingly attached to them, according to observers. “Dealing with a stronger and potentially more aggressive China will be the next issue for the president of the United States,” Reguly said.

Thanh Tam (According to The Globe and Mail)

Leave a Comment