China keeps the West guessing economic pressure on Russia | Your money

BEIJING (AP) — Chinese leader Xi Jinping is keeping the West guessing whether Beijing will cooperate with tougher sanctions on Russia as he meets President Vladimir Putin a year after he said they had a “boundless” friendship. before the Kremlin invaded Ukraine.

China has avoided violating sanctions, but its purchases of Russian oil and gas rose nearly 60% in August more than a year ago to $11.2 billion. This helps supplement Moscow’s cash flow after the United States, Europe and Japan cut purchases and kicked Russia out of the global banking system.

Xi and Putin are to meet this week in Uzbekistan at a meeting of the Shanghai Cooperation Organization, a security group of eight Central Asian countries.

Washington and its allies in the Group of Seven major economies want to pressure Moscow into applying an upper limit on how many buyers are allowed to pay for its oil. This would require the cooperation of China, India and other energy-guzzling Asian economies that have avoided taking sides and continue to buy from Russia.

“India and China may decide to stay out of the fray and sign separate deals with Russia,” Sergey Vakulenko, former chief strategy officer of Russian gas giant Gazprom, wrote in a report for the Carnegie Endowment. for International Peace.

China’s potential role as a spoiler reflects its strength as the world’s second largest economy and his reluctance to hurt Russia.

Beijing-Moscow relations were cold during the Soviet era, but the two sides have formed a political marriage of convenience since the 1990s, united by shared frustration with US dominance in global affairs.

Russia is looking to China for support, said Alexander Gabuev, a leading Russian expert on relations with Beijing.

China is the largest trade and economic partner outside the sanctions coalition, he noted, contributing about 18% to Russia’s foreign trade. As Russia adopts the use of the Chinese yuan as its main foreign currency and looks to China to replace certain technologies that it cannot buy from the West, it will increase further.

“China will be a much more important partner for Russia by the end of this year, and especially in the years to come, when the oil embargo is in full operation and gas exports to the EU fall, maybe zero, except for what goes through the Turkish Flux,” Gabuev said.

Beijing bought 20% of Moscow’s crude exports last year, according to the International Energy Agency. Purchases have increased this year, help bail out Russia’s liquidity in the face of Western sanctions. China spent 60% more on Russian oil and gas in August than a year earlier, according to customs data.

The ruling Communist Party’s military wing, the People’s Liberation Army, spent billions of dollars on Russian fighter jets and other weapons beginning in the late 1990s, but those purchases ended then. that China is developing its own technology.

G7 governments announced on September 2 that they would apply price caps on Russian oil by prohibiting their shipping companies or insurers from dealing with any customer who pays more. They have not yet said when this might come into effect.

Other sanctions imposed by Washington, Europe and Japan are enforced by the threat that any country that violates them, even if it has not accepted them, could also be cut off from valuable Western markets and the global banking system.

China, the world’s largest energy consumer, has one of the largest tanker fleets and its own insurers, which would allow Beijing to operate outside the G7 boundaries.

If China, India or other Asian governments refuse to cooperate, the G7 must decide to sanction its biggest trading partners and “risk a multi-pronged economic war”, Vakulenko wrote.

Meanwhile, Russia has threatened to stop selling to any country that complies.

Xi’s government also sees Russian oil and gas as a way to diversify supplies and reduce strategic risks from potential disruptions. Last year, China bought 20% of Russian crude exports, according to the International Energy Agency.

China rejects sanctions already in place as inappropriate because they were not imposed by the United Nations, where Beijing and Moscow have veto power as permanent members of the Security Council. But Chinese banks and companies have obeyed for fear of losing access to valuable Western markets or the global financial system.

China or other countries are not prohibited from buying Russian energy. But President Joe Biden has warned Xi of unspecified consequences if Beijing helps Moscow evade sanctions.

Some Chinese companies are pulling out of Russia, but Beijing appears to be looking for ways to take advantage of Moscow’s isolation.

Gazprom agreed last week to let state-owned China National Petroleum Corp. pay in Russian rubles or Chinese yuan instead of dollars. This works in favor of China, as few other exporters accept yuan, making Russia more likely to buy Chinese products.

Access to cheap Russian oil and gas has helped China fight the inflation that is rocking Western economies.

While inflation in the 17 countries that use the euro hit a record 9.1%, Chinese consumer prices rose just 2.5% in August, from 2.7% the month previous.

Besides the imports that appear in official data, China could also buy Russian oil, as well as Iranian and Venezuelan crude, through traders in the Middle East.

Merchants in Fujairah, a port in the United Arab Emirates, are mixing shipments from suppliers under sanctions and transferring them between tankers at sea to hide their origin, The Wall Street Journal reported on August 29, citing unidentified traders.

Elsewhere, exports to China from oil-producing Malaysia exceed the Southeast Asian nation’s domestic output by a third, according to Bloomberg News, suggesting it is being used as a channel for other supplies.

China gave Moscow an economic lifeline following Western sanctions imposed over its 2014 capture of Crimea from Ukraine, agreeing to buy Russian gas as part of a $400 billion deal over 30 years. Moscow turned to Chinese state-owned companies to help pay for oil and gas development after Crimean-related sanctions cut off Western funding.

On February 4, three weeks before Moscow’s attack on Ukraine, Beijing and Moscow announced a 30-year gas contract. The official Global Times newspaper said it would increase Russia’s annual supplies to China by around 25%.