West 'Sanctions on Russia' Neutralized? ... Russia to Increase Gas Exports to China

Russian President Vladimir Putin (left) and Chinese President Xi Jinping (right) [Image source=Yonhap News]

[Asia Economy Reporter Hwang Sumi] Russia is expected to expand its natural gas trade with China. While reducing gas exports to Europe in response to Western sanctions following the invasion of Ukraine, Russia is increasing exports to China. As a result, there is analysis that the economic sanctions against Russia led by the US and Europe may be offset.

On the 18th (local time), according to China's state-run Global Times, Huang Yongjiang, Deputy General Manager of China National Petroleum Corporation (CNPC), held a video conference with Russia's state-owned gas company Gazprom the day before and signed a technical agreement to strengthen cooperation on the Far East gas supply project. Although details were not disclosed, experts speculate that the agreement involves expanding the capacity of energy trade conducted through pipelines.

Previously, Gazprom and CNPC signed a large-scale contract in 2014 to supply 38 billion cubic meters of Russian natural gas annually to China for 30 years. This contract was dubbed the "contract of the century" due to its enormous contract value of $400 billion (475.2 trillion KRW).

After the contract was signed, Russia began supplying gas to China in December 2019 through the "Power of Siberia" pipeline, which stretches over 2,000 km from the Chayanda gas field in Siberia to China.

The supply volume increased to 53 billion cubic meters last year. Additionally, according to Alexey Miller, CEO of Gazprom, Russia increased its gas exports to China by more than 67% in the first half of this year compared to the same period last year.

This contrasts with Russia's control over gas exports to Europe in response to Western sanctions due to the Ukraine crisis. Recently, Russia completely cut off gas supplies to European countries that refused to pay for gas in its national currency, the ruble.

Instead, gas exports to its ally China have steadily increased. According to China's customs authority, the General Administration of Customs, China's imports of Russian energy last year amounted to about 334 billion yuan (approximately 64 trillion KRW), a 47.4% increase compared to the previous year. Russian energy imports accounted for 65.3% of China's total imports from Russia last year.

The expansion of gas trade between the two countries is expected to be a meaningful energy risk diversification strategy for China. Currently, China imports about 45% of its natural gas consumption from Russia, Myanmar, Central Asia, Australia, Qatar, and others. Notably, the volume imported from Australia, a close ally of the US and a country with tense relations with China, accounts for nearly half of China's natural gas imports. This implies that China's gas imports could be significantly affected by geopolitical security issues. In this situation, China expects that expanding trade with Russia will make gas supply and prices more sustainable and stable.

Meanwhile, as a result, the effectiveness of Western economic sanctions aimed at reducing Russian energy exports related to the Ukraine war may be diluted. While the West, including the US, is expected to curb China's role as a "sanctions bypass," the US itself is currently in a state of emergency due to inflation. Therefore, there is considerable speculation that it will not be easy to impose sanctions on China that could shake the global economy.

This content was produced with the assistance of AI translation services.