Is China Bailing Out Russia with Unexpected Energy Purchases? – In the wake of energy sanctions levied against Russia by the United States, and after Russian President Vladimir Putin requested military assistance from China in Ukraine, reports reveal how the Chinese Communist Party may be indirectly aiding Russia through unexpected spot purchases of liquefied natural gas (LNG).
The sale of oil and gas is vital to the Russian economy, making up around half of the Kremlin’s budget. Sanctions against Russian oil and natural gas will undoubtedly hurt Russia but are also expected to hurt the European Union and the United States, too. Some 25% of Europe’s oil is imported from Russia, as well as 40% of the continent’s natural gas.
Before the United States announced sanctions on Russian energy, the idea was very much not on the cards. The Biden administration itself warned that energy sanctions on Russia may hurt the United States more than it would the Kremlin – and the Kremlin said as much, too.
China’s Indirect Assistance in Russia’s Ukraine Invasion
A surprising purchase of LNG by the Chinese Communist Party last month, however, may be a sign that President Xi Jinping is looking out for the Russian economy even if he is not officially assisting Russia’s invasion of Ukraine.
A report by Energy Voice reveals how China imported twice as much LNG from Russia in February 2022, compared to February 2021.
“The world’s second-biggest buyer of the superchilled fuel bought almost 401,000 tons from Russia in February, according to official customs data released Sunday. The increase came as total Chinese LNG imports fell 12% from a year earlier, with Russia’s share rising to 8%,” the report explains.
Despite an overall drop in Chinese LNG imports – as part of the country’s efforts to diversify its energy supply – Russia came out on top. Rising prices, that prompted an 8.7% drop in LNG imports in the first two months of this year, have apparently not deterred China from ramping up Russian purchases.
While indirect, China’s unexpected purchase may indirectly assist Russia’s invasion of Ukraine by making up for a shortfall in future sales. Whether China intends to permanently increase the share of its LNG imports from Russia, however, remains to be seen.
Foreign Cash Reserve Moves?
Following the financial sanctions levied against Russia, President Vladimir Putin has been largely unable to access the $630 billion in foreign cash reserves that have been gradually built since sanctions were placed on Russia in 2014 in the wake of the annexation of Ukraine.
Both the United States and European Union took decisions that would block Russia’s access to the funds, removing Russia from the SWIFT banking system and sanctioning its major banks. However, a report by Foreign Affairs suggests that tens of billions of dollars in reserve assets may have already been stashed away by Russia in offshore accounts.
“We see indications, in fact, that across two different periods—one in mid-2018 and the other late last year, as Russia built up troops on the Ukrainian border—Russia may have secluded up to $80 billion in Treasury securities offshore. Russia’s total offshore dollar holdings, of course, could be higher still. And there are signs, too, that Russia may have moved some of its dollars with help from a foreign government,” the report says.
The piece argues that China is the most likely country to have helped Russia stash Treasuries in offshore accounts, citing data that shows China holding 14.2% of Russia’s foreign reserves – the largest share out of any country.
Jack Buckby is a British author, counter-extremism researcher, and journalist based in New York. Reporting on the U.K., Europe, and the U.S., he works to analyze and understand left-wing and right-wing radicalization, and reports on Western governments’ approaches to the pressing issues of today. His books and research papers explore these themes and propose pragmatic solutions to our increasingly polarized society.