{"id":1835,"date":"2022-10-07T17:21:13","date_gmt":"2022-10-07T17:21:13","guid":{"rendered":"http:\/\/roydadnaft.ir\/English\/?p=1835"},"modified":"2022-10-07T17:21:17","modified_gmt":"2022-10-07T17:21:17","slug":"china-is-the-wild-card-in-the-energy-war-with-russia","status":"publish","type":"post","link":"https:\/\/roydadnaft.ir\/English\/1835\/","title":{"rendered":"China Is the Wild Card in the Energy War With Russia"},"content":{"rendered":"
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Slower growth in China has braked the rise in world energy prices and Russian riches, but Beijing has also stepped up its purchases of Russian fossil fuels.<\/p>\n\n\n\n

Just 12 months ago, China\u2019s economy was growing too fast for its energy sector to keep up.\u00a0Blackouts darkened vast factory districts. Office high-rises were evacuated minutes before they lost electricity for elevators. Municipal water systems stopped pumping for lack of power.<\/p>\n\n\n\n

Today China faces the reverse. Growth has\u00a0slowed so rapidly\u00a0that\u00a0tens of millions of young people\u00a0are without jobs and businesses teeter at the brink of bankruptcy.<\/p>\n\n\n\n

And as the economy skids, China is importing far less energy \u2014 almost two million barrels of oil a day less than expected in August, and one-sixth less natural gas than a year earlier.<\/p>\n\n\n\n

The sharp decline in demand by China, the world\u2019s second-largest economy, is helping slow price rises sparked by Russian\u2019s invasion of Ukraine. China\u2019s slump in energy consumption is also offering an unintended assist to the U.S.-led efforts to choke off the enormous revenues Russia reaps as an energy exporter.<\/p>\n\n\n\n

The most recent move by Ukraine\u2019s allies came on Wednesday. The\u00a0European Union, which begins an embargo on Russian oil this winter, agreed to a plan to cap the prices that Russia can charge for oil that it sells to countries not in the European Union using ships or insurance from Europe.<\/p>\n\n\n\n

But even as China reduces its overall energy imports, it has increased its purchases of fossil fuels directly from Russia next door. Chinese oil refineries and gas distributors have been snapping up fuel at deeply discounted prices while Moscow has less clout to negotiate.<\/p>\n\n\n\n

China\u2019s role as a friend of Russia and the world\u2019s largest importer of crude oil \u2014 and second-largest importer of natural gas after Europe \u2014 makes it harder for the West to isolate Russia.<\/p>\n\n\n\n

\u201cThe friendship between China and Russia means that in the case of oil and gas, there is a geopolitical challenge for the West,\u201d said Philip Andrews-Speed, a China energy specialist at the National University of Singapore.<\/p>\n\n\n\n

The question is what happens next.<\/p>\n\n\n\n

On Wednesday, OPEC Plus, the oil producers\u2019 group led by Russia and Saudi Arabia, said it would\u00a0reduce production by two million barrels a day\u00a0\u2014 a measure opposed by the Biden administration. The production cut almost exactly offsets the lost demand in China.<\/p>\n\n\n\n

What\u2019s more, if the Chinese economy\u2019s demand for energy rebounds in the coming months, China\u2019s increase together with the OPEC Plus cuts could strain the limits of global energy supplies and make it much harder for the European Union to limit price increases.<\/p>\n\n\n\n

China\u2019s energy use began slowing at the end of March, Dong Wancheng, deputy planning director at the National Energy Administration, said  in August. That was also when Shanghai began a two-month Covid-zero lockdown that paralyzed one of Chinas\u2019s most important hubs of economic activity.<\/p>\n\n\n\n

The government severely limited truck traffic in or near Shanghai, cutting consumption of diesel fuel. Roads were closed, reducing gasoline used by motorists. Factories ran short of components to assemble and curtailed operations or closed, reducing electricity use.<\/p>\n\n\n\n

\u201cWe\u2019re not crazy tight in the oil market because China\u2019s Covid-zero policy has suppressed demand,\u201d said Alex Turnbull, a commodities analyst at Keshik Capital, a Singapore investment fund.<\/p>\n\n\n\n

But China\u2019s economic troubles this year have not been limited to steps meant to contain the coronavirus pandemic.<\/p>\n\n\n\n

A real estate bust has slowed apartment construction. That has hurt the energy-guzzling steel and cement sectors.<\/p>\n\n\n\n

Factories, another sizable category of electricity use, are also curtailing operations or closing in China. Many households in the West are paying less attention to the pandemic, and buying fewer Chinese-made gadgets and furnishings for their homes. They are spending more money on travel, restaurant meals and other services instead.<\/p>\n\n\n\n

China\u2019s oil and gas imports took a nosedive in August, the most recent month available, data from China\u2019s General Administration of Customs show. China imported 9.4 percent fewer barrels of crude than a year earlier, and imports of refined products like diesel were down 35.4 percent.<\/p>\n\n\n\n

For natural gas imports, tonnage was down every month from January through August this year compared with the same period last year, reaching a drop of 15.2 percent in August.<\/p>\n\n\n\n

China\u2019s dwindling need for natural gas has directly helped Europe in at least one way. Chinese state-controlled companies have longstanding contracts for regular shipments by sea of low-cost liquefied natural gas from countries like Qatar. But the Chinese companies have recently resold many of those cargoes to Europe instead of taking delivery of them, said Yan Qin, a China energy analyst for Refinitiv, a London-based data company.<\/p>\n\n\n\n

Together with China\u2019s reduction in oil imports and broader signs of weakness in the global economy, the effect on energy prices has been significant. World oil prices have fallen steadily since a peak in early June. Natural gas prices have fallen since late August as well.<\/p>\n\n\n\n

Weak demand from China helped drive down the price for Brent crude oil, the international benchmark, below $85 a barrel in recent weeks, before it bounced back above $90 this week as OPEC Plus prepared to act.<\/p>\n\n\n\n

If China\u2019s consumption had continued at previously expected levels, \u201cwe would at least have stayed at the June highs, so we would have stayed at $120 or $125\u201d per barrel, said Saad Rahim, the chief economist at Trafigura Group, a Geneva-based commodities giant that is one of the world\u2019s largest oil traders.<\/p>\n\n\n\n

Whether China\u2019s oil and natural gas will stay weak in coming months is unclear.<\/p>\n\n\n\n

The government might gradually ease Covid controls after a Communist Party congress that begins on Oct. 16. China is starting to spend more on the construction of roads and other infrastructure, which requires considerable diesel for excavators and trucks.<\/p>\n\n\n\n

Lin Boqiang, dean of the China Institute for Energy Policy Studies at Xiamen University, said that with a recent decline in oil prices, Chinese companies were already becoming more willing to take the financial risk of buying large quantities of crude oil to refine into gasoline, diesel, jet fuel and other materials.<\/p>\n\n\n\n

The big dilemma for China now lies in how much to count on Russia for energy.<\/p>\n\n\n\n

Russia and Saudi Arabia were China\u2019s largest suppliers of oil in the first seven months of 2022, with each supplying a sixth of China\u2019s oil imports, according to an analysis by the Peterson Institute for International Economics. Russia was also China\u2019s fifth-biggest supplier of natural gas.<\/p>\n\n\n\n

China has leaned toward Russia during the Ukraine war, echoing Russia\u2019s disinformation campaigns while not visibly undermining Western sanctions. But China has long tried not to be overly dependent on a single energy supplier, and has seen Europe scramble after Russia turned off the taps for natural gas deliveries.<\/p>\n\n\n\n

Vladimir V. Putin, the Russian president, has\u00a0called for shifting Russia\u2019s exports\u00a0from Europe to Asia. A week before\u00a0a summit on Sept. 15, Mr. Putin said details had been agreed for a new pipeline that would take Russian natural gas across western Siberia and Mongolia to China.<\/p>\n\n\n\n

But when Mr. Putin, President Ukhnaagiin Khurelsukh of Mongolia and Xi Jinping, China\u2019s leader, met a week later, the pipeline deal was not announced, nor has any deal been publicly revealed since then.<\/p>\n\n\n\n

Gazprom, the Russian energy giant, subsequently turned off natural gas flows to China through a different pipeline in eastern Siberia for more than a week, saying the pipeline needed maintenance. That hurt Russia\u2019s reputation in China for reliability, but Chinese energy experts have tended to accept that the pipeline needed repairs.<\/p>\n\n\n\n

\u201cChina should avoid a situation in which Russia becomes its largest source of fossil fuel imports,\u201d said Kevin Tu, a Beijing energy consultant and former China program manager at the International Energy Agency in Paris. \u201cIn case of a dramatic adjustment in international relations, it may have a great impact on China\u2019s energy security.\u201d<\/p>\n

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