According to Al Jazeera news channel, it is about Russian energy, Chinese exports and getting Russia out of the dollar economy. In terms of trade, China undoubtedly benefits the most from the new situation and Moscow has little choice: it has to deal with the consequences of Western economic sanctions one way or another.
Russian oil and gas satisfy China’s energy hunger
China has quickly emerged as a major buyer of heavily discounted Russian oil and gas. Last year China imported 1.57 million barrels of Russian oil per day, in 2023 it will already be 1.94 million. China’s imports of Russian pipeline gas and liquefied natural gas also more than doubled last year, while imports of Russian coal increased by 20%. Incidentally, China is not the only one helping Russia circumvent the sanctions. The other two largest buyers of Russian energy are India and NATO member Turkey. Analysts expect sales to continue to rise as the war in Ukraine continues.
Chinese goods conquer the Russian market
If China buys Russian energy, the Russians buy Chinese stuff like cars, electronics, base metals, vehicles, ships and planes. Chinese exports to Russia increased from $67 billion to $76 billion in the first year of the war.
What also helped was the exodus of Western brands from Russia. The vacuum this has created is welcomed by Chinese industries such as the auto industry. For example, last year the Chinese Geely Automobile Holdings, Chery Automobile and Great Wall Motor captured 17% of the Russian market.
Total bilateral trade between China and Russia increased by nearly a third last year to about $190 billion. That 30 percent growth may seem like a lot, but it’s still a peanut compared to China’s trade with Europe, the United States, and the rest of Southeast Asia. These are amounts of USD 821 billion, USD 734 billion and USD 947 billion respectively.
De-dollarization of Russia
The Russian economy has been largely evicted from the dollar-dominated international financial system by all the Western monetary sanctions and measures. But Beijing is helping out there too, and China’s currency, the yuan, is becoming increasingly important. Some Russian banks use the yuan for transactions and loans.
The number of yuan transactions rose by 0.4% to 14%, and Russia appears to be increasingly exchanging its dollar reserves for dwindling yuan. This makes Russia more financially dependent on China. So much so, in fact, that according to a financial analyst at the Carnegie Endowment for International Peace, he prefers to speak of “yuanization” rather than “de-dollarization” of the Russian economy.