As the Chinese economy is in the grip of a zero-COVID policy, the administration of President Xi Jinping is rushing to secure stable supplies of resources by increasing purchases of Russian oil.
It was visible in the city of Linyi, where one gas station had signs screaming at drivers: “Gas is 6.78 Yuan (USD 1) a litre, the lowest in China. Car washes are also free.” The messages drew a constant line of cars waiting to fill up at the Shandong Petrochemical gas station.
However, the discounted prices invite additional political costs for China, reported Nikkei Asia.
Managers at independent oil refiners clustered in Shandong keep a close eye on the daily crude oil market. “Buy ESPO now.” ESPO stands for the East Siberia-Pacific Ocean oil pipeline. It starts in Eastern Siberia and allows oil to flow to China from Kozmino and other ports in Russia’s far east.
Moreover, Japan, the US and Europe responded to Russia’s invasion of Ukraine with an embargo on Russian crude oil. China has not.
Data shows that 46 large vessels in July crossed from Russia’s far east to ports in Qingdao and Dongjiakou, in China’s Shandong Province.
That is 1.9 times more than made the journey in January. Companies in Shandong are quietly at work, and the amount of crude oil purchased in July was almost double that of May, reported Nikkei Asia.
China depends on imports for 46 per cent of its natural gas. Russian gas makes up 10 per cent of this. Chinese companies plan to gradually expand their share of procurement while looking toward 2030, reported Nikkei Asia.
Although China is the world’s fourth largest country by land mass, it has chronic resource shortages. It imports about 70 per cent of its crude oil. If that flow were to stop, many Chinese would find themselves cut off from modern life, reported Nikkei Asia.
As energy prices soar and their economy turns down due to the COVID-19 pandemic, the Chinese are growing increasingly discontent. That has the country’s leaders looking to increase procurement from Russia.
China’s economy is slumping partly because of the government’s strict zero-COVID policy, which mandates lockdowns when cases pick up.
Because China has always had to import resources, today’s soaring prices, especially those for energy, are also placing downward pressure on the economy. This makes Russia an attractive partner.
However, if China does not stop purchasing Russian oil, it could become just as isolated as Russia.