Does China re-export Russian gas to Europe?

As the EU tries to shed its dependence on Russian gas, it could become more dependent on Chinese supplies, some of which come from Russia. This could jeopardize the objective of reducing purchases of its fossil fuels.

As China and Russia meet to discuss broader issues, reports indicate that Russian gas exports are heading to Europe – via China.

“The global liquefied natural gas (LNG) market is increasingly well integrated, and changes in regional demand can help balance otherwise tight markets. This redirection of flows serves the interests of all parties involved,” Nicholas Kumleben, director of energy research at macroeconomic consultancy Greenmantle, told DW.

Before winter, gas storage in Europe is now almost 80% full, thanks in part to LNG exports from China, reports The Nikkei. Russia has dramatically reduced gas supplies to Europe since its invasion of Ukraine.

China ramps up gas exports

Chinese LNG companies have increased their supplies for overseas markets in response to growing demand.

So far this year, Chinese companies have sold 4 million tons of LNG to international markets. This represents approximately 7% of Europe’s gas consumption in the first half. Proof of this came from the Chinese group JOVO, an LNG broker, which said it sold a shipment of LNG worth 100 million dollars (103 million euros) to a European buyer.

China’s largest oil refiner, Sinopec Group, also said it had funneled excess LNG to the international market. Local media said Sinopec sold 45 LNG shipments, or about 3.15 million tons.

“If Europe buys LNG from China, then yes, some of it could be Russian, if it’s blended in particular,” Anna Mikulska of the Center for Energy Studies at the Baker Institute for Public Policy told DW. Rice University. “I don’t believe there are rules of origin for content – ​​at the end of the day, it’s always a matter of moving volumes really.”

It looks like circumventing sanctions against Russia, although the EU has not sanctioned Russian gas. Russia has systematically cut off supply and LNG markets are interconnected.

“There is nothing the EU can do other than not buy from China, but then expose itself to potentially severe winter gas shortages,” Mikulska added. “This way, it is China and not Russia that captures the potential additional profits from the resale of this gas.”

China buys Russian gas
Gas pipeline sales from Russia to China have increased nearly 65% ​​in the first six months of the year compared to 2021. Since the Russian invasion of Ukraine, China’s spending on gas imports Energy from Russia jumped to $35 billion from $20 billion a year earlier. , reported Bloomberg.

Russia’s Gazprom and China National Petroleum Corporation (CNPC) signed a 30-year, $400 billion deal in 2014 to build the Power of Siberia, a 3,000-kilometre (1,865-mile) pipeline in Russia and 5,000 kilometers in China. The pipeline was launched in late 2019 and is expected to supply China with up to 38 billion cubic meters of gas per year once it reaches full capacity in 2025.

Moscow’s energy plans include increased exports to China. Russia knows it needs to diversify into new markets as the EU reduces reliance on its supplies.

“What Russia sells to China is also on a contract price basis and from what I understand the deal that China and Russia made for Power of Siberia 1 was rather more advantageous for China, also in terms of price,” explained Mikulska.

“The Chinese would break Gazprom’s export monopoly by reselling Russian LNG,” said Albrecht Rothacher, a European diplomat and East Asia specialist. “The Kremlin would have to be really desperate – or politically very weakened – to allow this,” he told DW.

Not enough – and too much
Experts warn that Europe cannot expect Chinese suppliers to cover its energy shortages, given that the total amount of gas that China can export to Europe is limited, compared to d other sources such as Russia.

Moreover, as economic activity resumes in China, the situation will reverse, leaving Europe dependent on Beijing for its gas at higher prices.

“I fear that China is not yet really on the EU radar for potential LNG deliveries,” Rothacher said.

“There might be excess shipments from Yamal west to Europe, but these would be minor compared to what the EU needs to import from Norway, Algeria, Qatar, UAR, Turkmenistan, Azerbaijan, Oman, Israel, possibly Iran, and last but not least the United States to fill the Russian gaps, which remain unpredictable at this time.

Sino-Russian cooperation

Mikulsksa, for his part, believes that the situation exposes the question that the EU as well as the United States and NATO will really have to think about, namely, “that, as they gravitate towards cooperation, Russia and China can work together to manipulate/influence global energy markets”. on a much higher level than if they were acting independently of each other,” Mikulska warned.

“It won’t be solved until Europe solves the alternative supply issues, it won’t be easy and it won’t happen this winter,” she said.

Mikulska adds that it will also not be so easy for Russia to repeat its high profits year after year thanks to rather weak gas sales as European countries move away from Russian gas and prices hopefully , will moderate.

“Furthermore, it is possible that Russia will become increasingly dependent on China for energy demand. And although these countries are cooperating now, it is a complicated relationship to say the least.
Source: Deutsche Welle