After Russia’s annexation of Crimea, which resulted in the imposition of sanctions by Western countries, economic cooperation between Moscow and Beijing intensified. Since 2014, mutual trade has increased by more than half. Last year, it reached $ 147 billion with the value of trade increased by 36%, and China has become Russia’s largest export market. Russia has achieved a surplus of its exports over imports from China, exceeding USD 12 billion. Both countries had previously announced an increase in exchange to $ 200 billion with perspective for 2024, and the meeting of their leaders on the occasion of the Winter Olympics resulted in raising this amount to $ 250 billion.
Energy resources account for almost two-thirds of Chinese imports. Russia is China’s largest supplier of electricity and the second-largest supplier of oil after Saudi Arabia (via the East Siberian ESPO pipeline) and coal. It also ranks third in terms of gas supplies and covers 5% of total China’s demand for this raw material, reports Reuters.
The economic agreement signed during the Winter Olympics provides for the lifting of Chinese restrictions on the import of Russian grain, which were embargoed for phytosanitary reasons, and the total grain import quota was 9.3 million tons per year. However, more important are the arrangements related to the import of Russian gas and oil; its total value will amount to USD 117.5 billion.
In the long term, China will therefore become an important recipient of Russian energy sources. 30 years ago, the economies of China and Russia had a similar value of GDP but today the Chinese national income is ten times larger than the Russian one. Russia’s share in China’s foreign trade is only 2% which is 10 times less than the reverse ratio.
For many years, Russia has also benefited abundantly from Chinese export credits as well as credits supporting investment projects, and the value of this financing has exceeded $ 125 billion since the beginning of the century. However, the Bloomberg agency points out that after the invasion of Ukraine, Chinese state-owned banks, fearing sanctions, began to be more cautious about opening letters of credit related to financing the purchase of Russian raw materials.
Russia and China have been trying to limit the role of the dollar in international settlements for several years. Russia took steps in this regard in 2014 when Western sanctions were introduced in response to the annexation of Crimea. China did so in 2018 when the US embargoed part of its tech sector.
Russia will be unable to replace the West with China, even in the long run, in terms of economic relations. Russia’s best opportunities arise from the growing Chinese demand for Russian energy resources. Their importance will increase with the launch of new lines of gas pipelines to China, but the chances of obtaining the same level of export as with the EU are small.
To a small extent, however, cooperation with China may replace access to Western financial markets and advanced technologies, if the West maintains the embargo for a longer period, and perhaps even revive the idea of the CoCom Coordinating Committee, which functioned until 1994 restricting the Eastern Bloc countries’ access to modern technologies and their use for military purposes.
Mirosław Ciesielski, an academic lecturer, describes financial markets, changes in the fintech and startups market order