Moscow & Beijing Laughing All The Way To The Bank – How China Makes Easy Money Reselling Russian Gas To Europe

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Sep 01 2022
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Energy crisis created by the Russia-Ukraine conflict isn’t over, even though the crude oil prices have dropped to below US$100 a barrel. The wishful thinking that sanctions imposed on Russia could cripple and defeat the Kremlin has boomeranged on the Western nations instead. The impact, either direct or indirect, is so bad that the West no longer brag about defeating Putin.


In March, President Joe Biden told the world that the war in Ukraine has been “a strategic failure” for Russian President Vladimir Putin. Washington thought it could win the proxy war quickly so that the Democrats could win the midterm election in November easily. Now, entering the seventh month, the Russian economy has not collapsed as predicted by many Western analysts.


From calling Putin a “butcher” to inciting the people of Russia to overthrow the dictator, the Western powers have done everything to win the proxy war. Yet, Europe, the U.K. and the U.S. are the nations that are suffering. In fact, Biden administration is so desperate that it’s reviving a nuclear deal with “terrorist state” Iran, hoping its oil production could provide some relief to global energy market.

Xi Jinping and Vladimir Putin - Toast

The war in Ukraine has been a “a strategic failure” for Biden and his allies, not Putin. The coming winter could be horrible. The energy crisis has created a new phenomenon in the West – fuel poverty – whereby people are unable to afford to keep their home adequately heated during winter. In England alone, around 2 million households are in fuel poverty (between 50 and 125 million in Europe).


On the contrary, Russia has been making truckloads of money. Hilariously, when the United States, United Kingdom and European Union slapped economic and financial sanctions on Moscow, they did not realize that Vladimir Putin is able to finance his war machine thanks to E.U. payments for Russian gas and oil. Russian gas made up 42% of Europe’s gas imports via pipeline alone.


Russia made nearly US$100 billion in the first 100 days of Ukraine War (it just spent less than US$25 billion on its military in January-April). In comparison, The EU’s energy imports from Russia were worth US$108 billion in the entire whole year of 2021. The Ukraine War has benefited not only Russia, but other oil producing countries, especially the Arabs in the Middle East.

Russia Gas Pipe Lifting

In every crisis there is opportunity, says a Chinese proverb. The Chinese word for “crisis” is made up of two Chinese characters – “danger” and “opportunity”. Interestingly, despite being a nation that imports about 70% of its energy, China too has made huge profits due to the strategic mistake and failure of the Western nations. So, how do the Chinese make easy money?


In the same month Biden fantasized how the U.S. could easily neat Putin, China has already started re-selling several U.S. liquefied natural gas shipments to Europe. Yes, as early as March, China simply re-route trade flows to the desperate European Union the very same commodity which the Chinese bought from America and made huge profits without lifting a finger.


For example, Unipec (trading arm of China’s state-owned Sinopec) sold at least three LNG cargoes for delivery to ports in Europe – loading it from Venture Global LNG Inc.’s Calcasieu Pass export facility in Louisiana, United States, according to Bloomberg. The sky-high gas prices in Europe compared to lowerer rate in Asia prompted traders to divert the commodity to the euro zone.

China Sinopec Petroleum

But reselling American LNG to Europe for quick profits was just the tip of the iceberg. China also bought from Russia before selling it to Europe. From the beginning, it has been part of Russia and China’s game to beat sanctions and profit from the clueless U.S. and Europe. Here’s how they did it. First, Moscow pushed up the gas price by creating a shortage – cutting flows to Europe.


As gas prices in Europe skyrocketing after Russia slashed supplies to its biggest market, at the same time, Russia’s giant state-owned energy company Gazprom boosts natural gas shipments to China. Thereafter, China would repackage the natural gas as Chinese LNG (not Russian LNG) to bypass sanctions and voila, both Beijing and Moscow laugh all the way to the bank.


But natural gas delivery over pipeline should not be confused with liquefied natural gas (LNG). They are gaseous in different form. LNG is natural gas that is cooled to -260° Fahrenheit, the temperature at which natural gas becomes a liquid, so that they can be transported using special LNG tankers. This is how Europe gets its natural gas after Putin turned off the taps.

LNG Tanker - Liquefied Natural Gas

Gazprom’s gas exports to China via the pipeline rose by 63.4% to 7.5 billion cubic meters during the first half of the year 2022, despite the fact that the Chinese economy was slowing down. The Chinese customs data showed in the same period, it bought a total of 2.35 million tonnes of liquefied natural gas (LNG) – valued at US$2.16 billion. The import volume increased by 28.7% year on year, with the value surging by 182%.


Meaning Russia has surpassed Indonesia and the U.S. to become China’s fourth-largest supplier of LNG. Imports from Australia, China’s largest source of LNG, declined by 28.8% in the first 6 months of 2022 to 11.2 million tonnes because Russia has eaten up the Aussie market share. China imports over half of the natural gas it consumes, with about two-thirds in the form of LNG.


Interestingly, the Customs of China have stopped publishing a breakdown in trade volume for pipeline natural gas since the beginning of the year. Spokesman Li Kuiwen claimed that the move was to “protect the legitimate business rights and interests of the relevant importers and exporters”. But it’s not rocket science Beijing does not want to reveal the true picture.

Ukraine War - Europe Energy Crisis Winter Protest

A week ago, the Financial Times reported how “China throws Europe an energy lifeline with LNG resales”. Suddenly, the British daily newspaper praised China as the white knight who saved Europe from a brutal winter. And thanks to the Chinese, Europe’s imports of LNG grew 60% year on year within the first six months of 2022, allowing the EU to fill 80% of its storage by November.


China’s Sinopec Group alone had resold at least 45 cargoes of LNG, or about 3.15 million tonnes. The actual amount could be as much as 4 million tonnes – equivalent to 7% of Europe’s gasoline imports within the half year. To justify Europe’s import of Chinese LNG, the Western media said it could be due to weak energy demand at home hence surplus to sell.


But obviously the so-called “excess LNG” which China able to resell to Europe isn’t really excess. There’s only one reason why the country purchased natural gas from Russia in such a fashion – to repackage and resell it to Europe, knowing very well both desperate Europe Union and the U.S. will close one eye, even if the West knows the Chinese has breached the sanctions.

Xi Jinping and Vladimir Putin - Toast

Hilariously, not only Europe has shifted its reliance to China from Russia for gas supply, it is paying multiple times more for the same Russian gas. It was already bad that the 27-nation bloc has to suffer high gas prices as a result of Putin’s blackmail – cutting supply. It becomes worse now that the Europe has to pay even more because “middleman” China is taking a cut.


The best part is the Western powers have to pretend that the Chinese gas is legitimate and China has saved them – even though the gas originated from Russia. But the problem is China can stop selling its gas to Europe whenever it likes due to whatever reasons, for example an economic rebound. Toothless Biden can only keep quiet because the U.S. does not have enough LNG to replace Russian’s.


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