China is ready to help Europe overcome its liquefied natural gas shortage (LNG). But, according to VOA News, part of that supply eventually came from Russia.
Since the Ukraine war, Russia’s supply to Europe has slumped to a four-decade low. But it also increased sales of LNG to China at significantly lower prices.
VOA says from Chinese customs that China imported 2.35 million tonnes of natural gas from Russia in the first half of this year, a 28.7% increase over the same period last year.
The Wall Street Journal reports that U.S. suppliers and Chinese buyers have announced 17 deals for around 19 million tons of gas yearly since 2021. The agreements will gradually come into effect in the next five years.
At the same time, China’s pandemic conditions have reduced domestic energy demand. As the Journal reported from data firm ICIS, China is estimated to purchase 72 million tonnes of energy through contracts this year, but it would need only 66 million tonnes.
VOA notes that Chinese companies are reselling the surplus gas to international markets for an enormous profit. The Financial Times reported that Sinopec acknowledged that it had been exporting excess LNG during an earnings call in April.
The news agency says from Chinese media that China may have sold more than four million tonnes of LNG, comparable to 7% of Europe’s gas imports over the six months ending in June. Sinopec, a major energy company in China, has sold 45 LNG shiploads totaling 3.15 million tons.
Ehud I. Ronn, professor of Finance at the McCombs School of Business, said that what China does contradicts the Western policy to sanction Russia. In addition, he noted that by buying Russian energy well below world prices and reselling it, China is helping Russia while also earning substantial economic benefits.
There have been concerns about China’s potential expansion of influence. According to Toshiyuki Makabe, an analyst at Goldman Sachs, if Europe completely stops taking Russian gas, it would have to seek supply from the spot market.
He believed that the unintended consequence of these changes was that China’s influence in the energy industry would grow.
Agata Loskot-Strachota, a senior researcher in energy policy at the Center for Oriental Studies in Warsaw, told VOA that there is no telling how far China would attempt to exploit the situation. There is also the question of whether re-export volumes are sufficient to be a useful tool.
Strachota reminds us that China’s domestic demand may also grow in the winter and that there are restrictions on gas imports from Russia.