“The key to minimizing sanctions losses”: what is the benefit of Russia from a sharp increase in trade with China

From January to May 2022, the trade turnover between Russia and China increased by 28.9% compared to the same period in 2021 and reached $65.81 billion. to these departments.

It is noted that over the five months of this year, the export of Chinese goods to Russia increased by 7.2%, to $24.56 billion. Meanwhile, Moscow increased the supply of its products to Beijing immediately by 46.5%, to $41.25 billion.

One of the main reasons for the sharp increase in the volume of mutual trade was the rush increase in energy prices, says Alexei Fedorov, an analyst at TeleTrade Group.

In addition, according to him, the unprecedented sanctions of the West against Russia also played their role.

“Average oil prices have increased by 25-30% since the beginning of 2022.

At the same time, we are now witnessing an emergency redirection of Russian energy supplies from Western countries to the Asian region, primarily to China and India, ”RT said.

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Recall that since the end of winter, the European Union, the United States and a number of other states continue to impose economic sanctions against Russia.

This is how the West reacts to the special operation in Ukraine.

In total, more than 10.6 thousand restrictions have already been imposed on Moscow (7.9 thousand of them since February 22), as evidenced by the materials of the global sanctions tracking database Castellum.AI.

Restrictions, in particular, have affected trade.

For example, the EU and the United States decided to stop importing Russian oil.

Meanwhile, China, on the contrary, is showing an increasing interest in purchasing energy resources from the Russian Federation.

As experts explain, the demand for fuel is now steadily growing in the Asian republic as the country's economy recovers from the effects of the coronavirus. 

“Russia and China have long been united by close cooperation, and not only in the economy.

Over the past few years, Beijing has been Moscow's largest trading partner.

Therefore, given the anti-Russian sanctions and the high demand for hydrocarbons in China, the trade turnover between the two countries will inevitably grow, ”Natalia Milchakova, a leading analyst at Freedom Finance IC, told RT.

According to Chinese customs, today about 70% of the cost of goods imported from Russia to China is oil, gas and coal. 

“China, together with India, is becoming for Russia the key to solving the problem of minimizing sanctions losses, primarily from the oil embargo.

How quickly we manage to redirect supplies of oil leaving the European market to the Asian region will largely depend on the final damage from the restrictions of the West.

However, so far, Russian companies are doing well,” said Alexey Fedorov.

In addition to energy, Moscow also actively supplies China with metals, timber, fertilizers, chemicals and diamonds.

In addition, China is increasing its purchases of Russian food, Natalya Milchakova noted.

“China is interested in agricultural products such as grain, meat, fish and caviar, as well as confectionery.

Russia, in turn, imports electronics, household appliances, clothing and footwear, textiles, technology, and seafood from China,” the specialist added.

Bypassing the sanctions

According to Natalia Milchakova, in the coming months, the volume of Russian imports from China may further increase. 

“Against the backdrop of sanctions and the withdrawal of many Western companies from the Russian Federation, one can expect quite large volumes of parallel imports of European and American goods from China.

In addition, the supply of spare parts and components for almost all types of engineering and instrumentation products is likely to increase,” Milchakova explained.

Recall that at the end of March, the Russian government decided to legalize parallel imports.

We are talking about importing foreign products into the country without the consent of the copyright holders.

As explained in the Cabinet, in the face of external restrictions, such a measure will help to provide the domestic market with demanded goods and will help stabilize prices for them.

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It should be noted that at the end of 2021, the volume of mutual trade between Moscow and Beijing increased by 36%, to a record $147.1 billion. At the same time, a record may be set again this year, experts are sure.

According to Alexei Fedorov, from January to December, the Russian-Chinese trade turnover is capable of reaching $185 billion. In turn, Natalia Milchakova allows for an even greater increase in the indicator.

“China will continue to increase its purchases of energy resources.

According to OPEC forecasts, by 2030 two countries, China and India, will account for a quarter of world oil demand.

Considering this and the growth of parallel imports in Russia, it is possible that the forecast of a trade turnover of $200 billion by the end of 2022 will be feasible,” Milchakova concluded.