China confident of ‘getting away with’ Russia backing says Leoni
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Gazprom CEO Alexey Miller said on Thursday that gas deliveries to China soared by 67 percent from January to May 2022. According to Danil Bochkov, an expert from the Russian International Affaris council: “During the same time, gas consumption in the world decreased by 25 billion cubic meters (bcm), with 24 billion to be a reduction of gas consumption in Europe.”
This comes after Russia and China agreed on a huge gas deal for the Kremlin to supply China with an extra 10 bcm of gas annually.
This will bring its total exports to China to 48 bcm per year.
The technical agreement between Gazprom and China’s CNPC is an extension to the “Far East” route for Russian gas travelling into China via the Power of Siberia pipeline.
The pair struck the 30-year deal back in February, the same month that Russia launched its invasion of Ukraine.
In response to the invasion, the EU has warned Russia of energy sanctions and has agreed an energy strategy to phase out Russian gas and oil imports by 2027.
This had been expected to deal a hammer blow to Putin’s energy empire, which last year raked in €48.5billion (£38billion) from crude oil sales to the EU, €22.5billion (£19billion) of petroleum oils other than crude, as well as €16.3billion (£13.5billion) for gas.
While plans to ban Russian and oil and gas from the EU are on the cards in a move likely to make a huge dent in Putin’s pockets, the Russian President may be able to swerve the damage by cosying up with China instead.
Russia already sends gas to China via the Power of Siberia, and has been doing so since 2019.
But Putin looks as though he is striking an ever closer partnership with China, which has not condemned the Russian invasion of Ukraine.
Putin said at a meeting with Chinese President Xi Jinping in February: “Our oilmen have prepared very good new solutions on hydrocarbon supplies to the People’s Republic of China. “
He said referring to the new contract to supply 10 bcm more gas per year to China: “And a step forward was made in the gas industry.”
According to estimates from Reuters, the gas sales alone could generate around $37.5billion (£30billion) over 25 years.
This is assuming an average gas price of $150 (£122) per 1,000 cubic metres as reported by Gazprom for its deal with China.
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The announcement also comes as Gazprom has announced that it slashed gas deliveries to France, Germany, Italy and Slovakia.
While the bloc is planning to scupper gas ties with Putin further down the line, it has said it will likely not include gas in the next sanctions package as it currently remains largely dependent Russia.
This helps to explains why when less Russian gas flows into Europe, prices are driven up.
Germany’s Vice Chancellor has called Putin’s latest gas squeeze a “political decision”, disputing Gazprom’s claim that the gas cuts were due to a delay to equipment repairs.
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