Cash from India and China is helping the Russian economy stay afloat as the next stage of Russia’s incursions commences. Here is how the Russia India China axis is defeating the western sanctions over Ukraine.
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The special operation in Ukraine by Russia brought the West together against a common foe. It also constructed a shakier Eastern coalition that has kept Russia’s economy afloat since the conflict started.
The United States, the United Kingdom, and the European Union have all struck Russia’s energy industry in recent weeks, imposing various sanctions on Russian coal, crude oil, and natural gas. The steps would compel the Kremlin to “to choose between propping up its economy and funding the continuation of Putin’s brutal war.” according to Treasury Secretary Janet Yellen.
Despite this, Russia has not felt the strain in the way that the West had intended. India and China are primarily to criticize. Neither country has taken a clear stance in favor of or against Russia, opting instead for a hazy middle ground as the bulk of the world’s countries denounce President Vladimir Putin. They have also kept buying Russian energy, so indirectly supporting the incursion of Ukraine while retaining essentially the same trading connections as before the war.
In recent weeks, India has actively increased its imports of Russian oil, drawn by the heavily discounted price compared to surging rates for other types of crude. According to Reuters, India’s government has requested at least 13 million barrels since the conflict began in late February. This amount, amassed in just two months, is rapidly approaching the 16 million barrels India purchased from Russia for the entire year of 2021.
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Meanwhile, according to Reuters, China is still honoring current oil contracts with Russia. Chinese state-run refiners have refused to sign any major agreements, but the Kremlin has a big buyer thanks to the continuance of current plans. According to Chinese government figures, China is the largest customer of Russian oil, importing almost 1.6 million barrels per day in 2021.
The People’s Republic of China was also a major buyer of Russian gas last year, purchasing 16.5 billion cubic meters of natural gas, or about 7% of Russia’s total output.
To be sure, the West’s response has been imperfect, with Russian energy still flowing into nations opposed to the invasion. While the United States was able to easily impose an embargo on Russian oil and gas, the United Kingdom and the European Union are far more dependent on those commodities to keep their economies running. Europe has been slow to wean itself off of Russia’s energy trade because of this dependence.
Germany, a manufacturing powerhouse, is under the most extreme strain. If Russia’s energy supply is cut off, prices for commodities critical to Germany’s industrial sector will skyrocket. Greater inflation would wreak havoc on households, resulting in higher utility bills. A comprehensive embargo would almost surely drive Germany — the EU’s largest economy — into a serious recession if there was no way to swiftly compensate for the loss of Russian energy.
The Kremlin is mitigating at least part of the West’s damage, thanks to the sanctions’ flaws and sustained trade with India and China. According to a Bloomberg analysis published on April 1, Russia is on track to earn $321 billion in 2022 from its energy exports if its current trade partners continue to buy. Earnings are expected to increase by more than a third above last year’s windfall.
Predictions are just that, and the energy market is still incredibly volatile. Russia, on the other hand, is already outperforming its own forecasts. Due to higher prices, energy sales in April are now likely to come in $9.6 billion higher than the Kremlin’s earlier forecast, the finance ministry stated on April 5.
In recent interviews, Kremlin officials supported the bullish outlook, arguing that Western sanctions have had little impact on energy income. Energy Minister Nikolai Shulginov told the Izvestia daily on April 13 that Russia is ready to export energy goods to “friendly countries in any price range.”
In early March, Foreign Minister Sergey Lavrov was more forthright in his dismissal of Western sanctions. He stated at a briefing that Russia “will not persuade anyone to buy our oil and gas,” but that the West is “welcome” to substitute Russian energy with an alternative.
“We will have supply markets, we already have them,” Lavrov said.
The West has taken note of these markets. Last week, Treasury Secretary Yellen stated that punishing nations “will not be indifferent” to those who are “sitting on the fence.”
However, no real regulations aimed at those who purchase Russian energy have been published. Cash from India and China is helping the Russian economy stay afloat as the next stage of Russia’s incursions commences in Ukraine’s Donbas region.