A year after Russia’s invasion of Ukraine, Moscow has been hit by unprecedented Western sanctions, squeezing it out of much of the global economy.
But China, which has declared its friendship with its northern neighbor “unbounded”, has turned the Kremlin into an economic lifeline to soften the effects of its expulsion from the global financial system.
Underscoring the closeness of ties, China’s top diplomat Wang Yi met with President Vladimir Putin during a visit to Moscow on Wednesday. The Wall Street Journal reported that Chinese President Xi Jinping and President Putin could hold a summit in Moscow in his April or early May.
Here are three ways China, the world’s biggest buyer of commodities and a powerhouse of finance and technology, has supported the Russian economy.
Western sanctions against Russia include embargoes on oil sales and caps on oil prices, denial of access to SWIFT, the international messaging system that enables banking transactions, and freezing of central bank assets held abroad. included.
These moves were intended to undermine Russia’s ability to finance war.
they made an impact. According to the World Bank’s latest estimates, the Russian economy has slipped into recession, shrinking by 4.5% in 2022.
However, according to the Russian government, Moscow’s financial income has increased. This is largely thanks to high energy prices and Russia’s attempts to reroute exports to other eager buyers such as China and India.
“China has financially supported Russia’s war in the sense that it has strengthened its trade with Russia,” said Neil Thomas, senior analyst for China and Northeast Asia at the Eurasia Group. “It undermines Western efforts to neutralize the machine.”
“Xi Jinping wants to deepen ties with an increasingly isolated Russia and China,” he said, noting that Moscow’s “marginal status” has allowed Beijing to afford cheap energy, advanced military technology, and China’s international reach. He added that he could use more influence to get diplomatic support for his interests.
According to China Customs statistics, the total trade value between China and Russia in 2022 will increase by 30% to $190 billion, a record high. In particular, energy trade has increased significantly since the start of the war.
China buys $50.6 billion From March to December, the value of Russian crude oil increased by 45% year-on-year. Coal imports he surged 54% to $10 billion. Natural gas purchases, including pipeline gas and LNG, jumped 155% to $9.6 billion.
It’s a win-win. For Russia, it desperately needs new customers as fossil fuels are being pushed away from the West. China, now focused on getting its economy out of recession, needs cheap energy to power its manufacturing giants. industry.
“For Russia, this partnership was born out of desperation,” said Keith Kluck, US Under Secretary of State for Economic Growth, Energy and Environment. “he [Putin] Xi Jinping is willing to prey on Putin’s desperation.”
“When it comes to China, China’s eagerness to back Russia is just the latest in a series of moves that once again expose Beijing as an irresponsible actor,” Krach told CNN.
The two sides are committed to further expanding their partnership, including a contract between Gazprom (GZPFY) and China National Petroleum Corporation to supply more gas to China over the next 25 years. Planning.
“Once the Chinese economy opens up in 2023, we expect further increases in Russian exports to China, including oil and other refined petroleum products,” said Anna Kyleeva, an associate professor at the Moscow Institute of International Relations. Told.
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Besides energy, Russia is spending billions of dollars to buy machinery, electronics, base metals, vehicles, ships and aircraft from China, as detailed in a US Congressional Research Service report last May. I am spending
“Despite China’s reluctance to provide direct support for Russia’s war, bilateral relations will continue to grow because Beijing is opportunistic,” Thomas said.
“Xi Jinping evaluates Putin’s support as follows. [a] It’s a strategic ballast against an increasingly hostile United States, but the main reason he’s interested in Russia is what Russia can do for China,” he added.
Russia also needs to find alternatives to imports from Western markets, such as automobiles and electronics.
“And here, China with its industrial capabilities cannot match other major producers,” Kyleeva said.
Chinese auto brands such as Havel, Chery and Geely surged in market share from 10% to 38% in a year after Western brands pulled out, according to the latest data from Russian research firm Autostat. And that share is likely to increase further this year.
In consumer electronics, Chinese brands accounted for about 40% of the smartphone market by the end of 2021, according to market research firm Counterpoint.
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After some Russian banks were cut off from SWIFT, Moscow Chinese yuan depreciation of the dollar.
Russian companies are using more yuan to facilitate increased trade with China. Kireeva said Russian banks are increasingly trading in renminbi to protect themselves from sanctions risks.
According to Russian media, the renminbi’s share of the Russian foreign exchange market jumped from less than 1% in January 2022 to 48% in November 2022.
Russia easily Last July, it became the world’s third largest offshore trading hub for the renminbi. Hong Kong and the UK, according to figures released by SWIFT. Since then, it has remained one of the top six markets for renminbi trading, although it was not even among the top 15 before the war in Ukraine.
Russia’s finance ministry has also doubled the percentage of yuan reserves that its sovereign wealth funds can hold to 60% after international sanctions freeze most of their savings, according to Reuters. pulled up.
Finance Minister Anton Siluanov said Russia will buy the yuan only in 2023 to replenish the country’s sovereign wealth fund, according to TASS.
“Of all the foreign exchange held by Russia, [central] Banks had reserves, but the only unfrozen Chinese yuan remains the “friendly” renminbi.
“We are likely to see further de-dollarization across Russia’s foreign trade, [an] We are increasing our share of trade in our own currency with all states that are friendly or neutral to Moscow. ”
With more yuan reserves, Moscow can use the yuan to stabilize the ruble and its financial markets. The ruble has fallen more than 40% against the euro and the dollar over the past year, and the main Russian stock index he has fallen more than a third.
Last month, Russia’s finance ministry announced it would resume foreign exchange intervention by selling the yuan and buying the ruble.
However, the relationship is not completely frictionless.
China’s payment system UnionPay The Russian newspaper Kommersant reportedly stopped accepting cards issued by Russian banks due to fears of international sanctions..
“Large Chinese companies are wary of secondary sanctions and are cautious about doing business with sanctioned Russian companies and the Russian market in general,” Kyriba said.
– CNN’s Michelle Toh contributed to this report