Russian President Vladimir Putin said March 21 that Russia is ready to increase oil supplies to China, which has become an increasingly important energy partner since Russia's invasion of Ukraine triggered wide-ranging Western sanctions.
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"Russia is prepared to increase uninterrupted oil supplies to support development of the Chinese economy," Putin said, after a meeting with Chinese President Xi Jinping in Moscow.
Russia has significantly increased oil deliveries to China since invading Ukraine, reaching a record high of 2.01 million b/d in February, according to China's General Administration of Customs data released March 20.
Analysts see infrastructure as limiting Russia's ability to further increase supplies, however. In 2022 it increased oil supply capacity at its Far Eastern port of Kozmino, but existing export capacity limits further export increases.
Russia also supplies oil to China via the major East Siberia Pacific Ocean pipeline, transit through Kazakhstan and via tanker. Future plans include development of the Northern Sea Route, which runs through Russian territorial waters in the Arctic and has shorter delivery times and lower costs, as well as less geopolitical risk than traditional routes.
S&P Global Commodity Insights sees the economic pressure of losing pricing power and sanctions as potentially reducing Russia's ability to build new export capacity to Asia.
Chinese importers are benefitting from discounts on Russian crude. The cost of the Russian crude imports averaged $73.53/b, 13.7% lower than $85.23/b in the same month a year earlier, GAC data showed. Cargoes from Saudi Arabia averaged $83.15/b in February.
Platts, part of S&P Global Commodity Insights, assessed Russia's key crude grade Urals FOB Primorsk at $35.92/b on March 20, a $36.10/b discount to Forward Dated Brent.
Putin also said March 21 that almost all details of the Power of Siberia 2 gas pipeline have been agreed with China.
Power of Siberia 2 has a planned capacity of 50 Bcm/year and will run through Mongolia. Russia has also proposed a new Far Eastern route to carry up to 10 Bcm/year.
Putin said that by 2030 Russia will supply China with at least 98 Bcm of gas and 100 million mt of LNG.
Russia began supplying gas to China via the Power of Siberia pipeline at the end of 2019. Supplies have grown from 4.1 Bcm in 2020, to 10 Bcm in 2021 and 15.4 Bcm in 2022. Flows are expected to reach 22 Bcm in 2023, and hit their design capacity of 38 Bcm/year in 2027.
Russian gas exporter Gazprom said March 21 that its gas exports to China via the route hit a new daily record on March 20 following a request for additional gas from China's CNPC.
Putin said that the two countries' bilateral trade grew by 30% in 2022 to over $185 billion, and will reach $200 billion in 2023.
He added that Russia and China are increasingly using the yuan and ruble in bilateral trade.
"According to results of the first three quarters of last year, the share of the ruble and yuan in bilateral commercial transactions reached 65%, and continues to grow, which allows us to protect mutual trade from the influence of third countries and negative trends in global currency markets," Putin said.
Russia is pushing to move trade away from the US dollar after sanctions on Russia's financial sector included asset seizures and restrictions on access to Western financial markets.
Putin added that Russia supports trade settlements in Chinese yuan with countries in Asia, Africa and Latin America.
The presidents said in a joint statement that Russia-China relations are entering a new era and continue to develop steadily.
Russia and China are focusing on several areas as part of their plan to develop economic cooperation up to 2030. This includes increasing and optimizing trade and developing an interconnected logistics system, as well as increasing financial, commodities, industrial and technological cooperation.
Russia and China signed 14 bilateral agreements during the visit. These included joint statements on strengthening partnership and strategic interaction as well as bilateral economic cooperation up to 2030. Other agreements cover industrial and infrastructure cooperation in Far East Russia, and nuclear cooperation.
The Russian and Chinese presidents also discussed security issues.
China has also proposed a plan for peace in Ukraine. Putin said that this may be taken as the basis for a peace deal in Ukraine when Kyiv and the West are ready for talks.