As a result of the collapse of the Soviet Union, Russia lost a considerable part of its industrial capacity, and today Russia is essentially a resource exporter that relies on the sale of oil and gas energy to survive. But the problem is that, as russia's biggest buyer of energy, Westerners have fundamental political contradictions with Russia, which makes this oil and gas supply relationship particularly fragile.
Yet the Russians were lucky, and in addition to the Europeans, they had a large customer of the highest quality in the far East! Agence France-Presse (AFP) lamented that as the Russo-Ukrainian war brought the Oil and Gas Cooperation between the West and Russia to the brink of collapse, China is becoming Russia's new "paradise" for oil and gas energy sales.
Russian oil and gas exports
How rich are Russia's oil and gas resources? And how much do you rely on oil and gas exports for your livelihood?
In terms of oil, Russia produced a total of 524 million tons of crude oil in 2021, accounting for 11.41% of the world's total production; of which 230 million tons were exported, second only to Saudi Arabia in the world;
In terms of natural gas, Russia has extracted 761 billion cubic meters of natural gas in 2021, second only to the United States in the world, accounting for 18.46% of the world's total natural gas production; of which 203.5 billion cubic meters are exported, ranking first in the world.
Such huge oil and gas exports naturally bring Russia a lot of foreign exchange earnings. For example, in oil, although the export volume of these 230 million tons fell by 3.8% compared with last year, benefiting from the sharp rise in oil prices, the revenue generated by these oil exports for Russia increased by 51.8% year-on-year to $110.119 billion. Throughout 2021, Russia's revenue from oil and gas is expected to be 8.5 trillion rubles, equivalent to 40% of Russia's national fiscal revenue.
Such a large foreign exchange income also laid a good foundation for the Russian economy, which lacks other sources of income from normal industries and tertiary industries: according to the Central Bank of Russia, as of December 24, 2021, Russia's international reserves reached $630.5 billion, a record high, the fifth in the world.
But the risk for Russia is that the European Union, which is divided by market and is everywhere opposed to the Russians, is the number one buyer of these oils and gases:
In terms of natural gas, in 2019, of the 236.9 billion cubic meters of natural gas exported by Russia, 192.6 billion cubic meters were exported to the European market, accounting for 81%; affected by political factors, Russia's export quota to Europe in 2020 fell sharply, of which the import volume of EU member states fell to about 152.65 billion cubic meters, but still accounted for nearly 75% of Russia's natural gas exports that year.
In oil, about 48% of Russian oil exports went to the European market in 2020; by 2021, this share will climb further to 50%.
Schematic diagram of Russian gas output
Knowing these specific data, we will understand what the current Russo-Ukrainian war means for Russia's energy export market:
On March 7, local time, European Commission President von der Leyen publicly stated that the EU has made up its mind to reduce its dependence on Russian oil and gas, and from now on - the EU intends to reduce the natural gas imports from Russia this year to 112 billion cubic meters, and the remaining gap will be filled from outside Russia. Desperate Germans have even planned to send their Minister of Economy and Climate Protection, Robert Hubbeck, to Visit African countries such as Algeria and Nigeria to ensure that Germany is free from dependence on Russian gas as soon as possible.
EU energy imports
Because a war lost its biggest international client, the account is not worth it politically, and we can only wait for time to prove it, but in the economic account, this is obviously a suicidal move:
Although in 2021, thanks to the rise in international oil prices, Russia's GDP achieved a positive growth of 4.7%, a record high in a decade, but in the earlier 2020, dragged down by the new crown epidemic, Russia's GDP growth rate that year was -3%, coupled with various expenses required to prevent and control the epidemic, between a positive and a negative, the real growth of the Russian economy was almost offset.
Now that the Russo-Ukrainian war itself is a money-burning machine, Russia has completely angered the entire West, according to the calculations of the Central Bank of Russia, in this 2022, Russia's inflation rate will be as high as 20%, and gdp growth may even fall to -8%.
Russian people under the flag
Knowing that it will drag the whole of Russia, Putin is still insisting on starting this war, is this too reckless? If you think so, you are obviously underestimating Putin's ability to operate – Agence France-Presse said that Putin had to make a special trip to Beijing on the opening day of the Winter Olympics on February 4, one of the purposes of which is to leave Russia with a way back in terms of energy exports: China today is the number one customer of Russia's highest quality energy in every sense.
First, China's dependence on energy imports is growing.
In 2021, China's apparent natural gas consumption was 372.6 billion cubic meters, and the consumption of refined oil products was 340 million tons, both of which were among the highest in the world; in the same year, China's natural gas imports exceeded 166.8 billion cubic meters, and the import volume of crude oil was 510 million tons, which was also the forefront of the world.
According to the International Energy Agency's estimates, by 2030, China's natural gas demand will be 40% higher than in 2020, making it the most promising energy market in the world. But Russia's energy exports to China have long hovered at a low level due to a number of factors: in 2021, Russia will export only about 15 billion cubic meters of natural gas to China, and oil exports to China will only be 1.59 million barrels per day.
It is conceivable that expanding exports to the Chinese market has long been a long-term goal pursued by Russia, and the Russo-Ukrainian war is only a catalyst to speed up this process.
Second, politically, there is almost no risk in exporting oil and gas to China.
In every sense, this is the decisive factor that has prompted Russia to increase its dependence on the Chinese market, or in this case, China is more dependent on Russia:
Needless to say, in politics, the Accusations and Prejudices against China in the Western world are equally enormous; in terms of geopolitical and sovereign interests, the crises caused by the United States to China are no less than those of Russia, and in terms of energy security, China is facing tremendous pressure that Russia, a major oil and gas exporter, has never experienced.
Finally, Russia's layout of the Chinese market has been around for a long time and has really helped Russia's economic problems tremendously.
For example, as early as 2014, China signed the "China-Russia East Line Gas Supply and Sales Contract" with Russia, agreeing that from 2018, Russia will supply gas to China through the east line of the China-Russia natural gas pipeline. Although the contract was postponed several times after its signing due to various factors, the current Russo-Ukrainian war will undoubtedly completely strengthen Russia's determination to complete the project: according to the contract, the gas supply of this line will eventually reach 38 billion cubic meters per year, accumulating for 30 years, with a total price of 400 billion US dollars.
That is to say, this line alone can ensure at least $13.3 billion in foreign exchange earnings per year for Russia over the next 30 years. On his Feb. 4 trip to Beijing, Mr. Putin proposed to China a new contract for natural gas with an annual supply of 10 billion cubic meters, according to the latest news.
Although these new energy export pipelines to China will not allow China to completely replace the Dominant Position of the West in Russia's energy export structure, it is enough to give Putin enough confidence to bargain with the West.
Coal-fired power plants in Europe
All in all, while the West is pinning its hopes on reducing oil and gas imports and economic sanctions to force Russia to bow to itself, Russia's cooperation with China has made this attempt almost doomed to failure. Or we can put it more bluntly:
When China's relationship with Russia is strengthened by oil and gas cooperation, is it still a good idea to offend China, the largest consumer in the international energy system, in order to attack Russia, or simply attack China itself?
In the past, it was understandable that Westerners could not see this clearly because of their arrogance, but after the Russo-Ukrainian War, Westerners could not see what It meant for Russia to "look east", which was pure stupidity.