China exports Russian gas to Europe on the sly

China exports Russian gas to Europe on the sly

In the first six months of 2022, imports of liquefied natural gas (LNG) into the European Union increased by 60% compared to last year, indicates the KPLR research firm. The European Union has thus imported some 53 million tonnes of LNG this year. In this context, China does appear to be Europe’s “unexpected white knight”. The one who comes to his energetic rescue. It is what has enabled the European Union to build up gas reserves faster than expected, largely thanks to liquefied natural gas.

For the record, last July, the Middle Kingdom bought a total of 2.35 million tons of LNG from Russia – worth $2.16 billion. The volume of imports from China to Russia increased by 28.7%. The Russian Federation can boast of having risen to fourth place as a supplier of LNG to China, ahead of Indonesia and the United States. And it goes without saying that this fourth place does not take into account the famous gas pipeline of the Russian producer Gazprom Power of Siberia which delivers gas to China daily. Deliveries from Power of Siberia increased by 63.4% in the first half of 2022. As a reminder, Power of Siberia is the second pipeline supplying China with natural gas, in terms of volume, behind Turkmenistan.

“bleached” gas

One could wonder about this unusual increase in Russian LNG imports. We know that China imports more than half of the natural gas it consumes, of which about two-thirds is in the form of LNG, and demand has fallen sharply this year, in a context of recession. China, which is keen to maintain excellent gas relations with Russia, has been careful not to reveal the origin of this gas. The General Administration of Customs of China has, moreover, “laundered” the gas from Russia by simply indicating that it was stamped “Chinese”. China’s General Administration of Customs has stopped publishing pipeline natural gas trade volume breakdowns since the start of the year, with spokesperson Li Kuiwen confirming that the move was to “to protect the legitimate commercial rights and interests of affected importers and exporters”.

This is how China is quietly reselling Russian LNG to the one place that desperately needs it more than anything, namely Europe. And it goes without saying that the profit margins are very appreciable. From this perspective, Shanghai futures traders estimate that the profits generated could reach $100 million. The claims of this trader were corroborated by China’s largest oil refiner, Sinopec. The latter also acknowledged that it had transported the surplus LNG to the international market.

A grotesque situation

Just think about it: Sinopec alone would have sold 45 cargoes of LNG, or around 3.15 million tonnes. The total amount of Chinese LNG that has been resold is likely over 4 million tonnes, which would be equivalent to 7% of Europe’s gas imports in the first half of this year.

All this LNG, although counted by customs as “Chinese LNG”, comes in part or in whole from Russia. The politicians who govern us live in absurdity: they impose sanctions on Moscow and then buy Russian LNG… from China. But not at the same price!

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