BEIJING — Last year, the Grand Aniva, a Russian tanker with four spherical tanks for holding ultra-cold liquefied natural gas, sailed between a gas field in eastern Russia and depots in Japan and Taiwan. But two days after Russia invaded Ukraine, the ship changed its route and sailed to China instead.
The tanker’s voyages, which span three football fields, underlined that despite Western sanctions, Russia’s President Vladimir V. Putin can still find buyers in Asia for his country’s fossil fuel exports. He must look for buyers as governments put more pressure on his country to try to end the war in Ukraine, including an expected move in the coming days by the European Union to phase out Russian oil imports.
Mr Putin on April 14 called on his country to “gradually redirect our exports to the fast-growing markets in the south and east.” Two obvious destinations are China, the largest energy market in the world, and India, the third largest in the world. (The United States is No. 2 in energy consumption.)
But any attempt to move Russia’s energy exports from Europe to Asia faces major obstacles. Russia would have to offer hefty rebates to make its oil and coal exports worth the risks and costs to buyers, and begin its long-standing task of building more ports and pipelines for natural gas exports.
To divert Russian natural gas from Europe to Asia would require the construction of extremely long pipelines or specialized ports, such as the one on Russia’s Sakhalin Island from which the Grand Aniva sails. Such ports can supercool natural gas so that it condenses into a liquid, which can then be shipped by ship.
Shipping oil to Asia would also require shipping. But because of Western financial sanctions over the war in Ukraine, insurers are refusing to cover tankers with Russian cargo. Banks refuse to lend money as long as the oil is on its way. So oil companies in countries like India have demanded very large price cuts to cover the extra costs and risks.
The export of coal, which can be loaded onto trucks or trains to China, has the fewest logistical obstacles. But Russia’s coal exports are worth only a tenth more than its oil exports and a quarter as much as its natural gas exports, according to data from Russia’s Federal Customs Service. And Western sanctions on the use of dollars for transactions with Russia are dampening Chinese demand for Russian coal.
“Even the private Chinese coal merchants today don’t want to touch Russian coal for fear of Western sanctions,” said Zhou Xizhou, a longtime Chinese energy specialist who now works at S&P Global.
Despite the hurdles, global energy leaders are betting that Russia can find a way to export at least the oil and coal, largely because global demand remains high. The world has been short of energy since the fall, when China ran out of coal and suffered widespread power outages.
Prices have risen sharply since last year for natural gas, oil and coal. By preventing Russian energy from reaching global markets, they could go even higher.
“This is possibly a bigger energy crisis than the 1970s — that was just oil, it was simpler,” said Daniel Yergin, the energy historian and author of books like “The Prize” and “The New Map.”
Some energy sector leaders are calling for policies that do not completely block Russian energy exports. The goal should instead be to make it very difficult for Russia to export, they say, so that it only does so at very low prices.
“The key point is not to cut or wipe out Russian exports to Europe, but to cut Russian oil and gas revenues — it’s not the same thing,” Fatih Birol, executive director of the International Energy Agency in Paris, said in a statement. a phone conversation. interview.
Mr Putin is expected to keep oil and coal moving by effectively holding the world’s largest sale.
Russia needs every dollar of export revenue it can get right now. It is heading for the default of its foreign debt. It has lost much of its foreign investment. And Western governments have frozen half of their central bank’s foreign reserves.
Russia currently exports nearly five million barrels of crude oil per day and another three million barrels of diesel, gasoline and other refined products. China and India have extensive refineries and are generally interested in crude oil, Mr Birol said.
Natural gas is more difficult for Russia to export. According to the International Energy Agency, Russia has the capacity to liquefy only about a tenth of its natural gas exports and load them onto ships. Most of the shipments being liquefied will go to East Asia anyway, many of which depart from the southern tip of Sakhalin Island, near Japan.
According to Marine Traffic, an Athens-based ship-tracking service that monitors ship locations, the Grand Aniva switched from resupplying Japan and Taiwan to resupplying China last year in the two months since the Russian invasion.
The war between Russia and Ukraine and the world economy
The Grand Aniva is one of the few tankers that still calls at Russian ports: it is owned by Sovcomflot, a Russian state-owned shipping company that has already been the target of Western sanctions.
On its most recent voyage, in mid-April, the Grand Aniva went from Sakhalin Island to an LNG unloading port in Beihai, on China’s southern coast. Sinopec, a Chinese state-owned refinery giant, built the port and then transferred it to PipeChina, a separate state-owned company, three years ago. Sinopec, PipeChina and Sovcomflot did not respond to requests for comment.
Geopolitics helps enable the continued export of Russian energy. China has avoided condemning Russia’s invasion of Ukraine and has a history of buying oil from Iran and Venezuela despite Western sanctions against those countries.
“The Chinese have found solutions for Iranian oil, for Venezuelan oil,” said Michal Meidan, the director of gas research and China energy at the Oxford Institute for Energy Studies. “They will find solutions for Russian oil.”
Russia is already increasing transportation of natural gas to China through a recently completed Siberian pipeline. But because Russia’s gas fields in Siberia are not pipelined to the Russian gas fields that supply Europe, there are strict limits to Russia’s ability to move gas sales to China.
Still, trade between Russia and China, largely of Russia’s energy exports, rose nearly 30 percent in the first three months of this year from a year earlier. That increase “fully demonstrates the great resilience and internal dynamism of the cooperation between the two countries,” Le Yucheng, a Chinese deputy foreign minister, said in a statement last month. “However the international situation changes, China will, as always, strengthen strategic coordination with Russia.”
Russia’s market position could improve in the autumn. Much of the Russian oil is very heavy and produces extra diesel during refining. Russia exported more than 10 times as much diesel as gasoline last year, data from Russia’s Federal Customs Service shows.
The most important diesel market in the world is China, with almost twice as many heavy-duty trucks in use as the United States. The coronavirus lockdowns have paralyzed a large part of the Chinese fleet in recent days, especially in and around Shanghai.
Demand for diesel in China could turn completely by the fall. Beijing is turning to its favored tactic in past economic slowdowns: massive investment in building more rail lines, roads, bridges and other infrastructure.
All that construction requires huge fleets of diesel-guzzling trucks, excavators, pile drivers, bulldozers and other equipment.
Li You research contributed.
