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New UserRussia Wants to Sell More Energy to Asia, but Has to Slash Prices - The New York Times (nytimes.com)
04 May 2022
Russia wants to sell more oil and coal to China and India, but
Western sanctions may make that hard unless Russia offers deep discounts on the
price.
The voyages of the
tanker, which is as long as three football fields, underlined that President
Vladimir V. Putin of Russia can still find buyers in Asia for his country’s
fossil fuel exports despite Western sanctions. He needs to look for buyers as
governments exact more pressure on his country to try to stop its war in
Ukraine, including an expected move in the next several days by
the European Union to gradually halt imports of Russian oil.
Mr. Putin called on April 14 for his
country “to redirect our exports gradually to the rapidly
growing markets of the South and the East.” Two obvious destinations are China,
the world’s largest energy market, and India, the world’s third largest. (The
United States is No. 2 in energy use.)
But any attempt to
shift Russia’s energy exports to Asia from Europe would face major obstacles.
Russia would need to offer steep discounts to make its oil and coal exports
worth the risk and cost to buyers, and would need to start the yearslong task
of building more ports and pipelines for natural gas exports.
Redirecting Russian natural gas to Asia from Europe would require building extremely long pipelines or specialized ports like the one on Russia’s Sakhalin Island from which the Grand Aniva sails. Such ports are able to supercool natural gas so that it condenses into a liquid, which can then be sent by ship.
Sending oil to Asia would also require transportation by ship. But because of Western financial sanctions over the war in Ukraine, insurers are refusing to cover tankers with Russian cargoes. Banks are refusing to lend money for the time that the oil is in transit. So oil companies in countries like India have demanded very steep discounts on the price to cover the extra cost and risks.
Exports of coal,
which can be loaded on trucks or trains to China, face the fewest logistical
obstacles. But Russia’s coal exports are worth only a tenth as much as its oil
exports and a quarter as much as its natural gas exports, data from Russia’s
Federal Customs Service shows. And Western sanctions on using dollars for
transactions with Russia are dampening Chinese demand for Russian coal.
“Even the private
Chinese coal traders these days don’t want to touch Russian coal, because of
the fear of Western sanctions,” said Zhou Xizhou, a longtime specialist in
Chinese energy who is now at S&P Global.
“This is actually
potentially a more significant 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 industry
leaders are calling for policies that do not block Russian energy exports
entirely. The goal instead should be to make it very hard for Russia to export,
they say, so that it does so only at very low prices.
“The main issue is
not to reduce or nullify Russian exports to Europe, but to reduce the Russian
oil and gas revenues — they are not the same thing,” Fatih Birol, executive
director of the International Energy Agency in Paris, said in a telephone
interview.
The expectation is
that Mr. Putin will keep the oil and coal moving by holding, in effect, the
world’s biggest sale.
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Russia needs every dollar of export revenue it can get right now. It is
lurching toward default on its foreign debt. It has lost much of its foreign
investment. And Western governments have frozen half of its central bank’s
foreign reserves.
Russia currently
exports nearly five million barrels per day of crude oil and another three
million barrels per day of diesel, gasoline and other refined products. China
and India have extensive refinery industries and are typically interested in
the crude oil, Mr. Birol said.
According to Marine
Traffic, an Athens-based ship tracking service that monitors ships’ locations,
the Grand Aniva switched from supplying Japan and Taiwan last year to supplying
China in the two months since the Russian invasion.
On its most recent
voyage in mid-April, the Grand Aniva went from Sakhalin Island to an L.N.G.
unloading port in Beihai, on China’s southern coast. Sinopec, a state-owned
Chinese refining giant, built the port and then transferred it three years ago
to PipeChina, a separate state-owned enterprise. Sinopec, PipeChina and
Sovcomflot did not respond to requests for comment.
Geopolitics help make possible 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 on those countries.
“The Chinese have
found workarounds 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 workarounds for Russian oil.”
Still, trade between
Russia and China, much of it Russian energy exports, jumped nearly 30 percent
in the first three months of this year compared with a year earlier. That
increase “fully demonstrates the great resilience and internal dynamism of
cooperation between the two countries,” Le Yucheng, a Chinese deputy foreign
minister, said in a statement last month.
“No matter how the international situation changes, China will, as always, strengthen
strategic coordination with Russia.”
Russia’s market
position might improve in the autumn. Much of Russia’s oil is very heavy,
producing extra diesel when refined. Russia exported more than 10 times as much
diesel as gasoline last year, data from Russia’s Federal Customs Service shows.
The world’s main
diesel market is China, with nearly twice as many heavy-duty trucks in
operation as the United States. Coronavirus lockdowns have paralyzed much of
China’s fleet in recent days, especially in and around Shanghai.
Diesel demand in China could completely reverse by autumn. Beijing is turning
to its favorite tactic in previous economic slowdowns: enormous investment in
the construction of more rail lines, roads, bridges and other infrastructure.
All of that
construction will require huge fleets of diesel-guzzling trucks, excavators,
pile drivers, bulldozers and other equipment.
Keith Bradsher is the Beijing bureau chief for The New York Times. He has previously served as bureau chief in Shanghai, Hong Kong and Detroit, and as a Washington correspondent. He was part of a team that won a Pulitzer in 2013 for its coverage of Apple, and he was a Pulitzer finalist in 1998 for his coverage of the dangers of sport utility vehicles. @KeithBradsher