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Reason Beijing Is Going After Russian Gas – Analysts Reveal

Analysts Reveal Why Beijing is Going After Russian Gas

Energy-hungry Due to the present trade spat with Canberra, China appears to be planning to expand its natural gas imports from Russia, potentially jeopardizing supplies from Australia, China’s top gas supplier.

China, as the world’s largest natural gas consumer, is heavily reliant on imports. The government imported 43 percent of its gas requirements from abroad in 2020, according to data supplied by the General Administration of Customs, comprising 89 billion cubic meters of LNG and 46 billion cubic meters of pipeline gas.

The trade data compiled by Refinitiv shows that Australia was China’s biggest supplier of gas in the first nine months of last year, followed by the US, another country whose relations with Beijing have been in steady decline in recent years.

A second supply channel with Russia “will partly meet China’s rising demand and also help diversify its imports,” according to Tian Miao, a senior analyst with Everbright Sun Hung Kai, as quoted by SCMP.

China-Australia trade and political tensions have been rising for several years, notably after Canberra barred Chinese vendors from its 5G deployment. When Australia joined a US call for an international investigation into Beijing’s alleged complicity in the Covid-19 outbreak, the situation became even worse.

As a result, China has levied high taxes on Australian wine, while China’s coal sales are said to have plummeted by 89.7% from January to November 2021. The Australian government has retaliated by canceling two transactions between Victoria and China under China’s Belt and Road Initiative.

Russian natural gas is currently being sent from Far-Eastern Yakutia to China through the Gazprom-operated Power of Siberia pipeline, which first became operational in December 2019. Meanwhile, the projected Power of Siberia 2 gas pipeline is expected to pump 50 billion cubic meters of gas annually to northern China.

“Just as it makes sense for the EU to use [liquefied natural gas] as a political hedge… it makes sense for China to use Russian pipeline gas as a political hedge or backup for its high reliance on LNG – large amounts of which come from Australia and the United States, with whom Beijing’s relations have deteriorated over the past years,” said Henning Gloystein, director of energy, climate and resources at Eurasia Group, as quoted by SCMP.

So far, the ongoing dispute between Canberra and Beijing has not extended to LNG or iron ore. However, Australia received no new long-term supply contract from China in 2021, according to data tracked by market intelligence provider, which also disclosed that some of its market share had been eroded by Qatar, Russia and the US.

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