Beggars cannot be choosers. In its enthusiasm to virtue signal the whole wide world, Europe decided that antagonising Russia was the best and wisest approach following the invasion of Ukraine. Europe’s confident imposition of sanctions against Russia should ideally have evoked confidence within the world community regarding the bloc’s ability to survive without Russian fuel. Evidently, the European Union misjudged its solidity. Russia was quick to act – cutting natural gas supplies to Europe. While Moscow previously blamed so-called technical issues for stopping gas supplies to Europe, in the past two days, it has become more candid. Now, Moscow is saying gas supplies to Europe will not resume until the sanctions against Russia are lifted. So, Europe has fallen prey to an acute energy crisis which is only set to get worse in the coming winter months.
In comes China to save the day like a messiah – albeit, temporarily.
China’s economic slowdown has left it with a surplus of natural gas that it is re-selling to Europe. Now the obvious question would be this: How does China have such a significant surplus of LNG? Well, in the first half of 2022, China’s imports of liquefied natural gas (LNG) jumped 60 per cent year-on-year. China’s import volume increased by 28.7 per cent year on year. Due to the surge in LNG imports, China’s position as the world’s largest buyer of natural gas got cemented and made Russia overtake the likes of the United States and Indonesia to emerge as the country’s fourth largest supplier of the resource. Russia’s sales of pipeline gas to China have increased even more dramatically, growing by almost 65 per cent year on year. However, at a time when China is experiencing an economic slowdown, the Communist nation simply has no use for such volumes of gas.
Europe’s Arrangement with China to Buy Russian Gas
It is here that Europe comes in. China has been exporting the surplus natural gas in its storage to Europe at inflated prices, and European buyers, who are desperate for even the smallest of LNG drops, are readily buying the resource from spot markets. Europeans are paying for the same Russian gas, only that they are now shelling out two to three times more money than they would have had their governments not prematurely sanctioned and antagonised Russia.
According to research firm Kpler, Europe’s imports of LNG have soared 60 per cent year on year in the first six months of 2022. As per Nikkei, more than 4 million tonnes of Chinese LNG has probably been resold — making up roughly 7 per cent of Europe’s imports in the first half of the year. So, Europe has been purchasing Russian LNG via China – while pretending like it is highly successful in its campaign to decouple from Moscow.
Therefore, a major part of natural gas currently in European storages continues to be of Russian origin – with the obvious caveat of it having been bought from China.
Beijing has emerged as an unexpected saviour for Europe, but it is hardly acting out of the magnanimity and goodness of its heart. China is reaping heavy profits by exporting Russian gas to Europe, even as European nations pretend to turn a blind eye to the obvious origins of natural gas which they are swallowing like there is no tomorrow. China has effectively become the middleman between Russia and Europe. What that means is Russia gets to keep earning big by exporting gas to China, since Beijing has ensured European markets remain available for Russian gas.
Ultimately, Europe is emerging as the only loser in this game. Both Vladimir Putin and Xi Jinping are making big money, while European nations continue to be battered by an energy-cum-economic crisis. Recession is now inevitable in Europe. Dark and extremely cold winters too have been accepted as imminent. To make matters worse, China is hardly a reliable energy exporter.
The only reason why China is exporting Russian LNG to Europe is because Beijing currently has a surplus of the resource. That will not remain the case forever. As soon as economic activity picks up in China, Beijing will shutter any exports of energy resources to Europe. Europe is finding it extremely difficult to find any sustainable alternatives to Russian fuel. To add to its woes, the bloc faces an energy crisis that will not get over in a matter of months, but will, in fact, last several years.
Why the West is in No Position to Lecture India
Ever since it got reported that India has increased its intake of discounted Russian oil, the West – including the United States and Europe have tried to trap India in a net of virtuous yet unfeasible morality, portraying New Delhi’s decision to buy Russian oil as some sort of a betrayal of Ukraine and all that the ‘liberal’ world order claims to stand for. India has rightly been responding to such hypocritical virtue signalling by making it clear that for New Delhi, the interests of Indian consumers reign supreme.
External Affairs Minister Dr S. Jaishankar last month said India was being very open and honest about its interests. “I have a country that has a per capita income of two thousand dollars. These are not people who can afford higher energy prices,” the foreign minister said, adding that it was his “obligation" and “moral duty" to ensure that the people in India get the best deal possible.
India’s petroleum minister, Hardeep Singh Puri on Monday was careful to not commit to a planned global energy price cap. Russia has already said any country that agrees to such a price cap will get energy supplies from Moscow suspended. In a scathing remark against those who have been preaching to India about the ills of its energy cooperation with Moscow, Mr Puri said, “…the Europeans buy more in one afternoon than I do in a quarter. I’d be surprised if that is not the condition still. But yes, we will buy from Russia, we will buy from wherever…I have a moral duty to my consumer.”
In the absence of Venezuelan and Iranian oil from markets, the world is practically facing a supply crunch, with the latest blow coming in from OPEC+, which has decided to cut daily output by 100,000 barrels beginning October. So, the West should not be very optimistic about India joining its energy price cap regime against Russia.
India is not keen to join the price cap bogey unless more oil becomes available in global markets. If India does not oblige, there is a high chance that rhetoric against New Delhi being a Russia sympathiser will rise – particularly among developed nations in the West that are consuming large amounts of laundered Russian fuel, like that is somehow supposed to mask their hypocrisy. Fortunately, the West’s hypocrisy is brazenly explicit and India is in no mood to take any of its grandiose sermons.