Thu. Sep 29th, 2022

Prof. ST Hsieh

Director, US-China Energy Industry Forum

626-376-7460

[email protected]

April 7, 2022

Cliches such as “When the Rubber Hits the Road” or “Each Tub on Its Own Bottom” is overused, it does reflect the reality. Ever national leader must take responsibility to keep his/her people provided with the basics. There is no need for others, especially those outsiders, to take a high moral ground criticizing their actions.

  1. “China and Russia are attempting to maintain energy trade even while other nations cut off Russian imports.”

This statement is patently no true: no major nation around the world has cut off Russian energy exports yet, including the US.

  1. Is there anything inherently wrong that “China is buying Russian energy with its own currency?”

“The effectiveness of the West’s sanctions against Russia has worked as a wake-up call for countries seeking to reduce their reliance on the dollar, he added.”

  1. Then look at the headlines from Germany:
    • German Finance Minister: Immediate Russian Oil, Gas Embargo Impossible.
    • Germany will need full transition period to ban Russian coal -Scholz
    • Germany is in a tough spot now, how the US and other EU nations can help? Should Germany be sanctioned by the “west” for continuously buying energy from Russia?
    • When the Ukraine war is over, hopefully sometimes soon, let us follow the EU energy independence movement moving forward.

China is buying Russian energy with its own currency, marking the first commodities paid for in yuan since Western sanctions hit Moscow

Phil Rosen

Thu, April 7, 2022, 6:28 AM

  • Russian oil and coal purchased in yuan will arrive in China soon, Bloomberg reported.
  • China and Russia are attempting to maintain energy trade even while other nations cut off Russian imports.
  • In May, the first cargoes of Russian oil purchased in yuan will arrive at refiners in China.

China is buying Russian oil and coal with its local currency as Western sanctions on Moscow spur trade deals that don’t rely on the US dollar.

In March, several Chinese firms used yuan to purchase Russian coal, which will begin arriving this month and mark the first commodity shipments purchased in China’s currency since the war in Ukraine began, Bloomberg reported.

Meanwhile, the first shipments of Russian oil purchased in yuan will arrive at independent Chinese refiners in May, sources told Bloomberg.

Such deals are typically priced in dollars. But Western sanctions imposed on Russia after it invaded Ukraine have largely cut off Moscow from the global financial system. And while Russian energy wasn’t targeted in the initial waves of sanctions, the US and Europe are more aggressively hitting that sector as evidence of war crimes in Ukraine continues to mount.

As the US leverages the power of the dollar to punish Russia economically, some countries are looking at other currency arrangements.

For example, the Indian and Russian governments have held talks to reinstate a rupee-ruble ledger for the first time since the Cold War. Saudi Arabia and China have discussed a yuan-based oil deal as well.

Experts have speculated that China will look to alter the status quo away from the dollar by pushing the yuan even more aggressively onto the world stage.

“Other countries’ need for dollars exposes them to the US financial sector, and consequently gives the US political leverage,” economist Aleksandar Tomic told Insider previously.

The effectiveness of the West’s sanctions against Russia has worked as a wake-up call for countries seeking to reduce their reliance on the dollar, he added.

For now, the dollar’s dominance is firmly established, as it accounted for nearly 90% of foreign-exchange transactions in 2019, compared to just over 4% for the yuan, per Bank for International Settlements.

Russia Coal and Oil Paid for in Yuan Starts Heading to China

Bloomberg News

Thu, April 7, 2022, 1:55 AM

(Bloomberg) — Russian coal and oil paid for in yuan is about to start flowing into China as the two countries try to maintain their energy trade in the face of growing international outrage over the invasion of Ukraine.

Several Chinese firms used local currency to buy Russian coal in March, and the first cargoes will arrive this month, Chinese consultancy Fenwei Energy Information Service Co. said. These will be the first commodity shipments paid for in yuan since the U.S. and Europe penalized Russia and cut several of its banks off from the international financial system, according to traders.

Sellers of Russian crude have also offered to give buyers in Asia’s largest economy the flexibility to pay in yuan. The first cargoes of the ESPO grade bought with the Chinese currency will be delivered to independent refiners in May, according to people familiar with the purchases.

China has long bristled at the dollar’s dominance in global trade and the political leverage it gives the U.S. Efforts to chip away at the status quo are now being accelerated by Western steps to punish Russia for its war of aggression. Moscow is offering rupee-ruble payments to Indian oil buyers, while Saudi Arabia is in talks with Beijing to price some of its crude in yuan.

It’s unlikely the yuan will pose a serious challenge to the dollar’s dominance, however, at least in the short term. The U.S. currency was used for 88% of foreign-exchange transactions in 2019, compared to 4.3% for the yuan, according to the Bank for International Settlements.

Both steel-making and power-plant coal are being paid for in yuan, Fenwei said. These deals are traditionally done in dollars, but many Chinese buyers temporarily halted purchases after the U.S. and Europe cut off Russian lenders from the SWIFT inter-bank messaging system.

Russia was China’s No. 2 coal supplier last year, filling the gap left by Beijing’s trade tussle with Australia. Nearly half of the imports from Russia are metallurgical coal, which is in demand after the partial resumption of operations in the Chinese steel-making hub of Tangshan. This type of coal isn’t subject to government price controls that apply to power-plant fuel.

While Chinese buyers are interested in importing more Russian supplies, logistics and financing barriers will ultimately cap the flows, the China Coal Transport and Distribution Association said last month.

The ruble, meanwhile, has recovered to levels where it was before the invasion of Ukraine. After plunging to around 140 to the dollar in early March, the Russian currency is now back near 80.

(Updates with move in the ruble in final paragraph.)

German Finance Minister: Immediate Russian Oil, Gas Embargo Impossible

Editor OilPrice.com

Wed, April 6, 2022, 7:00 AM

An immediate ban on imports of Russian oil and gas into Germany is not feasible, Germany’s Finance Minister Christian Lindner said on Wednesday, although he added he was all in favor of an energy embargo.

“If I could follow my heart,” there would be a ban on Russian oil and gas in Germany, Lindner said in an interview published by German weekly Die Zeit on Wednesday.

An immediate ban on imports of Russian oil and gas, however, is not feasible at present, because it would endanger Germany’s economy and social stability, the minister added.

“We can’t be responsible for that,” he said.

Since the start of the Russian war in Ukraine at the end of February, Germany—Europe’s biggest economy, which depends on Russian gas for around half of its consumption—has been one of the biggest opponents of an energy embargo on Russia.

So far, Europe—which collectively depends on Russian natural gas and oil for around one-third and one-fourth of its demand, respectively—has refrained from targeting directly Russian energy exports fearing that sanctions or an embargo could lead to a deep recession in the major European economies, including the biggest one, Germany.

Earlier this week, after photos of Russian atrocities in Bucha and other Ukrainian towns emerged, the mood appeared to be shifting even in Berlin.

The EU should discuss a ban on the import of Russian natural gas, Germany’s defense minister Christine Lambrecht was quoted as saying on Sunday.

“There has to be a response. Such crimes must not remain unanswered,” Lambrecht said.

The EU is considering proposing a full ban on imports of Russian coal after footage continues to emerge of alleged war crimes committed by Russian troops. The European Commission is working on more severe sanctions, including on oil imports, European Commission President Ursula von der Leyen said on Tuesday.

By Tsvetana Paraskova for Oilprice.com

UPDATE 1-Germany will need full transition period to ban Russian coal -Scholz

Thu, April 7, 2022, 3:22 PM

(Adds further comments by Scholz, background)

BERLIN, April 7 (Reuters) – Germany will need to use the full four-month phase-out period to implement a ban on Russian coal under European Union sanctions, Chancellor Olaf Scholz said on Thursday.

The EU’s ambassadors agreed a fifth sanctions package on Russia, including a coal embargo, with a 120 day wind-down period to give EU member states time to find alternative suppliers.

“We will need to use this period,” Scholz told a news conference following a meeting with the leaders of Germany’s 16 federal states.

“If it’s faster, that’s good. But we will need some time, and the companies will need it as well, though they have been looking for new suppliers for a while already,” he added.

A German economy ministry report prepared for parliament warned earlier this week that the country would likely have to switch off some of its power plants if it ended Russian coal imports straight away.

An immediate ban on Russian coal imports would lead to “coal shortages after a few weeks”, it said.

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