July 19, 2024: Chinese trade was disrupted in 2022 when Russia was hit with economic sanctions for its invasion of Ukraine. The most harmful impact of those sanctions was the loss of customers for Russian oil and petroleum products. The major customers for these products were in neighboring European countries. Russia had built an extensive infrastructure of pipelines and other export systems to get the oil to Western Europe. This included the expensive Nordstream II Pipeline. Suddenly that business was gone and Russia was faced with major losses because of the lost customers.

Eastern neighbor China saw an opportunity and offered to step in and expand and offered to purchase the natural gas and oil that European customers had recently paid Russia to deliver. China pointed out that it and Russia would have to expedite completion of the $55 billion Power of Siberia natural gas pipeline and upgrade ESPOOP (Eastern Siberia–Pacific Ocean oil pipeline). These two pipelines were built with excess capacity and now Russia used its unsold oil and natural gas to move these products to China. This was seen as an economic opportunity for China because the Russians had no choice but to sell the natural gas and oil to China or reduce production of both natural resources and sell what they could to smaller customers willing to face the possibility of being sanctioned also. China was a major trading partner with Europe and the Europeans were not willing to endanger that trade with sanctions. Because of this China was able to get Russian natural gas and oil and reduced rates because Russia had no other major customers. Oil and natural gas are major exports for Russia and account for 36 percent of government revenue. Selling to China at a discount would reduce government oil and natural gas revenue by a few percent. Not being able to divert oil and natural gas to Chinese customers would cost the Russians a lot more. Another downside for Russia is that this greater dependence on China for natural gas and oil sales means greater dependence on China in general. It is now a buyer’s market and China is making the most of it. It means a major shift in Russia-China relations with China becoming the dominant partner. The new boss is not the same as the old boss and Russia has to get used to it.