European leaders are becoming more and more annoyed by China’s role in making the conflict in Ukraine. Some have even made a public threat to censure Russia if it continues to supply it with the resources necessary to build more arms.
And they are appropriate to focus on China’s position of power. Russia is now so dependent on Russia’s only big business, which is still risking losing ground to its regime, that China may properly compel Vladimir Putin to put an end to the discord.
After Russia’s full-scale invasion of Ukraine in February 2022, the degree of its economic dependency became visible comparatively immediately. Just a few months after, things were not going to prepare.
Russia decided to cut almost all of its oil exports to the West in order to force Western nations that are supporting Ukraine. Before the war, Russia had provided about 40 % of Europe’s gas.
Europe finally managed to extricate itself from Russia’s offer, despite initially causing a crisis and a rise in bills across the continent. They did this by replacing fuel with other energy sources, in part, and by substituting imported gas from Russia with gas from different nations, including the US.
Electricity costs in Europe are currently around at pre-war levels. Gas prices have dropped, despite them still being great, and storage facilities are expected to be almost complete by the end of the year.
Russia now has to deal with selling its oil, which is a significant issue.
Gazprom, the Russian state-owned power large, suffered a financial loss in 2023 for the first time in more than 20 times. Until then, the traditions and tax income from the business contributed approximately 10 % of the country’s resources.
Income from oil exports has even decreased. Russian oil is forbidden in European nations, but the state is forced to sell it for less, covering the additional costs of shipping it to countries like China and India, while traditional transporters refuse to hazard carrying it because of the country’s refusal to do so.
Geographical factors make things worse for Russia with natural oil. China is the only possible customer that is big enough to warrant a new pipeline to replace the one that served Europe at the time. But given this privileged location, China feels able to demand the oil at a great discount.
In this kind of negotiation position, China has the upper hand.
Russia can only sell gas to China ( at the required amounts ) but China can purchase it anywhere in the world. The intensity of a war is therefore, while China has no pressing energy requirement that it can meet.
Bargaining room
Russia’s dependent on China also affects other economic areas. Since it was disconnected from the global banking system in 2022, the Chinese yuan now accounts for 54 % of trades on Russia’s stock exchange. If China begins imposing similar sanctions, it has no viable solution to that wealth.
Perhaps more important for the war, China is responsible for around 90 % of Russia’s import of “high priority” double- use goods – electronic components, radars, sensors– without which it could never build advanced military hardware. Again, there is no other dealer.
With just North Korea and Iran on your side, which are both nations that are subject to severe economic sanctions, it is difficult to get a battle. In essence, this means that China is then able to impose any demands on Russia.
And both have a similar negotiation status to each other and have much to gain from possible agreements between China and the West.
For instance, China is already dealing with serious home financial issues of its own. One of these is brought on by professional overcapacity and the need to get customers for all the goods it produces.
But the US has just imposed a 100 % border tax on electric cars from China, and 50 % on solar cells. Similar to how the EU is pursuing, it might even think about inviting Chinese companies to create electrical vehicles in Europe and share their technology.
Given the immediate need to fund the energy transition, punishing inexpensive goods that could reduce carbon emissions may seem like a self-defeating plan. Therefore, maybe the West wants to avoid becoming too reliant on China for the same negotiation factors that cause Russia’s existing standing to be so weak.
However, the harmony is different. China needs West-oriented clean business potential and know-how, as China builds more solar power each year than the rest of the world combined.
A price is basically an additional revenue burden on Western consumers because Europe is still going through difficult economic times. People would gain from the toning down of the trade war, and China has something very important to sell.
For all intents and purposes, China currently has the majority of Russia and has the potential to use this influence to put an end to the conflict in Ukraine.
Renaud Foucart is Top Lecturer in Economics, Lancaster University Management School, Lancaster University
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