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Russian state news is raising alarm about Chinese tactics for acquiring the Kremlin’s hydrocarbons at below market prices, and damaging the Russian economy. Apparently China is discussing forcing oil companies that buy over 5mm barrels per day to join forces and drive down prices, especially for Russian oil.
Analysts doubt that there will be a surge in China’s demand for Russian oil. “Given the fact that Chinese importers bought a large amount of oil when prices were at a low point in order to build up their stockpiles, one can assume that China’s oil demand won’t grow much in the coming months,” BCS Premier’s Anton Pokatovich pointed out, reported Russian state news agency TASS.
“The main reason why Chinese companies are coming together is to get the highest possible discount on oil purchases. This poses a risk to Russia. In fact, as an oil exporter, Russia will lose a number of diversified clients and get one major client instead. If the client’s mood and plans change tomorrow, Russian oil producers will actually lose all clients at once. It’s not the best scenario for the industry,” said Yuri Mazur of CEX.IO Broker.
On the other hand, Finam analyst Alexei Kalachev believes that if such a huge buyer emerges on the market, it will boost Russian oil exports and help diversify geographical representation.
Russian President Putin famously shifted the focus on oil and gas sales from the West to China after the 2014 annexation of the Crimean peninsula. Many of these contracts are believed to be at break even or below market prices.
Tsarizm expects the long-dormant, inherent distrust of Moscow towards Beijing to be rekindled as China looks to take advantage of Russia as well.
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1 comment
China wants everything from everyone for nothing. That’s the sad truth of it. If it’s not tied down, it will disappear into China. That seems to be their modus operandi. We used to laugh back in the 50’s and 60’s at Japan who could take an idea or product and make it better and cheaper. Although Japan would buy the product first before refining it. The same is true for China unfortunately China doesn’t even waste it’s time buying the product to improve on, they just prefer to steal it and then pretend they own the idea and the product. Russia is learning a valuable economic lesson. Keep your friends close but your enemies closer, and never ever give them the key to the chicken coop.