Russia warned the European Union on Thursday that it will export more oil to countries in the East if the bloc goes ahead with aggressive plans to embargo Russian crude on account of the Ukraine war.
On Friday, reports said China is looking to reload its crude oil stockpiles by buying more Russian oil. By strengthening its energy ties with Russia, China is serving the dual goal of replenishing its own crude reserves and beating back the European threat to destroy Russia's crude oil industry.
Self-Defeating Game
The West calculated that a stern oil embargo by Europe will effectively force force Russia into submission as Moscow is seen struggling to find buyers for its crude due to perception issues in the wake of the Ukraine war.
However, like India, another power, did at the beginning of the war, China is now seen ramping up its Russian crude supplies. Instead of joining the European herd controlled by the US, India decided to support Russia and buy more crude from the embattled nation.
While the United States and Western Europe adopted an extremely hostile stance against Moscow, the treatment in New Delhi was quite different. The Asian ally made sure the West would not succeed in the game of arm-twisting. India pressed ahead with the purchase of the Russian oil, now cheaper for that matter.
Europe's Dependence
In recent days Russia has dared Europe to roll out its embargo, which would effectively mean that the European countries will have to buy crude from elsewhere at higher prices. Europe depends heavily on Russian energy, with Moscow meeting up to a third of the oil demand of the region.
The delusional strategy of Europe also means crude prices will shoot up further if Russian oil is blocked off the market due to political opposition in the wake of the Ukraine war. An oil embargo on Russia will mean the Europeans will be forced to shell out more for fuel while the rich oil exporters of the Middle East will make a killing with the subsequent rise in crude prices.
"Let the West pay more than it used to pay to the Russian Federation, and let it explain to its population why they should become poorer," Russian Foreign Minister Sergei Lavrov said last week, alluding to the European threat.
China's latest move will go a significant distance in puncturing the European strategy. Citing people familiar with the matter, Bloomberg reported that China is holding discussions with Russia to buy additional supplies.
China's Reserves
"Crude would be used to fill China's strategic petroleum reserves, and talks are being conducted at a government level with little direct involvement from oil companies," the report said.
According to industry estimates, China now has overall stockpiles of about 926.1 million barrels, which is up from 869 million barrels in mid-March. However, this level is about 6 percent lower than a record hit in September 2020. This means that China is in a position to stockpile more crude.
"There is still room to replenish stocks and it would be a good opportunity for them to do so, if they can be sourced on commercially attractive terms," a senior oil analyst at data and analytics firm Kpler said.
