China refused to buy this thing from RussiaImage Credit source: ai generated
Examples of friendship between Russia and China have often been cited in global diplomacy, but when it comes to trade and profit, it does not take long for the equation to change. With the beginning of the new year, Russia has received a big blow from its closest partner China. Actually, China has stopped buying electricity from Russia. This standoff in the energy sector between the two countries comes at a time when Russia is dependent on Asian markets to sustain its economy amid Western sanctions.
Expensive electricity spoiled the game
The root of this entire controversy is ‘price’. According to the report of Russia’s Energy Ministry and Reuters, China has completely stopped the import of electricity from Russia from January 1. Actually, the simple rule of business is profit. Till now China was finding it cheaper to buy electricity from Russia, but the situation has changed in recent times.
Reports suggest that Russia’s electricity export prices have now increased so much that they are even higher than China’s domestic electricity prices. That is, it is cheaper for China to generate electricity in its own country, while it is more expensive to buy it from Russia. This is the reason why Beijing has stepped back. Experts believe that there is very little possibility of these prices coming down or becoming compatible with China’s domestic rates by 2026. In such a situation, it is being assumed that the supply of electricity from Russia to China may not resume this year.
Where does India stand in the Russia-China dispute?
Whenever there is any big news regarding energy between Russia and China, it is natural for India to be mentioned. The question is arising whether like China, India also buys electricity from Russia? And will this decision have any impact on us?
The answer lies in the geographical location of India and Russia. China and Russia share a very long land border, making it easy for them to exchange electricity directly through the ‘power grid’. On the other hand, there is no such direct land connectivity between India and Russia. Therefore, India does not import electricity directly from Russia.
However, this does not mean that the energy relations between India and Russia are weak. India is a big buyer not of electricity but of electricity generating fuel. We buy crude oil and coal from Russia on a large scale. China’s decision not to buy power is not going to have any direct negative impact on India’s oil or coal imports.
This interruption may be temporary
The report of Russian media ‘Kommersant’ suggests that this interruption may be temporary, but the current situation is serious. This contract for electricity supply between Russia and China is valid till the year 2037. Despite such a long-term agreement, the supply stoppage shows how price sensitive China is.
Russian electricity exporting company ‘InterRAO’ has made it clear that no party wants to terminate this contract completely. The Russian Energy Ministry has also put the ball in China’s court. He says that if the request comes from Beijing and the prices are acceptable to both the parties, then the supply can be resumed. At present, Russia has changed its priorities and will use this electricity to meet the domestic demand of its Far East regions.
Not only electricity, but also gas issue
This is not the first time that Moscow and Beijing have been at loggerheads over energy prices. This can be seen like a pattern. China is adept at bargaining and knows how to take advantage of Russia’s helplessness. The biggest example of this is the ‘Power of Siberia-2’ gas pipeline.
This pipeline is to go from Russia to China via Mongolia, but its final approval has not been given yet. The reason is the price. Russia’s giant Gazprom and China are unable to agree on gas prices. China wants to get gas at a very low price, which is not acceptable to Russia.