The governments of China and Russia are hashing out a deal to restore China’s strategic petroleum reserves with cheap Russian crude, according to reporting by Bloomberg News.
Russia faces an increasingly isolated market for oil following international sanctions after its invasion of Ukraine.
Throughout the Russia-Ukraine war, China has not hesitated to take advantage of Russian energy, and now seeks to increase its purchases significantly. China tapped its strategic reserves last year when prices were up, and planners are expecting increased oil demand over the next few months as the country exits another round of COVID lockdowns.
While the U.K., the U.S., and many European nations have pledged to reduce their imports of Russian energy, some countries have leapt at the opportunity to shore up supplies at low cost. Besides China, notably India and Italy have found the Russian prices too low to resist.
The additional crude sales between Russia and China are being discussed at the government level, without much involvement from the respective state-run oil companies, according to the unnamed Bloomberg source.
More recently, the two governments have moved closer to each other. China’s Xi Jinping hosted Russian President Vladimir Putin as a guest of honor at the 2022 Winter Olympics even as Russian forces mobilized to invade Ukraine. China has played to the party line by avoiding the word ‘war’ in reference to the invasion.
The American efforts to replace Russian oil have caused some international relationships to shift closer to home. The U.S. has looked at easing sanctions on Venezuela in hopes for the option to purchase its oil, even though Venezuelan government leader Nicolas Maduro has a cozy relationship with Putin. Tuesday, the U.S. extended Chevron’s license to maintain its Venezuelan operations in the case the opportunity to drill arrives.