China buys Russian gas and coal in an effort to overcome the energy crisis

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China buys Russian gas and coal in an effort to overcome the energy crisis
China buys Russian gas and coal in an effort to overcome the energy crisis
1 October, 09:28EconomyPhoto: tradernet.com
In China, to the surprise of many experts, an energy crisis erupted. More than half of the country's provinces have limited electricity consumption. In many cities, even traffic lights do not work, residents were forbidden to turn on air conditioners, heaters and televisions.

Gennady Charodeyev

Official Beijing has repeatedly assured the population that electricity will be sufficient for domestic needs and heating in winter. However, today the power shortage is especially felt by the population in the northeast of China, where nearly 100 million people live. According to Reuters, not only large factories have stopped, but also elevators in residential skyscrapers have "frozen". Many shops operate without light. Utility workers warn that the water supply may be cut off at any moment. At the same time, small companies in China are switching to diesel power generators or stop working altogether.

The Coal Industry Association of China has warned of low coal reserves at power plants. Its leaders are not optimistic about the winter months, when demand for electricity is particularly high. The industry lobby is asking businesses to "do their best" to ramp up supply.

By the way, today the cost of coal in China has risen to record levels - 1,324 yuan per ton.

The State Committee for Development and Reforms of the People's Republic of China (something like the Soviet State Planning Commission) announced that the authorities would "allow" electricity prices to fluctuate within reasonable limits so that they reflect the real situation on the market.

“The shortage of electricity is associated with stricter standards for greenhouse gas emissions and high demand from production”, - Igor Yushkov, an expert at the Financial University under the government of the Russian Federation, told Novye Izvestia. - In addition, the cost of gas on the world market has grown significantly and therefore China is trying to minimize gas consumption. You can, of course, recall the Power of Siberia gas pipeline. Gas imports from Russia have become more relevant than ever for China this year. There was a time when the Chinese mainly bought LNG, which was quite cheap in the first half of the year. But today LNG has risen in price, while Russian pipeline gas has fallen in price. And the Chinese have already begun to "pump" large volumes of gas from our pipe. This year Russia is to supply 10 billion cubic meters of gas via the Power of Siberia pipeline. So, in this regard, China receives substantial assistance from Russia. But Power of Siberia will not save the entire Chinese economy. Only certain regions in the north-east of the PRC, as well as the city of Beijing, will receive substantial assistance.

Gazprom CEO Alexey Miller recently said that in the first half of 2021, gas consumption in China increased by 15.5% and imports by 23.8%.

Meanwhile, the governor of the multimillion-dollar city of Jilin, Han Jun, announced the need to create several reliable coal supply channels. In particular, it is planned to increase its purchases in Russia, Indonesia and Mongolia. Electricity suppliers said coal purchases must be expanded at any cost - especially ahead of the heating season.

According to experts, 44 percent of industrial production in the PRC faced a shortage of electricity. This could lead to a decrease in annual GDP growth by 1% in the third quarter of this year and by 2% in the fourth.

According to Western analysts, the reasons for the energy crisis in China are only partly local (clearing the blue sky over Beijing for the Winter Olympics, boycotting Australian raw materials due to the diplomatic conflict). Otherwise, they are global: a rapid recovery in production and consumption after lockdowns, record prices for natural gas in the world and the transition from fossil fuels to renewable energy sources in order to combat global warming.

So very soon the energy crisis will reach the rest of the countries, according to the British BBC. In Brazil, there is a drought and the generation of hydroelectric power plants is falling. America and Russia are replenishing their own reserves and refusing to increase exports. Europe has had a calm and hot summer, and gas reserves in underground storage are record low.

And this is still before winter came to the northern hemisphere and the heating season began. So while the world has ideal conditions so that in the coming months gas and electricity, followed by food, materials, goods and transport, continue to rise in price, business to go bankrupt, the economy to slow down, and people to become poorer.

Yuri Tavrovsky, Chairman of the Expert Council of the Russian-Chinese Committee for Friendship, Peace and Cooperation, told Novye Izvestia that rumors about the “demise of the Chinese economy” were greatly exaggerated.

"It is important to know what the Chinese themselves think about this crisis. First of all, they declare that all these are temporary difficulties, and the Western media are stirring up hysteria. I have heard the opinion that the owners and managers of industrial enterprises have undertaken too zealously to carry out the instructions of the party and the government about a "gradual" transition to "green" energy. By 2030, they want to receive about 60% of the capacity of the energy sector from renewable energy sources. Local authorities literally overdid it - they closed the coal mines! In addition, recently the CPC Central Committee has strongly “run over” big business, including wealthy energy companies. All of them were ordered to "share" the income with the poor provinces and cities. In the near future, you will see, everything will return to normal”, - said expert Tavrovsky.

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