To put it in perspective, what currencies are China and Russia using in their bilateral oil trade or other businesses? Not in US$ definitely, but in Yuan and Rubles that defy monitoring by the USA. Or to be more transparent, they are predominantly doing barter trade, oil for infrastructure and investments. So, how much oil flows into China are just guesswork, especially through pipelines.
As already sounded out by some analysts, the success of the latest sanctions depends on co-operation of every country buying Russian energy, which we have seen has already been working out fine for them so far against all the earlier sanctions imposed on the buying of Russian energy. To put it in better perspective, even the one's involved in the sanctioning, the EU, is still discreetly buying Russian oil under the table.
If China and Russia can do the oil trade outside the purview of the US$, what about other countries using Yuan to do the same? Which inevitably is again helping de-dollarization, putting another nail in the coffin of the US$ hegemony.
Anonymous
2 comments:
The narrative about China immediately buying less Russian oil is nothing more than throwing spanners into the works in the hope that it will sour relations and split the alliance of the two countries. It is not going to work. We have seen attempts made in the past, hyping up differences between Moscow and Beijing as a sign of trouble between the two countries. No two countries can have no differences on issues and that goes for Russia and China as well.
China and Russia are going ahead with the gas pipeline, the Power of Siberia 2. It is a win-win project for China and Russia. But the risk of the project going through Mongolia is not to be underestimated. Mongolia is playing musical chairs with China, Russia and USA, just like India. Russia and particularly China, must look at the risk involved in investing in projects in or passing through Mongolia and not get its fingers burnt, knowing that the USA is also having its influence over Mongolia over such moves.
Any country with good relations with USA is not to be trusted at face value and needs to be evaluated using very close scrutiny. Just look at the Netherlands. What it has done to China in the lithography machine sector under USA's prodding needs no further repeating.
And yet, the Netherlands had the audacity to seize Nexperia, a company owned and saved from collapse earlier by Wing tech of China and nursed back into profitability. It was a classic case of Dutch piracy, seizing the property of another country using fabricated evidence harping on security issues that have yet to emerge. Now, the irony is that what the Dutch Government thought it seized a gem turns out basically to be just a shell, a nameplate and some call it a mailbox, while China still holds the property ownership. The real asset value of Nexperia is still inside China, the factory making all the chips, which has now been stopped from being exported to Europe. European car manufacturers are facing an existential dilemma, and the situation is unraveling.
Volkswagen of Germany is trying to put on a brave front by claiming that it relies on supply chains inside Germany, forgetting that even its tier one supply chain providers have to rely on those chips to make products for their cars These supply chain vendors across the whole of Europe are the ones going to suffer the secondary collateral damage, not just in Germany alone, started off innocently and illegally by the seizure of a foreign owned company in the Netherlands.
The bigger damage that this has been done to Europe comes from the perception that if a Chinese company can just be seized using untenable and fallacious arguments, who else is next. Investors will be asking that question before putting their money into projects in Europe. A small misstep by the Dutch Government that is to be of gigantic economic consequences for Europe.
And the irony is that it is going to benefit China and countries across Asia, South-East Asia, Africa and South America, emphasizing to investors that their bets will be safer in the long run if they just avoid going to Europe.
The retaliation by China would be blunted if China were to relent, negotiate and sell those chips to car manufacturers and their supply chains and asking to be paid in Yuan as suggested by some commentors.
A very painful lesson must be taught to the Dutch by completely cutting off such sales outside of China, even if being paid in Yuan. Let the Germans, French and Italians go after the Dutch for igniting the fire and pushing the others to help it fight the blaze engulfing the whole car manufacturing sector in Europe.
China has yet to teach the Dutch pirates a lesson over the ASML issue and this ought to present China the opportunity to do so. China must not let this opportunity pass by and be seen as still weak and too accommodating.
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