Beijing has just signed new big deals with Russia for importing oil and gas, coal and wheat as western sanctions take effect
Agencies
How long can Russia withstand western sanctions imposed on it after its invasion of neighbouring Ukraine?
Russia is capable of weathering the sanctions, claimed Kremlin spokesman Dmitry Peskov on March 5.
He said measures were being taken for “unhindered operation of all economic sectors and systems.”
The Kremlin spokesman talked about preparations made by Russia “in advance for such situations.”
Now look at the Russian people and its economy and what impact the sanctions will have on them.
Russia has become a prosperous society over the past two decades on the back of revenue from oil and gas emports as Russia is the world’s biggest gas exporter and the second biggest oil exporter, accounting for 40 percent gas supplies and 26 percent oil supplies to Europe.
The standard of living in Russia has improved dramatically and the country’s middle class has grown from 8 million in 2000 to over 110 million now.
A 110 million -strong middle class in a total population 146 million means that over 75 percent Russians enjoy a very good of standard of living today.
This propserity has fuelled the country’s domestic consumption market.
Russia has been pivoting its economy from being export-oriented (oil and gas, timber, wheat, metals, etc.) to one based on domestic consumption for its long-term growth.
Russia’s second pivot is to the east (China) from the west (European Union). Though EU is still Russia’s largest trade partner, China is set to replace it.
Russia’s $147 billion trade with China in 2021 is 36 percent up from 2020 and it accounts for 18 percent of Russia’s total trade.
Because of the sanctions, Russia-China trade is going to see a big jump because China is a guzzler for energy – oil and gas and coal. Beijing has just signed deals worth over $117.5 billion for additional Russian oil and gas supplies.
China is also set to become the biggest importer of Russian coal as the two countries have just signed a $20-billion deal.
Not only oil and gas and coal, China also has decided to help Russia (which is the world’s biggest wheat exporter) by lifting ban on wheat imports.
To beat the ban on payment through SWIFT, the two countries – which use the Chinese yuan for about 17 percent of their trade today – are adopting alternatives to the dollar-based SWIFT by using their own payment systems – Russia’s Transfer of Financial Messages (STFM) and China’s Cross-Border Interbank Payment System (CIPS).
On the other hand, America is Russia’s 23rd largest trading partner and the two-way trade between the two countries in 2021 was just $36.1 billion.
