More evidence Beijing is supporting Moscow via Minsk
China’s trade with Belarus soared in 2022; Correction on Chinese crude oil inventory builds
Minsk’s Ambassador in Beijing, Yuri Senko, claimed to Belarusian state media that January 2023 saw a 200 percent increase in Belarusian exports to China. If Senko is truthfully saying that Belarusian exports to China in January 2023 grew 200 percent from same period prior-year levels, it would easily mark the highest level of Belarusian exports to China in at least 24 months.
Chinese overall goods trade with Belarus rose 33 percent in 2022 compared to the prior year, while imports from Belarus surged an astonishing 65 percent. Belarus has traditionally exported meat, dairy, and wood to China. Surging bilateral trade could be partially driven by economic fundamentals, but politics may be playing a greater role.
China’s post-COVID reopening undoubtedly provided fundamental support for Belarusian exports, but Chinese demand for food and wood imports appears inelastic. While I’m not an expert on the Belarusian economy, there is no apparent reason why Belarus’ monthly exports to China would triple from the prior year same period and double from December 2022.
Senko’s January trade data, if confirmed, would provide growing evidence that Beijing is using Minsk as a cutout to provide economic and potentially even military assistance for Moscow.
Additionally, I’ve issued a significant correction to a prior article due to new, compelling evidence that Chinese crude inventories did not rise in 2022. While Beijing did support Moscow in oil markets in 2022, especially by increasing imports of Russian crude oil, its actions in refinery markets were not as blatantly pro-Putin as I previously believed.
Table of Contents:
1) Belarus – China political ties and goods trade
2) Correction: Chinese crude oil inventory builds
3) Chinese state media on the war in Ukraine
4) The war
1) Belarus – China political ties and goods trade
Sources: China’s General Administration of Customs; Author’s calculations
Sources: China’s General Administration of Customs; Author’s calculations
Comment: These statistics only reflect trade in goods; they do not include services trade. Also note the different scales on the vertical axes.
1. The Belarusian side warmly congratulates the complete success of the 20th National Congress of the Communist Party of China and President Xi Jinping's re-election as the General Secretary of the CPC Central Committee. He speaks highly of the great achievements of China's economic and social development in the past 10 years in the new era, and wishes the Chinese people great success under the leadership of the Communist Party of China…
China speaks highly of the major achievements of the Republic of Belarus in national development and construction since its independence, respects the development path chosen by the Belarusian people in line with its own national conditions, and reiterates its support for the policies and measures adopted by the leaders of Belarus and their government to maintain national stability and development.
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4. The two sides are committed to deepening comprehensive cooperation within the framework of the joint construction of the "Belt and Road", continue to promote trade facilitation between the two countries, release the potential of cross-border transportation such as China-Europe Railway Express, and steadily increase the scale of bilateral trade. The two sides agreed to continuously expand mutual investment and promote cooperation between the industrial circles and financial institutions.
The two sides will carry out practical cooperation in the financial field on the basis of marketization [市场化], autonomy, and rule of law, expand the use of local currency in bilateral trade, investment and financing, support financial institutions to actively cooperate, further improve the level of financial services, and promote bilateral economic and trade development.
The two sides will expand mutual direct investment, carry out cooperation in high-tech industries, promote commercial cooperation between enterprises, and encourage entrepreneurship as priority directions for cooperation.
The two sides concluded the negotiations on the main terms of the draft text of the "Agreement on Trade in Services and Investment between the People's Republic of China and the Republic of Belarus" and launched market access negotiations.
The two sides will carry out industrial cooperation between the two countries on the basis of equality and mutual benefit and market principles, promote the upgrading and transformation of Belarus' traditional industries, strengthen cooperation between enterprises of the two sides in parts and raw materials, and take advantage of China's advanced technology to carry out joint production.
The two sides will be committed to promoting the active expansion of trade exchanges between departments and enterprises of the two countries.
The two sides emphasized the importance of the production and supply of agricultural products, and will continue to support the mutual export of high-quality agricultural products from China and Belarus to each other's countries.
Comment: [This is significant, as China suffers from food insecurity, while Belarus is an agricultural exporter]
The two parties will jointly promote the high-quality development of the China-Belarus Industrial Park and build it into an international cooperation project and a satellite city of Minsk. China encourages domestic large-scale production enterprises and high-tech enterprises to settle in the industrial park.
The two sides emphasized the importance of carrying out cooperation projects of traditional Chinese medicine in the China-Belarus Industrial Park, including attracting new enterprises and other institutions in the field of traditional Chinese medicine to participate in the cooperation.
The two sides emphasized the necessity of further developing the human resources of the China-Belarus Industrial Park, and encouraged willing and capable colleges and universities of the two countries to independently and orderly carry out industry-university-research exchanges and cooperation with the park, so as to provide high-quality talents in the new technology field for the park enterprises.
The two sides are willing to further implement the memorandum of understanding on bilateral e-commerce cooperation signed by the relevant departments of the two countries, actively carry out cooperation in the field of digital economy, encourage the development of e-commerce, and jointly promote the implementation of the global data security initiative proposed by China.
The two sides agreed to strengthen mutual communication and cooperation, speed up the implementation of ongoing projects such as the national football stadium and the international standard swimming pool, and discuss the implementation of more development cooperation projects.
The two sides support the continuation of the China-Belarus "Local Cooperation Year" in 2023, and welcome relevant places such as Tianjin, Chongqing, and Qingdao in Shandong to deepen economic and trade cooperation with Belarus.
The China-Belarus Industrial Park connects Eurasia through industries – Global Times
Currently, a total of 107 companies from 15 countries and regions have settled in the China-Belarus Industrial Park, including 50 Chinese-funded companies, accounting for 46.73 percent, and 37 Belarusian companies. The total contracted investment is $1.34 billion, with business covering machinery manufacturing, e-commerce, new materials, traditional Chinese medicine, artificial intelligence and 5G.
Belarus's agricultural products are needed by China, and China's processing and manufacturing of consumer goods have huge market demand in Belarus.
"If the park can be well integrated, the industrial chains in China and Belarus can extend across borders, forming a real industrial mechanism," Cao Heping, an economist at Peking University, told the Global Times.
However, affected by the spillover of conflict between Russia and Ukraine and unilateral sanctions of Western countries, some Chinese and Western investors have postponed their investment plans.
Some enterprises in the park are facing pressures such as rising operating costs, poor financing and payment channels, hindered logistics, and difficulties in recruiting workers, Li said.
In addition, due to the spillover of unilateral sanctions, the two-way payment channels between China and Belarus have been disrupted, resulting in greater difficulties in the flow of funds for companies, which have also slowed the flow of further investment.
However, changes in the external environment have not blocked overall development. According to Li, the park uses multiple channels to help companies solve the problems of financing, exchange rate and payment channels; it also assists park companies to expand their markets.
Latest data showed that there were 19 enterprises registered in the park last year. As of February 22, the park has added seven new enterprises since the beginning of this year.
After official negotiations in Beijing Belarus President Aleksandr Lukashenko and China President Xi Jinping passed a joint statement on further advancement of exemplary relations of all-weather strategic partnership between Belarus and the People's Republic of China in a new age, BelTA has learned.
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The sides emphasized that mutual strong support on matters affecting each other's main interests is the cornerstone of the stable development of Belarusian-Chinese relations. The Belarusian side fully adheres to the “One China” principle, supports the position on matters concerning national security, territorial integrity, and citizens' rights.
China supports Belarus' efforts to maintain political stability and economic development and opposes any outside interference in domestic affairs of Belarus under any pretext whatsoever.
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The two sides make joint efforts to deepen comprehensive cooperation under the Belt and Road initiative, will continue to facilitate trade procedures between the two countries, unlock the potential of transit transportation, including between China and Europe by rail, and steadily increase bilateral trade. Belarus and China have agreed to continuously expand mutual investment and promote cooperation with assistance of the private sector and financial institutions.
This includes increased use of national currencies in bilateral cooperation in trade, investment, and finance.
The expansion of mutual direct investments, creation of joint high-tech innovative manufacturing enterprises, promotion of joint business between commercial entities of the two countries, encouragement of entrepreneurial initiatives are defined as priority avenues of cooperation.
Support for shipments of high-quality agricultural products from Belarus and China to each other's markets has been declared.
The sides will also jointly promote the quality-based development of the China-Belarus industrial park Great Stone. The Chinese side encourages large Chinese manufacturing and high-tech enterprises to start operating in the industrial park as resident companies.
Belarus and China declared their readiness to advance cooperation in e-commerce and digital economy.
Support for extending the Year of Regions of Belarus and China onto 2023 has been declared. The sides welcome in-depth trade and economic cooperation between Belarus and Chinese cities, in particular, Tianjin, Chongqing, and Qingdao.
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Belarus and China will take steps to strengthen transport and logistics ties and speed up the processing of transported cargos. The sides will encourage Belarusian and Chinese air carriers to increase the number of direct flights from Belarus to China in a timely manner in accordance with market principles.
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Judging from the text of the joint statement, Belarus and China will strengthen cooperation in defense, law enforcement and security, will deepen cooperation including in the training of military personnel, [the] joint fight against transnational and terrorist crimes and terrorism, [and] will fight against color revolutions together.
Belarus and China also intend to step up exchange and cooperation in disaster prevention and mitigation.
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[T]he sides will continue comprehensive cooperation within the framework of multilateral structures such as the Shanghai Cooperation Organization and the Conference on Interaction and Confidence-Building Measures in Asia.
China supports accelerated accession of Belarus to the Shanghai Cooperation Organization as a full member.
The visit of Belarusian President Aleksandr Lukashenko to China created new opportunities for Belarusian business, ministries and departments, Valery Matsel, Head of the Economic Policy and Public Administration Department of the Academy of Public Administration under the aegis of the President of the Republic of Belarus, told the STV channel, BelTA informs.
“This visit created a most favorable environment for our business, for our companies, for our ministries and departments. As President Xi Jinping wisely noted, the agreements reached should be flashed out,” said Valery Matsel.
As for the 12-point peace plan to resolve the Ukrainian crisis that was presented by China last week, the head of the department noted that the West is trying to hush up the document. “First of all, China has carefully studied the international situation, and it is fully aware that wars end sooner or later. And one of the points of the plan directly states that the parties should sit down at the negotiating table without any preconditions. The title of the document suggests a political settlement, and by and large - a diplomatic settlement. This is the only real way to end this conflict. But, unfortunately, as we know, it is not Ukraine, but the United States who takes decisions,” Valery Matsel stated.
Ambassador: Belarusian products are popular with Chinese – Belta
MINSK, 6 March (BelTA) - Belarus and China demonstrate the desire to live, to work, and together find new goals for our countries, Belarusian Ambassador to China Yuri Senko said in an interview to Belarus 1 TV channel as he commented on the outcome of Belarusian President Aleksandr Lukashenko's state visit to China, BelTA has learned.
“Our president is a great friend of China, Xi Jinping, and the Chinese side did everything to the highest standard in terms of protocol, in terms of compliance with all the attributes of a state visit. The whole of China saw this, and I am convinced that the whole world saw this. It emphasizes the nature of our bilateral relations. This is a signal to the whole world that we have partnership relations, that we have the desire to live, to work, and to find new goals for our countries together,” Yuri Senko said.
According to him, Belarus is interesting to China. “Belarusian goods, Belarusian export products do not need any additional advertising for the Chinese people. They know very well what the Republic of Belarus is, and the word ‘Belarus' means quality, ecology, very useful goods, especially food products. The Agriculture and Food Ministry is ready to increase trade with China. There is potential for this as we are increasing production capacity. Today we are talking about increasing the volume of production and, accordingly, we offer Belarusian products to our Chinese friends. We will see it by the results of 2023. Even January 2023 posted a 200% increase in the exports of Belarusian goods. I am also 200% sure that the results of these negotiations will have a tremendous effect and a great result,” the ambassador added.
Comment: Be wary of year-over-year comparisons in Chinese trade data in January and February due to the impacts of Chinese New Year. Indeed, the first two months are often combined in Chinese economic statistics’ annual reporting. Still, a 200% increase in monthly trade, if confirmed, would be stunning.
2) Correction: Chinese crude oil inventory builds
On Feb 19th, The Report published “Beijing backed Moscow in oil markets in 2022, at seemingly great cost.” A colleague of mine, Reid I’Anson, who works at Kpler, a commodity data services firm, heard about the article and reached out with some objections about underlying crude oil data. For purposes of transparency, Kpler is a donor to the Atlantic Council’s Global Energy Center, where I am a senior fellow.
Reuters claims that “Over the first 11 months of 2022 the volume of crude going into [Chinese] inventories was around 700,000 bpd,” – implying a stock build of about 234 million barrels for the first 11 months of 2022. That data formed a pillar of an analytical piece I published about two weeks ago, arguing that Beijing supported Moscow in oil markets by stockpiling crude amid sky-high prices (and severe backwardation) while declining to export refined products despite extremely favorable refinery throughput economics. I contended that Beijing’s oil market actions had no economic basis, suggesting it was purposely supporting prices of crude oil and refined products (i.e. diesel and gasoline) to simultaneously boost Russian export earnings and stimulate politically-sensitive consumer fuel prices, all in an effort to help Putin win his kinetic conflict in Ukraine and bolster populist, Kremlin-curious political figures and movements across the West.
Reid – someone I’ve worked with in the past and a person I find highly knowledgeable – disputes Reuters’ data on China’s 2022 crude storage inventories.
Reid writes: “In November 2022, according to Kpler, Chinese crude stocks were holding at 911 Mb, up just 17 Mb against the same period a year earlier, and much of this gain was a result of restocking as Chinese refiners came back to the market amid the issuance of additional product export quotas. In August, before extra product quotas had been issued, stocks were down 13 Mb against same month year earlier.”
You can see Reid’s data on Chinese refinery runs here.
In other words, the two estimates of inventory changes have a discrepancy of more than 233 million barrels. Although I regard both sources as extremely credible suppliers of oil market news and information, Kpler’s satellite and cargo-tracking methodology appears much more robust than Reuters’ when measuring Chinese crude storage levels. According to Reuters: “China doesn't disclose the volumes of crude flowing into or out of strategic and commercial stockpiles, but an estimate can be made by deducting the amount of crude processed from the total of crude available from imports and domestic output.”
I strongly suspect that Reuters’ methodology undercounts the amount of crude processed at China’s independent “teapot” refiners. Chinese refineries, especially the independents, often misclassify their products or even outright underreport production to evade taxes.
If Reuters did indeed significantly overstate Chinese crude inventories – if the article’s supporting evidence changed – then the piece’s conclusions are not as straightforward. Even though Beijing certainly helped Moscow by purchasing Russian crude oil throughout 2022, there is less robust evidence that it sought to artificially inflate consumer transport fuel prices, as it appears it did not, as I previously thought, build crude inventories at sky-high prices. Beijing’s decision to restrict refinery output in the summer of 2022 bolstered Putin – and may have been an objective of the policy – but these actions were more indirect and less blatant than I previously thought.
There is substantial evidence that Beijing is backing Moscow diplomatically, politically, and economically. It may even be considering extending military aid. The PRC also supported Putin in oil markets in 2022, as it purchased substantial amounts of Russian crude oil, maintained consistent inventory levels, and eschewed boosting refinery runs. While this policy was somewhat costly, it was not as blatant as building crude oil inventories then refusing to export them despite favorable economics. Beijing did support Moscow in oil markets in 2022, but not to the extent I previously believed. I apologize for the error.
- Joe Webster
3) Chinese state media on the war in Ukraine
Why China's position paper on Ukraine crisis annoyed some countries? – People’s Daily
Some Western countries have consistently failed to play a constructive role in easing the tensions of the Ukraine crisis. Instead, they have continuously imposed sanctions on Russia while arming Ukraine, fueling the crisis, Rawashdeh said.
The motive is to weaken Russia and Ukraine and to benefit from the conflict. This is a typical Cold War mentality, and the real victims are the people of the two countries, who have suffered from the trauma of the crisis, he said.
The high inflation and food shortages resulting from the Ukraine conflict continue to bite. The world will become more turbulent and unstable if the West keeps instigating, he added.
Richard Grenell, former U.S. ambassador to Germany, noted in an article on news website California Globe that China offered "a conceivable starting point" to end the conflict whereas "veteran State Department employees were furious that a year has gone by without a U.S. plan for a peaceful solution."
According to a report by the TASS news agency on the 2nd, about ten saboteurs sneaked into the Bryansk region on the Russian border from Ukraine that day. Ukrainian officials denied this on the same day.
The TASS news agency quoted sources from the Russian powerful department as saying that saboteurs sneaked into Russia from the Chernihiv region of Ukraine, and six local residents may have been taken hostage, which may have caused civilian casualties. According to news released on social media by the Governor of Obryansk Region Bogomaz on the 2nd, saboteurs sneaking in from Ukraine killed 2 civilians in the Klimovsky District of Bryansk Region that day.
4) The war
Russia and Iran hesitate over co-operation as west warns of costs – FT
Moscow held off buying Iranian missiles over fears Ukraine would receive long-range rockets, say officials
Russia may be close to capturing Bakhmut. But a victory could come at a heavy cost - CNN
For the first time in eight months, the Russians are on the cusp of taking a Ukrainian city, albeit a small one already abandoned by more than 90% of its prewar population.
Ukrainian defenses in and around the eastern city of Bakhmut are being squeezed by a combination of intense artillery, mortar fire, and airstrikes and a substantial commitment of ground forces, both Russian regulars and fighters of the Wagner private military company.
Joe Webster is a senior fellow at the Atlantic Council and editor of the China-Russia Report. This article represents his own personal opinion.
The China-Russia Report is an independent, nonpartisan newsletter covering political, economic, and security affairs within and between China and Russia. All articles, comments, op-eds, etc represent only the personal opinion of the author(s) and do not necessarily represent the position(s) of The China-Russia Report.