It has been nearly two months since Russia invaded Ukraine, with no end in sight as Moscow gears up for ‘phase two’ of the conflict. In response to Russia’s invasion, Western countries have hit Moscow with a plethora of sanctions, though accomplishing very little to dismantle the country’s key energy sector.
Outbound shipments of Russian coking coal to China doubled in March to 1.4 million tons, compared with 550,000 tons for the same month last year, according to Bloomberg, citing Chinese customs data.
China has resisted Western sanctions on Russian energy products as it panic hoards heavily discounted coal used for steel-making. Russian coal trades well below market prices than what other top suppliers, like Indonesia and Mongolia, are offering.
We noted earlier this month that Chinese commodity firms purchased Russian coal and crude in yuan due to Western sanctions isolating Russian banks from the SWIFT payment system. This may suggest, and is just one example, of a new emerging economic order dubbed the “Bretton Woods III.”
Reports China uses local currency to purchase Russian energy products only suggest that the path to a new world order is accelerating as commodity-based currencies become utilized for trading rather than dollars.
Moscow is also considering a rupee-ruble payment system for Indian oil traders, while Saudi Arabia could start pricing some of its brent in yuan for Chinese traders.
And while the White House made sanction demands for G-20 nations not to buy Russian energy products, Biden’s sanctions are hitting a “BRIC+ wall” as Brazil, Russia, India, and China, widely known as BRICs, have not bowed to US pressure. Nor have Mexico, Saudi Arabia, or South Africa.
Russia is offering deep discounts on its energy products as some countries find these cheap commodities irresistible and are trading outside of the dollar system (in local currency), ignoring the West’s sanctions on Moscow.