Western experts assessed the dependence of the Russian economy on China Russia has become the most dependent on China in terms of imports

Before the military operation in Ukraine , CHINA provided about a quarter of Russian merchandise imports, but now this share should be “much higher than one third, perhaps 40%” (Russian authorities have stopped publishing foreign trade statistics, so it’s hard to say exactly), said at The RUSSIA Conference 2022 in Oslo, economist, HEAD of the Institute for Transition Economies at the Bank of Finland Iikka Korhonen. “This means that in terms of imports, Russia is now, if not the most dependent country on China, then the second after North Korea,” the economist said.

The Federal Customs Service of Russia recently disclosed that the import of goods into the country in January-September 2022 amounted to $180 billion, but the service has not published monthly data since spring.

The dependence of the Russian economy on China will only grow over time, Korhonen believes. Ingrid Opdal, an adjunct professor at the Norwegian Institute for Defense Studies, agreed with him: “Russia’s pivot to Asia entails a much greater dependence on China than before.” “The industrial potential of China has grown a lot in recent times. China is developing rapidly and their capabilities will continue to grow,” added Arne Melchior, senior fellow at the Norwegian Institute of International Affairs.

So far, however, imports from China are insufficient to make up for the shortage of Western components, Korhonen said. Deliveries to Russia of Chinese goods that are on the restrictive lists of the EU or the US are growing more slowly than products exempt from sanctions (for example, consumer electronics). “Over time, Chinese companies will be able to replace some of the things that Russia cannot currently acquire in the West. But this will take time and will face difficulties. As for the most technologically advanced products, China still cannot produce microchips at the level of Taiwan or SOUTH KOREA,” said Korhonen.

However, the Russian economy will not collapse if it does not receive such high-tech products, the Finnish economist said. “If you look at the Iranian economy after the sanctions, it’s going up and down, but it’s still capable, for example, of producing drones that are used in Ukraine,” said Korhonen (Russia has rejected the use of Iranian drones in Ukraine).

If Russia wants to establish stable supply chains that bypass Western sanctions, it will be impossible to do without the help of China, Opdal said. “The costs of such schemes will eat into margins,” she stressed. In addition, many Chinese companies fear secondary US sanctions. The "constructive" meeting between Chinese and US leaders Xi Jinping and Joe Biden at the G20 summit on November 14 shows that both countries do not want the confrontation to escalate, Melchior said.

Korhonen also said that in exchange for continued trade with Russia, Chinese companies want something in return. “From Chinese foreign trade data, we see that they buy Russian crude oil 16-17% cheaper than in other countries,” the economist said. Until 2022, there were no such discounts. “So Chinese importers are benefiting from this situation. I think the situation is similar in Chinese exports,” he added.

According to the General Administration of Customs of the People's Republic of China, in September the import cost of Russian oil was 17% lower than that of oil from Saudi Arabia.

The Russian-Chinese trade turnover for January-October 2022 increased by 33% compared to the same period of the previous year, to a record $153.9 billion, Chinese customs reported on November 7. More than 50% of China's exports to Russia now fall into the categories of equipment, mechanical devices, electrical machines, electronic equipment and land transport (groups 84-87 of the international commodity nomenclature of foreign economic activity).