The world needs Russian oil and gas
- The West should thank China and India for keeping a lid on high energy prices by buying Russian resources; otherwise, as a prominent economist has argued, prices would be even more destabilising, if not ruinous, especially for low-income countries
As the war in Ukraine drags on, finance ministers from the Group of 20 countries meeting in Bali were unnerved by an “alarming increase of food and energy insecurity” and a slowdown in the global economy. Meanwhile, major central bank chiefs around the world fret about rising inflation.
In this context, the United States and the European Union should thank China and India rather than castigating them for buying cheap oil and gas from Russia. The conventional wisdom is that those who buy from Russia are funding Vladimir Putin’s war and are therefore complicit. That view might have been viable if Western unity had held and the war could have ended quickly with Russia’s defeat. Now, with each passing week, both conditions look increasingly unsustainable.
Instead, the stability and growth of the world economy have been seriously damaged, and low-income countries are most dangerously exposed. The massive embargo promised by the US and the EU on Russian energy sources did not materialise, fortunately. If they had succeeded, prices today would have been ruinous for many more poor nations, as some already are in a dire situation with today’s prices.
As argued by economist Huang Yukon of the Carnegie Asia Programme, “if the two Asian giants [China and India] actually stopped buying crude oil from Russia and relied more on Middle Eastern producers, the competing demand coming from Europe would result in soaring prices and chaos in global energy markets”.
The double standards of Washington have meant that it keeps criticising China’s “support” for Russia even though its own mid-level officials have admitted the country has by and large avoided challenging US-EU sanctions. And while China is now the biggest buyer of Russian energy, India was the first to jump into the market, back in May. But in trying to lure New Delhi into an anti-China coalition, Washington’s criticism has been mute, at least in public.
As Huang wrote: “The Western alliance should not even try to persuade China and India to stop buying energy resources from Russia. By reducing its own energy dependency on Russia, the EU gains more flexibility in dealing with Putin.
“But the oil and gas that Europe is no longer buying needs to be made available to other major customers, or energy prices will ratchet up to politically destabilising levels. The Western allies cannot have it both ways.”
But that’s the problem, because Brussels and Washington – but especially the latter – have insisted on being entitled to having it both ways since day one. In the end, they will end up with a badly damaged world economy and a victorious Russia.