Closing ranks: Russia-China energy cooperation amid escalating confrontation with the West

Cooperation in the energy sector, which has long been a key pillar of Russia-China economic relations, has assumed even greater importance since Russia’s invasion of Ukraine. For the Kremlin, the sale of fossil fuels to China provides a vital source of foreign currency and, indirectly, of budget revenues. From Beijing’s perspective, these fuels offer a cheaper and more secure alternative to supplies from other directions. The prolonged lack of access to alternative markets for hydrocarbons has left Russia dependent on trade with China under unfavourable terms dictated by Beijing.

Despite the complementarity of their economies and the convergence of their strategic objectives, Russia and China face real obstacles to extending their energy cooperation. This is demonstrated by the decline in Russian oil exports to China following the imposition of US sanctions in 2025 and by the protracted negotiations over the Power of Siberia 2 gas pipeline. The Kremlin’s desperation may be growing, but it has not yet abandoned its efforts to secure favourable pricing terms. At the same time, China is rapidly expanding its domestic energy sources and continues to diversify its foreign supplies, while maintaining caution in the face of new Western restrictions. Overcoming these limitations and taking further steps to strengthen energy cooperation would send a clear signal that China is adopting a more confrontational stance towards the West and that Russia is willing to accept its growing dependence on China as the de facto leader of the anti-Western bloc. 

Fossil fuels as the cornerstone of bilateral trade

In 2024, the three key fossil fuels – crude oil, hard coal and natural gas (supplied via pipelines and as LNG) – accounted for two-thirds of Russia’s total exports to China, amounting to $85 billion.[1] Chinese purchases became a crucial source of funding for Russia’s war machine after most Western markets closed themselves off to its energy resources in late 2022. Since then, China has purchased nearly half of all Russian hydrocarbons sold abroad. India has also emerged as a major buyer, accounting for around one third of Russian oil exports. Without China’s willingness to increase its imports, Russia would have faced the need to make more substantial production cuts, affecting budget revenues, the financial performance of energy companies and the economy as a whole, as the so-called fuel and energy complex accounts for 20% of Russia’s GDP.[2] Moreover, in 2024, tax revenues from the extraction and export of resources by oil and gas companies[3] reached 11.1 trillion roubles, representing 31% of total federal budget income.

In the context of Russia’s rising spending on its war effort, maintaining a steady stream of export revenue is of vital importance to the Kremlin, particularly as it ensures the inflow of foreign currency. Taxing the energy sector also allows the government to avoid shifting the costs of the war directly onto the population. Fearing public discontent, it is seeking to mitigate the impact felt by Russian citizens.

However, it is important to note that the export of individual hydrocarbons differs in terms of their political and economic significance. Crude oil sales are an indispensable source of federal budget revenues, while gas exports carry substantial political weight since they can be used as a tool to exert pressure on third countries. In contrast, hard coal exports are relevant only from the perspective of that industry and a handful of Russian regions, generating limited profits.[4]

For China, Russia is the largest foreign source of fossil fuels, but Chinese energy imports remain diversified and their role is rapidly diminishing as the country advances its green transition. In 2024, crude oil, natural gas and hard coal imported from Russia accounted for 20%, 23% and 25% of China’s total imports of these resources, respectively. However, when domestic production is taken into account, Russian supplies covered only a small share of China’s overall demand, ranging from just a few to a dozen or so per cent.

Amid growing concerns over potential disruptions to maritime routes due to armed conflict and increasingly frequent shipping interruptions – from the ‘Ever Given’ incident in the Suez Canal to Houthi attacks in the Red Sea – overland routes are gaining prominence as more stable and secure alternatives to maritime transport, which is more vulnerable to hostile actions. However, the Chinese government’s priority is to expand domestic energy sources rather than to increase imports from the relatively reliable Russian direction. This policy reflects Beijing’s simultaneous pursuit of several objectives: enhancing self-sufficiency, accelerating technological development and industrial modernisation, and stimulating economic activity.[5] The electrification of additional sectors of the economy, including transport, combined with slower GDP growth in recent years, has reduced China’s demand for fossil fuels. Electricity, produced almost entirely from domestic sources such as coal and renewables, already accounts for around 30% of China’s final energy consumption, compared to just over 10% in the early 2000s. This share now exceeds that of both the United States and the European Union. The domestic production of fossil fuels is also steadily increasing, covering over 25% of China’s oil demand, around 60% of its gas needs and more than 90% of its coal consumption.

Oil – a strategic commodity for both sides

Crude oil is the most important component of Russia’s exports to China. In 2024, it accounted for 48% of the total value of Russian sales to the Chinese market, amounting to $62 billion. For Russia, the ability to sell crude oil in such volumes is invaluable, given the critical role of oil revenues in the federal budget. In 2024, taxes on oil extraction constituted 85% of all income generated by the oil and gas sector. The industry also contributes to the budget through other levies on its commercial activities; state-owned Rosneft is the single largest taxpayer to the federal budget.

Chinese buyers account for half the volume of Russia’s total crude oil exports. In 2024, sales of Russian oil to China reached nearly 2.2 million barrels per day. Based on Russia’s overall oil production, it can be estimated that nearly one in every four Russian barrels ends up on the Chinese market, either as crude or refined product. As with other commodities, the sharp increase in oil shipments came after Russia launched its full-scale invasion of Ukraine in 2022 and redirected a large share of its exports from Western markets to China. While in 2021 the volume of crude oil shipped to China stood at just under 80 million tonnes, by 2024 it had soared to 108.5 million tonnes.

Although China ranks as the world’s fifth-largest oil producer, imports cover more than 70% of its demand. The country remains dependent on foreign supplies, but a strategy of diversification has helped it avoid excessive reliance on any single partner. In recent years, Russia has accounted for 15-20% of China’s oil imports; since 2023, it has been China’s largest supplier of crude. From Zhongnanhai’s perspective, this situation offers three main advantages. First, purchasing oil from Russia bolsters a China-friendly regime. Second, Russian supplies are relatively inexpensive due to Western sanctions. Third, they offer greater stability and security, as deliveries are primarily made through two overland routes (the ESPO pipeline linking Siberia with north-eastern China and a pipeline running through Kazakhstan) and port infrastructure in the Russian Far East, thereby avoiding the need to transit the Strait of Malacca or the Taiwan Strait.