Russia may benefit from trade rift between China and Australia

Russian coal suppliers could boost their exports to China, as the world’s largest coal buyer is reportedly curbing shipments of the commodity from Australia amid escalating tensions between the two countries.

The developer of the largest Russian coal deposit, Elga, announced on Tuesday that it created a joint venture with a Chinese shipping company to promote Russian coal on the massive Chinese market. The project between Elgaugol and GH-Shipping is set to satisfy China’s growing demand for high-quality coking coal.

The deal is set to help boost Russian coal supplies to China from one million tons this year to 30 million tons in 2023, and the developer could potentially further increase annual imports to 50 million tons. The joint venture is also expected to contribute to the ambitious goal of the Russian and Chinese governments to significantly increase bilateral trade turnover, as it would increase the volume of trade between the two countries by $5 billion per year.

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“The supplies of coking coal from Elga will replace a significant amount of Australian and American coal of similar quality,” Elgaugol Director-General Aleksandr Isaev said.

Another Russian producer, Mechel, previously said that it was planning to increase exports of coal to China amid Beijing’s restrictions on Australian imports. In November, the shipments rose by 13 percent, and are set to jump by 25-30 percent in December, Mechel CEO Oleg Korzhov said as cited by Russian media.

Tensions between the two countries have been growing for around three years, after the Australian government began limiting Chinese investments in the country. In 2018, Canberra added fuel to the fire when it banned China’s Huawei and ZTE from its 5G rollout. The most recent escalation occurred when Australia pushed in April for an international inquiry into the origins of the coronavirus outbreak.

Earlier this week, Chinese state-linked media reported that the nation’s top economic planner gave domestic power plants the greenlight to import coal without clearance restrictions from several countries “except for Australia.” While Beijing has not officially confirmed the restrictions, Canberra has already urged the Chinese government to clarify the reports.

This week’s reports are not the first to allege that China is quietly banning coal imports from Australia. Last month, several million tons of Australian coal worth more than $500 million were reportedly stuck in Chinese ports.

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