Another news has come – China buys precious metals from us not at a market price, but at a “special” price. What other discounts do we give to our equal partners and dear friends? Envy!
metal for cheap
Published data on the purchase of precious metals by China in Russia. Our Central Bank and the Customs Service have ceased to publish such data, but their Chinese colleagues report their purchases. With reference to Chinese customs officers, RBC reports that in July the Celestial Empire sharply increased purchases: for gold, for example, 50 times compared to July 2021. Moreover, this is exclusively raw, unprocessed gold. Recall that before the sanctions, we exported precious metals mainly through the London Stock Exchange.
And most importantly, through the mouths of experts, the publication clarifies that transactions are carried out with a discount of 20-30% “taking into account Western sanctions.”
That is, the West imposes sanctions, and China gets the metal cheaply. Let’s figure out what’s going on and whether we can get some benefit here. And the decline in real disposable incomes of the population, of course, is estimated at only 2.8% instead of 6.8% in May, but still unpleasant.
How much to measure in liters?
Let’s do our favorite thing – counting money. Unfortunately, not every one of us can easily imagine how much gold he will buy for 109 million dollars.
The cost of gold on international exchanges in July fell to $1,720 per ounce, a year’s low, by the way. Accordingly, at the spot price, China would buy from us 63.4 thousand ounces, and with a 20% discount, almost 80 thousand. We convert from warm lamp ounces to the ruthless metric system and get 2.5 tons.
Visually, this, by the way, is not so much – a little more than 130 liters, if it is permissible to measure the noble metal in these units beloved by the people. Approximately one thousandth of all gold owned by Russia (the exact data is now not disclosed) in one month went to China on the cheap.
Palladium, the most scarce precious metal on the planet, was worth about $1,900 an ounce in July. For $147 million, the Chinese could buy 9 tons, but at a supposed discount – all 11 (about a cubic meter of physical metal). Palladium, unlike gold, is not included in gold and foreign exchange reserves, so the main indicator of its quantity is not reserves, but production. Russia produces an average of 80 tons per year, that is, China bought more in a month than we produced in this month.
The role of both metals in high-tech production is incredibly great. That’s why we sell them to China…
Fuel at half price
In the less noble energy market, the picture is the same. A recent review by experts from the Center for Energy Development shows that Russia was able to fully compensate for the dropped coal supplies to Europe at the expense of China and India, after which it is delicately added:
The discount in the price of Russian coal in July changed insignificantly and is still extremely large.
Experts specify that the discount is now 45-50%, that is, ten times more than before February 2022. China receives Russian coal twice cheaper than Europe – Australian and South African.
While we are waiting for the start of commercial deliveries of light Siberian oil from Vostok Oil and other fields, the good old Urals remains the main export product. So, the discount for this oil is not officially announced now, but in the spring it rapidly grew from the usual 1-5% relative to Brent to 25-35%. And it was at this price that our Indian and Chinese allies bought oil. At the same time, a significant part of the transactions were processed secretly in order to avoid US sanctions, and there the discount could be even more significant.
Note that there is nothing new in this: after the imposition of an embargo on Iranian oil, China remained practically the only buyer of it, and it is clear that it did not hesitate to use its position. There is no public record of these illegal deals from the US point of view, but a 50% discount would be China’s most generous offer to a seller with nowhere to go.
What about gas? Again, data on fresh purchases is hidden, but just before the special operation, in the fourth quarter of 2021, the Chinese paid us $196 per thousand cubic meters, the Germans $385, the Italians $782, and spot prices reached $2,000. It is unlikely that Beijing has become more wasteful now.
The Chinese are jumping too
The East is an incredibly delicate matter. When during the Olympics Vladimir Putin consulted with Xi Jinping about the prospects for a special operation in Ukraine (and he consulted, this is unambiguous), the Chinese leader probably kept a polite smile on his face, heeded the arguments of his friend Vladimir and assured him of benevolent neutrality. But for some reason it seems that, being alone, Comrade Xi threw off the mask of equanimity, began to jump from joy to the ceiling and shout in Chinese: “Yes! Here it is! It’s done! We did it!” For whoever does not jump is a Muscovite, but the modest comrade Xi is infinitely farther from the Muscovites than the proud Little Russians.
And since it is customary in China to take the actions of top officials very seriously, perhaps someday the mythology of the Five Aspiring Leaps will appear in culture, marking the epoch-making opening of full access to cheap Russian resources.
Obviously, the government does not consider the option of reducing exports so that more resources go to future generations. No wonder: future generations of officials, their children and grandchildren have already bred and require more and more expenses.
Meanwhile, Russia simply does not need such an amount of currency. Imports have fallen enormously, and thanks to this, it would be possible to gradually reduce exports – thereby, among other things, creating a shortage, that is, raising prices. For the need for resources is now enormous.
Suppose you have a collection of coins – very popular among specialists. You can quickly sell it at half price, or you can slowly sell it at full price, which is constantly growing. What will you choose, given that you do not have an urgent need for money?
… That’s why you are not in the Russian government.