China and India are saving Russia from economic collapse

Russia's invasion of Ukraine united the West against a common adversary. It also built a shakier coalition in the East that's been keeping Russia's economy alive since the conflict began.

The past few weeks have seen the US, UK, and European Union strike at Russia's energy industry with varying bans on Russian coal, crude oil, and natural gas. The moves, according to Treasury Secretary Janet Yellen, would force the Kremlin "to choose between propping up its economy and funding the continuation of Putin's brutal war."

Yet Russia hasn't felt the pressure like the West had hoped. The blame largely lies with India and China. Neither country has explicitly sided with or against Russia, and instead have stood a murky middle ground while the majority of the world's nations condemn President Vladimir Putin. They've also continued to buy Russian energy, indirectly funding the invasion of Ukraine while maintaining effectively the same trade relationships they had before the war began.

India aggressively ramped up its purchases of Russian oil in recent weeks, attracted by the highly discounted price compared to soaring rates for other kinds of crude. India's government has ordered at least 13 million barrels since the war broke out in late February, according to Reuters. That sum, accumulated over just two months, already nears the 16 million barrels India bought from Russia through all of 2021.

China, meanwhile, is still honoring existing oil contracts it has with Russia, Reuters reported. Chinese state-run refiners have refrained from signing any new deals, but the continuation of existing plans locks in a major buyer for the Kremlin. China is the biggest buyer of Russian oil, having imported nearly 1.6 million barrels a day throughout 2021, according to Chinese government data.

The People's Republic of China was also a top customer of Russian gas, having bought 16.5 billion cubic meters of natural gas — roughly 7% of Russia's supply — last year.

To be sure, the West's measures have been far from perfect, with Russian energy continuing to flow into countries opposed to the invasion. While the US was readily able to embargo Russian oil and gas, the UK and EU are much more reliant on those goods to keep their economies operating. That dependence is why Europe has been slower to wean itself off of Russia's energy trade.

Manufacturing giants like Germany are under the most intense pressure. Cutting out Russian energy would immediately lift prices for commodities crucial to Germany's industrial sector. That higher inflation would also slam homes in the form of higher utility bills. Without the ability to quickly backfill the loss of Russian energy, a full embargo would almost certainly plunge Germany — the EU's largest economy — into a major recession.

Between the sanctions' shortcomings and continued trade with India and China, the Kremlin is offsetting at least some of the West's impact. Russia is on track to make $321 billion from its energy exports in 2022 should its current trading partners keep buying, according to a Bloomberg analysis published on April 1. The forecasted earnings are up by more than a third from last year's windfall.

The forecasts are just that, and the energy market remains extremely volatile. But Russia is already beating its own projections. Energy sales in April are now expected to come in $9.6 billion above the Kremlin's previous target due to higher prices, the finance ministry said on April 5.

Kremlin officials bolstered the positive outlook in recent interviews, claiming the West's sanctions have done little to affect energy revenues. Russia is ready to sell energy products to "friendly countries in any price range," Energy Minister Nikolai Shulginov told the Izvestia newspaper in an April 13 interview.

Foreign Minister Sergey Lavrov was more pointed in downplaying Western sanctions in early March. Russia "will not persuade anyone to buy our oil and gas," he said at a briefing, adding the West is "welcome" to replace Russian energy with an alternative.

"We will have supply markets, we already have them," Lavrov said.

Those markets haven't gone unnoticed by the West. Treasury Secretary Yellen said last week that sanctioning countries "will not be indifferent" to those that are "sitting on the fence."

Yet no concrete policies have been announced to target those buying Russian energy. As the next phase of Russia's invasion begins in Ukraine's Donbas region, cash from India and China is helping the Russian economy stay afloat.