Trade Between Russia and China Surges in 2023

Preliminary data published last week by China’s General Administration of Customs show that in the first five months of 2023, trade between Russia and China reached $93.8 billion, a 41 percent increase over the same period in 2022 and an 85 percent increase over the first five months of 2021. This figure shows that China is playing a pivotal role in sustaining the Russian economy and Moscow’s war effort.

Russia’s exports to China comprise 54 percent ($50.9 billion) of the trade, leaving Russia with an $8 billion trade surplus with China. Russian mineral fuels and oil constitute the bulk of the exports, with China’s imports of Russian crude oil reaching a record high in May. China’s private refineries have rushed to buy the discounted Russian oil, the same way they have purchased Iranian oil in violation of U.S. sanctions. Tehran exports close to a million barrels per day to China.

In the first four months of 2023, China’s exports to Russia totaled $33.7 billion, showing a 66 percent growth over its value in the same period in 2022 and an 85 percent increase compared to the same period in 2021. Unlike Russia’s export profile, China’s exports to Russia are more diverse and evenly distributed across key categories. Whereas Russia exports primarily raw materials to China, the core of China’s exports to Russia consists of manufactured, processed, and industrial goods.

Machinery, mechanical appliances, and electrical equipment account for 38 percent ($12.8 billion) of Chinese exports to Russia. This category has grown by 43 percent compared to the same period in 2022 and by 59 percent compared to the same period in 2021.

The second largest category of Chinese exports to Russia is vehicles, aircraft, vessels, and associated transport equipment, which comprises 19 percent ($6.4 billion) of total exports. This category saw a 241 percent increase compared to the same period in 2022 and a 346 percent increase compared to the same period in 2021. The exodus of Western car manufacturers from Russia has not left Russians many choices, but the Chinese share of the market has jumped to 40 percent from less than 10 percent in early 2022.

These categories of goods play a significant role not only in keeping the Russian economy running but also in helping its war machine. Ukrainian sources have recently announced that they have been finding more Chinese components in Russian equipment and weapons. China argues that its export policy to Russia is in line with its domestic laws and regulations.

China is using its massive economy to keep its partner Russia afloat, enabling Moscow to resist America’s coercive diplomacy. Beijing benefits economically by purchasing sanctioned goods at a discount and getting exclusive access to those markets for Chinese companies.

The key to effective U.S. economic warfare against countries such as Russia is to effectively punish sanctions-busting countries such as China. The obvious targets are Chinese companies that are buying Russian oil and gas. Regarding China’s exports to Russia, Washington should allow the export of consumer goods to permit Russia’s currency reserves to diminish. However, Washington should zealously target exporters of industrial and manufactured intermediate goods, which are being used to keep the Russian industries and its war machine running.

Saeed Ghasseminejad is a senior advisor on Iran and financial economics at the Foundation for Defense of Democracies (FDD), where he contributes to FDD’s Iran Program and Center on Economic and Financial Power (CEFP). Follow Saeed on Twitter @SGhasseminejad. For more analysis from Saeed and FDD, please subscribe HERE. FDD is a Washington, DC-based, non-partisan research institute focusing on national security and foreign policy.