The following is from Hideo Tamura's regular column in yesterday's Sankei Shimbun titled China and Russia Sneer at G7 Leaders' Statement.
This article also proves that he is one of the leading economic commentators in the postwar world.
It is a must-read not only for the Japanese people but for people worldwide.
The emphasis in the text except for the headline is mine.
What was apparent at the recent G7 summit meeting was the impasse in the West's economic and financial sanctions against Russia.
It is not only Russian President Vladimir Putin who is smiling faintly through the process.
Chinese Communist Party General Secretary Xi Jinping is probably smiling faintly as well.
The main feature of the additional economic sanctions against Russia, which were included in the June 28 communiqué issued by the G7 leaders against Russia's repeated brutal attacks on Ukraine, is only the consideration of setting a ceiling on the import price of Russian oil transported by sea. The only feature of the communiqué is the consideration of setting a ceiling on the import price of Russian oil by sea.
Although British Prime Minister Johnson announced before the summit that it had also agreed to ban imports of Russian gold, there is not a shred of gold in the communiqué.
The three Anglo-Saxon nations of Britain, the U.S., Canada, and Japan will soon ban imports of newly mined or refined Russian gold, but Germany, France, and the European Union (EU) have not complied.
The EU also weakly stated that it was "considering" setting a cap on oil import prices.
Suppose international oil prices rise in tandem with the gradual reduction of Russian oil imports proposed by Japan, the U.S., and the EU before the summit. In that case, Russia's oil revenues could increase further, which would directly affect the household budgets of the West and low- and middle-income countries as a whole.
The aim is to prohibit imports at prices above the import price ceiling, but countries other than the G7 are unlikely to participate.
A proposal to prohibit property insurance coverage for tankers carrying Russian oil above the ceiling is in the works, but it is a bitter pill to swallow.
Lloyd's, headquartered in London, is the leading insurer of international cargo shipping. Still, Lloyd's is a free-market organization that sets reinsurance premiums based on the risk of accidental ship accidents and earns huge profits.
It is not a system designed to determine the suitability of providing insurance based on the price of oil imports.
It is neutral in international political conflicts and is unlikely to readily comply with the G7's request, whether or not a cap is set. Instead, it is taking advantage of the G7's gradual reduction of Russian oil imports. The leading importer is China.
China's imports of Russian crude oil have been increasing rapidly since the Western sanctions against Russia following Russia's invasion of Ukraine.
According to Chinese customs statistics, the volume exceeded 2 million barrels per day in May, up more than 40% from February.
The unit price per barrel was $92 in May, down $6.5 from the previous month.
It is more than $20 cheaper than the international crude oil market price of over $114 per barrel, according to the Organization of Petroleum Exporting Countries (OPEC) statistics, which has remained high.
As for gold, the craving of wealthy Chinese is immense, and the People's Bank of China is trying to increase its gold holdings as foreign reserve assets.
When Russian gold is shut out of the London market, it is evident that China will decide it is an excellent time to buy and purchase large quantities at low prices.
In other words, the more the West sanctions Russia for oil and gold, the more favorable it will be for China.
In response to the increase in oil exports to China, the Russian side is accumulating yuan-denominated assets.
According to Russian government statistics, the government-owned National Welfare Fund, financed by oil export revenues, had RMB-denominated assets of $45.8 billion in May, an increase of $16.8 billion since March.
Although this is the only publicly available data that indicates closer economic ties between China and Russia, perhaps due to information controls on both sides, Sino-Russian cooperation is steadily deepening.
The graph below clearly illustrates the West's ineffective sanctions against Russia.
After February 24, when Russian troops crossed the Ukrainian border, the U.S., Europe, and Japan stepped in with financial sanctions, causing the Russian currency ruble to plummet and Russian interest rates to rise sharply.
However, the ruble has strengthened its rise since April, and in late June, the ruble's exchange rate against the dollar and the euro were higher than before the invasion of Ukraine.
Interest rates have also returned to pre-invasion levels. Prices are high but seem to have passed the peak.
Russia's external reserves, which stood at about $640 billion as of late February, have stopped falling after declining by about $60 billion by late June.
The reduction in external reserves was accompanied by market intervention to buy rubles, but intervention is no longer minimal.
China is cooperating with the stable management of Russia's foreign currency assets.
China's imports of Russian oil and grain are surging and helping to prop up the ruble market by depositing about $100 billion worth of Russian foreign quotas.
The summit statement calls on China to ask Russia to withdraw from Ukraine immediately, but it seems to be just saying what it means.
Unless there is a warning to China that it will consider secondary sanctions if it does not stop cooperation with Russia immediately, it will be as good as praying to deaf ears to the Xi administration.
(Editorial Board Member)
