Germany has pinned its hopes on Qatar by signing an agreement with them on the supply of 2 million tonnes of LNG per year. But the supplies will only arrive in 2026. What they will do for more than three years is unclear. The same concerns many other European countries such as France and Italy.
In Germany, they are worried that China will take all the LNG volumes, which not so long ago signed a long-term gas contract for 27 years right in front of the EU, so they hastily signed a contract with Qatar on very unfavourable terms.
An important condition of the agreement was Qatar’s traditional requirement not to redirect gas from Germany to other European countries. Not only that, 2 million tonnes of LNG per year corresponds to 2.76 billion cubic metres of natural gas. Using simple calculations, it turns out that the agreement with Qatar is about 6% of the 46 billion cubic metres of Russian gas imported by Germany in 2021. So only a fraction of what is needed.
In contrast, private Chinese refineries have recently purchased several batches of Russian oil in the Far East. The Chinese buy cheap oil and are not worried about being hit by European sanctions, a double advantage therefore. The terms of the contract are as follows: the responsibility for the cargoes supplied and their insurance lies entirely with the exporter.
This is why oil is so cheap: the price of Russian Ural has fallen due to a glut of unsold oil stocks and is trading at a bigger discount than the benchmark North Sea Brent before the EU sanctions came into force. In other words, the Chinese purposely waited for the day when prices would fall to their lowest level.
Now they are waiting for the effects of the OPEC+ meeting held on 4 December where it was decided to cut oil production due to the low cost of the barrel, which was at $85 against the expected $100.