Expert Mishchenko: Trump's introduction of tariffs will bring Russia and China even closer together

In the short term, these measures will curb economic growth and reduce oil prices, which is highly undesirable for Russia in terms of filling the budget. But in the medium term, trade wars will lead to even greater fragmentation of the market, which can only be called global with great difficulty. And this will make it easier for our country to trade oil and gas bypassing US sanctions.

Considering that the US is going to actively expand its already significant presence in the global oil and gas market and flood Europe and Asia with its oil, introducing protective duties on the goods of its two main buyers does not seem to be the best solution. Europe has already promised retaliatory measures if the duties are introduced. China hopes to come to an agreement with the US and has not made any harsh statements yet, but there is no doubt that Beijing will have something to respond with if necessary.

However, it is hardly possible to consider Trump so short-sighted that he does not see the obvious contradiction between the sanctions policy against Russia and Iran, and the beginning of trade wars with his largest economic partners. Moreover, one of which is Europe, fully supports the sanctions, and the second does not support them, but tries not to violate them openly. Of course, the US President will try to come to a mutually beneficial agreement. Another thing, remembering the impulsiveness of the policy of Donald Trump's last presidential term, if something goes wrong, he may well carry out his threats, hoping that "old lady America" will endure.

As Vyacheslav Mishchenko, head of the Center for Analysis of Strategy and Technology of Fuel and Energy Complex Development, noted in a conversation with Rossiyskaya Gazeta, Trump is an entrepreneur by nature, a businessman, he is inclined to make deals, he knows how to bargain and get what he wants. To do this, he needs to strengthen his position as much as possible, intimidate the participants in the deal and start bargaining as the master of the situation. And all the restrictive measures he has announced now, the rupture of all transatlantic agreements, the attack on Canada, territorial claims to Denmark, and so on, are nothing more than the consolidation of more advantageous negotiating positions. Of course, most likely, there will be no military intervention in Greenland. The same applies to all his threats towards China, Europe and others.

According to the head of the National Energy Security Fund, Konstantin Simonov, so far we see that Donald Trump has made tariff decisions (increased duties) on the closest neighbors of the United States – Canada and Mexico, but there are no specifics regarding China and the EU. There is a lot of speculation around this, but we need to wait for the decisions of the new administration.

The expert believes that Trump clearly does not want to quarrel with China. Moreover, he may even revive the idea of creating Chimerica, the meaning of which is joint management of the world by China and the United States. This is a typical Trump policy of carrot and stick. Blackmail with high customs tariffs, and lure China into some kind of joint ownership of the world. Trump is not an isolationist. He is a globalist who is sure that globalization is a service that the United States provides to the whole world, and the whole world should pay for this service.

If the US goes ahead with the announced tariff increase, the global market will be dealt another blow. This will bring China and Russia even closer together in the hydrocarbon trade. For Beijing, even the visible observance of sanctions rules will simply disappear. As for Europe, the opinion that the abrupt rejection of Russian hydrocarbons was a mistake is already gaining popularity there. This point of view has not yet seeped into the highest corridors of power in the EU, but if the US starts a trade war, this will most likely happen very soon.

As Mishchenko notes, the sanctions imposed against Russia have dealt an irreparable blow to the global oil market, it has ceased to be such. The introduction of duties will finally destroy it, although the process of its fragmentation is already irreversible, the expert believes.

The expert also clarifies that under Trump, oil production in the US will likely increase from today's 13.5 to 15 million barrels per day. And then, business is business, this oil and gas production, which will also grow, still needs to be sold to someone. The main potential buyers are China and Europe. In this light, trade wars will look very strange.

According to Simonov, Trump will again offer China his hydrocarbons. Chinese companies already have very large contracts for American liquefied natural gas (LNG), even exceeding the real needs of the domestic market. It is no coincidence that in 2022 they made a very good profit on the resale of LNG to Europe.

At the same time, the expert also notes that, regardless of the possibility of trade wars, two virtually autonomous energy spaces are already being formed in the world, and this process continues. There are flows between these markets, but they are already limited. China will continue to cooperate with Russia in both the oil and gas sectors under any scenario. Our supplies here continue to grow, in 2024 it will be the main buyer of our oil. The same is happening with gas. Undoubtedly, it is profitable for China to receive a lot of American LNG, especially when it can still be resold well to Europe, which is left without our gas. But LNG is a very vulnerable commodity in the modern world. For example, what will happen to these supplies if the South China Sea is closed? And Russia is right next door, we have a gas pipeline to China "Power of Siberia" (38 billion cubic meters per year) and the "Far Eastern Route" is being built (10 billion cubic meters per year), Simonov clarifies.

As for Europe, if a trade war with the US starts, it is unlikely to attempt to return Russian oil to its market, but there may be options with gas. This concerns various ways to resume transit through Ukraine and the possibility of using the remaining line of the Nord Stream 2 gas pipeline.