The Sinopec logo is displayed at a gas station in Hong Kong.Bobby Yip/Reuters
China’s state-run Sinopec Group has suspended talks for a major petrochemical investment and a gas marketing venture in Russia, sources have told Reuters, heeding a government call for caution as sanctions mount over the invasion of Ukraine.
The move by Asia’s biggest oil refiner to hit the brakes on a potentially half-billion-dollar investment in a gas chemical plant and a venture to market Russian gas in China highlights the risks, even to Russia’s most important diplomatic partner, of unexpectedly heavy Western-led sanctions.
Beijing has repeatedly voiced opposition to the sanctions, insisting it will maintain normal economic and trade exchanges with Russia, and has refused to condemn Moscow’s actions in Ukraine or call them an invasion.
But behind the scenes, the government is wary of Chinese companies running afoul of sanctions – it is pressing companies to tread carefully with investments in Russia, its second-largest oil supplier and third-largest gas provider.
Since Russia invaded Ukraine a month ago, China’s three state energy giants – Sinopec, China National Petroleum Corp. (CNPC) and China National Offshore Oil Corp. (CNOOC) – have been assessing the impact of the sanctions on their multibillion-dollar investments in Russia, sources with direct knowledge of the matter said.
“Companies will rigidly follow Beijing’s foreign policy in this crisis,” said an executive at a state oil company. “There’s no room whatsoever for companies to take any initiatives in terms of new investment.”
China’s ministry of foreign affairs this month summoned officials from the three energy companies to review their business ties with Russian partners and local operations, two sources with knowledge of the meeting said. One said the ministry urged them not to make any rash moves buying Russian assets.
The companies have set up task forces on Russia-related matters and are working on contingency plans for business disruptions and in case of secondary sanctions, sources said.
The sources asked not to be named, given the sensitivity of the matter. Sinopec and the other companies declined to comment.
The ministry said there is no need for China to report to other parties about “whether there are internal meetings or not.”
“China is a big, independent country. We have the right to carry out normal economic and trade co-operation in various fields with other countries across the world,” it said in a faxed statement.
U.S. President Joe Biden said on Thursday that China knows its economic future is tied to the West, after warning Chinese leader Xi Jinping that Beijing could regret siding with Russia’s invasion of Ukraine.
Global oil majors Royal-Dutch Shell and BP PLC, as well as Norway’s Equinor ASA pledged to exit their Russian operations shortly after Russia’s Feb. 24 invasion. Moscow says its “special operation” aims not to occupy territory but to destroy Ukraine’s military capabilities and capture what it calls dangerous nationalists.
Sinopec, formally China Petroleum and Chemical Corp., has suspended the discussions to invest up to US$500-million in the new gas chemical plant in Russia, one of the sources said.
The plan has been to team up with Sibur, Russia’s largest petrochemical producer, for a project similar to the US$10-billion Amur Gas Chemical Complex in East Siberia, 40-per-cent owned by Sinopec and 60 per cent by Sibur, set to come online in 2024.
“The companies wanted to replicate the Amur venture by building another one and were in the middle of site selection,” said the source.
Sinopec hit pause after realizing that Sibur minority shareholder and board member Gennady Timchenko faces sanctions from the West, the source said. The European Union and Britain last month imposed sanctions on Mr. Timchenko, a long-time ally of Vladimir Putin, and other billionaires with ties to the Russian President.
Mr. Timchenko’s spokesman declined to comment on sanctions.
The Amur project itself faces funding snags, said two of the sources, as sanctions threaten to choke financing from key lenders, including Russia’s state-controlled Sberbank and European credit agencies.
“It’s an existing investment. Sinopec is trying to overcome the difficulties in financing,” said a Beijing-based industry executive with direct knowledge of the matter.
Sibur said it continues to co-operate with Sinopec including working jointly on implementing the Amur plant. It denied that there was a plan to team up with Sinopec for a project similar to the Amur Gas Chemical Complex in east Siberia.
“Sinopec is actively participating in the issues of the project’s construction management, including equipment supplies, work with suppliers and contractors. We are also jointly working on the issues of project financing,” Sibur told Reuters by e-mail.
Sinopec also suspended talks over the gas marketing venture with Russian gas producer Novatek over concerns that Sberbank, one of Novatek’s shareholders, is on the latest U.S. sanctions list, said one source with direct knowledge of the matter.
Mr. Timchenko resigned from Novatek’s board on Monday in the wake of the sanctions. Novatek declined to comment.
Novatek, Russia’s largest independent gas producer, entered a preliminary deal in 2019 with Sinopec and Gazprombank to create a joint venture marketing liquefied natural gas to China as well as distributing natural gas in China.
Beyond Sinopec’s planned Amur plant, CNPC and CNOOC were among the latest investors into Russia’s natural gas sector, taking minority stakes in major export project Arctic LNG 2 in 2019 and Yamal LNG in 2014.
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TORONTO – Strength in the base metal and technology sectors helped Canada’s main stock index gain almost 100 points on Friday, while U.S. stock markets climbed to their best week of the year.
“It’s been almost a complete opposite or retracement of what we saw last week,” said Philip Petursson, chief investment strategist at IG Wealth Management.
In New York, the Dow Jones industrial average was up 297.01 points at 41,393.78. The S&P 500 index was up 30.26 points at 5,626.02, while the Nasdaq composite was up 114.30 points at 17,683.98.
The S&P/TSX composite index closed up 93.51 points at 23,568.65.
While last week saw a “healthy” pullback on weaker economic data, this week investors appeared to be buying the dip and hoping the central bank “comes to the rescue,” said Petursson.
Next week, the U.S. Federal Reserve is widely expected to cut its key interest rate for the first time in several years after it significantly hiked it to fight inflation.
But the magnitude of that first cut has been the subject of debate, and the market appears split on whether the cut will be a quarter of a percentage point or a larger half-point reduction.
Petursson thinks it’s clear the smaller cut is coming. Economic data recently hasn’t been great, but it hasn’t been that bad either, he said — and inflation may have come down significantly, but it’s not defeated just yet.
“I think they’re going to be very steady,” he said, with one small cut at each of their three decisions scheduled for the rest of 2024, and more into 2025.
“I don’t think there’s a sense of urgency on the part of the Fed that they have to do something immediately.
A larger cut could also send the wrong message to the markets, added Petursson: that the Fed made a mistake in waiting this long to cut, or that it’s seeing concerning signs in the economy.
It would also be “counter to what they’ve signaled,” he said.
More important than the cut — other than the new tone it sets — will be what Fed chair Jerome Powell has to say, according to Petursson.
“That’s going to be more important than the size of the cut itself,” he said.
In Canada, where the central bank has already cut three times, Petursson expects two more before the year is through.
“Here, the labour situation is worse than what we see in the United States,” he said.
The Canadian dollar traded for 73.61 cents US compared with 73.58 cents US on Thursday.
The October crude oil contract was down 32 cents at US$68.65 per barrel and the October natural gas contract was down five cents at US$2.31 per mmBTU.
The December gold contract was up US$30.10 at US$2,610.70 an ounce and the December copper contract was up four cents US$4.24 a pound.
— With files from The Associated Press
This report by The Canadian Press was first published Sept. 13, 2024.
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
