• Russia's latest economic figures show it had a strong 2024.
• But economists are suspicious, believing its data don't stand up to scrutiny and is inflated.
• This week, Trump threatened high tariffs and more sanctions if Russia doesn't end the Ukraine war.

Economists are questioning Russia's latest economic data, as they say recently published and cited figures don't seem to match its real economic predicament.

During an economic meeting on Wednesday, President Vladimir Putin claimed that 2024 was a "strong year" for Russia.

He cited what he described as a manageable 1.7% deficit, and a 26% increase in non-oil and gas revenue to 25.6 trillion rubles, about $257.9 billion.

A day earlier, Russia's finance ministry released a report saying that the country's budget revenue in December was over 4 trillion rubles, or about $40 billion — a 28% increase compared to December 2023, and the highest level recorded since 2011.

However, some are growing skeptical of the data shared by Russian authorities.

On a panel at the World Economic Forum in Davos on Wednesday, Elisabeth Svantesson, the finance minister of Sweden, said Putin "wants us to believe that Russia's economy is strong" and that Western sanctions aren't effective.

"But when you dig a bit deeper, you'll see that's not the case," she said, pointing to a report commissioned by the Swedish government.

That analysis, published in September by the Stockholm Institute of Transition Economics, found mounting imbalances and an inconsistent policy mix in the Russian economy — including massive stimulus and subsidies amid record-high interest rates.

The report also warned that official statistics like GDP growth and inflation rates were tainted by the Kremlin's propaganda machine and "manipulated to support the narrative that the Russian economy is stable."

"It's very clear that Russia's economy isn't as strong as Putin wants us to believe," Svantesson said, pointing to capital flight and nighttime satellite photos as potential evidence.

Iikka Korhonen, head of research at the Bank of Finland Institute for Emerging Economies, made a similar statement.

Korhonen said that Russia has largely stopped publishing its foreign trade data and fiscal data, in sharp contrast to before its full-scale invasion of Ukraine in 2022.

"Of course, Putin will put a positive spin on all pieces of data," he said.

As such, the published data may be correct, he added, "but they always leave out negative data and important context."

Economists on the MMI Telegram channel, a Russian discussion group, also highlighted a December Bank of Russia report on the country's balance of payments.

On Wednesday, the group said that Russia's fiscal surplus dropped last month to its lowest level since August 2020, at an estimated $5.6 billion.

While the Bank of Russia described the fiscal surplus as "stable," the MMI Telegram channel said $5.6 billion was not enough to cover the deficit in trade in services, repayment of foreign debt, and demand for foreign assets from citizens and businesses.

It added that the falling fiscal surplus was also piling pressure on the ruble, which fell to a two-year low against the dollar in November.

In a note on Thursday, TsMAKP, a think tank linked to the Russian government, highlighted what it said appeared to be inconsistencies and miscalculations in Russia's official economic data.

It said that while reported GDP growth of 3.8-4% in 2024 appeared strong, real production activity has stagnated since the third quarter of 2023 and investment estimates appeared inflated.

At the same time, the Institute for the Study of War, a Washington DC-based think tank, has questioned Russia's finance ministry report, which said that Russia's revenue hit a record high of about $40 billion in December.

It said Russia's figures failed to account for its unsustainable defense spending, high rates of inflation, a widening deficit, and the depletion of its sovereign wealth fund.

Anders Åslund, a Swedish economist and former fellow at the Atlantic Council, said this month that Russia's financial reserves could run out before the end of the year.

Not everyone is so down on the Russian economy.

Vasily Astrov, an economist at the Vienna Institute for International Economic Studies, acknowledged indicators showing a slowdown in Russia's GDP growth and high inflation, but said that Russia's defense spending of 6% of its GDP could be sustainable for "quite some time."

Exiled Russian economist Vladislav Inozemtsev wrote in November that Russia's war economy isn't in imminent danger of collapse.

And Alexander Kolyandr, a financial analyst and non-resident senior scholar at the Center for European Policy Analysis, told BI in an interview last month that with all "extraordinary" factors remaining unchanged, he didn't see any economic "collapse or meltdown" in Russia.

Even so, the US tightened sanctions against Russia earlier this month, and on Wednesday, President Donald Trump threatened high tariffs and more sanctions if it doesn't end the war.

Anders Olofsgård, a deputy director at the Stockholm Institute of Transition Economics, said oil and gas exports are by far the most important lubricant of the Russian economy, so global prices, the discount on Russian oil, and the ability to shut down Russia's shadow fleet are key.

Right now, however, Roman Sheremeta, an associate professor of economics at the Weatherhead School of Management at Case Western Reserve University, said that Putin "needs to show that he can continue this war, that his economy is capable of sustaining the Kremlin war machine for the next 2-3 years."

Otherwise, he said, Putin's "future negotiation position will be drastically undermined."

• Chinese firms that are setting up operations in countries outside China could face more scrutiny.
• Governments could start focusing on the ownership of companies rather than where goods come from.
• This would mean Chinese firms working outside China to avoid tariffs wouldn't be spared from levies.

America could lock out Chinese companies that use other countries to circumvent tariffs, a top think-tank chief said.

Companies — including Chinese ones — have been shifting some production out of China. They're trying to diversify their supply chains, which have been under more pressure in recent years thanks to the first Trump administration's tariffs and Beijing's disruptive pandemic lockdowns.

"I think there will be a lot of focus on if China's using other countries for transshipment or if it's Chinese companies that are going into another country, you're going to see a new form of protectionism where we focus on rules of ownership, not rules of origin," Michael Froman, the president of the US-based Council on Foreign Relations, said at a panel on Thursday at the World Economic Forum in Davos, Switzerland.

Trade is traditionally viewed based on the rules of origin, or which country a product came from. This is also how tariffs are generally applied.

But Froman, who served as the US trade representative from June 2013 to January 2017 under the Obama administration, said governments could soon start to look at trade in a new way: through the lens of company ownership. This change would hit Chinese companies that are using transshipment hubs to avoid punitive measures.

"So it doesn't matter that it's coming from Mexico or Indonesia. If it's a Chinese company and they're violating rules, or they're trying to circumvent the tariffs, they may well find themselves blocked from the United States," Froman said.

In his first week in office, President Donald Trump said a 10% tariff on Chinese goods could come as soon as next month. While on the campaign trail, he threatened to put much higher tariffs — 60% — on Chinese goods.

Mexico, an auto hub, is becoming a prime location for Chinese manufacturers to relocate to because the US is a key market for vehicles and parts.

In 2023, Chinese companies announced $2.7 billion worth of investments in Mexico's auto sector, according to an analysis from research provider Rhodium Group. This is nearly three-quarters of Chinese investment into Mexico and is dominated by vehicle-parts manufacturers.

The West is concerned about Chinese overcapacity

The West has slammed China's overproduction of goods that have poured into global markets and hurt their economies.

"China is flooding strategic sectors with supply that's well beyond what global demand can plausibly absorb, and therefore wiping out the competition," said Daleep Singh, then a deputy national security advisor at the White House, in October.

At the same time, China is framing the West's concerns about overcapacity as protectionism and as moves to curtail the country's economic development.

"The US and Europe basically maintained an open rules-based system, but the rest of the world greatly benefited from including China," Froman said.

"But all throughout that period, that benign international environment, we were warning China that if they continue to engage in protectionism, close their market to foreign investment, subsidize their industries at the expense of other countries, that benign international environment would disappear — and that's exactly what's happened," he said.

• Saudi Arabia said it will invest at least $600 billion in the US over the next four years.
• President Donald Trump has long enjoyed a good relationship with Saudi Arabia's crown prince.
• Trump has moved quickly since taking office, signing executive orders and announcing investments.

Saudi Arabia's Crown Prince Mohammed bin Salman has told newly inaugurated President Donald Trump that his oil-rich nation will invest at least $600 billion in the US over the next four years.

The crown prince told Trump about the investment during a congratulatory phone call on Wednesday evening, per a report from the state-run Saudi Press Agency published on Thursday.

According to the report, the two leaders discussed how the US and Saudi Arabia can work together to promote peace and security in the Middle East.

Representatives for Trump and Saudi Arabia's foreign ministry did not respond to requests for comment from Business Insider.

Trump has long enjoyed a good relationship with the crown prince. Saudi Arabia was the first foreign nation he visited during his first term.

When Trump met the crown prince in June 2019, he described him as a "friend of mine " and lauded him for "opening up Saudi Arabia."

Deal after deal

Shortly after being sworn in on Monday, Trump moved quickly, issuing a wave of executive orders covering areas including trade, immigration, and energy.

He's also been working on making deals, both domestically and abroad.

On Monday, Trump signed an executive order that would pause the ban on TikTok for 75 days. Trump said while signing the order that the US should own half of TikTok if he's able to halt the ban.

"I may not do the deal, or I may do the deal. TikTok is worthless, worthless, if I don't approve it," Trump said, adding that the social media platform could be worth $1 trillion.

And on Tuesday, Trump announced Stargate, a new joint venture between OpenAI, Oracle, and SoftBank. The president said Stargate plans to invest up to $500 billion in AI infrastructure across the US.

"Before the end of my first full business day in Washington and the White House, we have already secured nearly $3 trillion of new investments in the United States and probably that's going to be six or seven by the end of the week," Trump said while announcing Stargate on Tuesday, though he did not elaborate on the sources of the new investments.

Later, on Wednesday, Trump made an overture to Russian President Vladimir Putin about the Ukraine war. Trump said in a Truth Social post that he was doing Russia a big favor by offering to end the conflict.

"If we don't make a 'deal,' and soon, I have no other choice but to put high levels of Taxes, Tariffs, and Sanctions on anything being sold by Russia to the United States, and various other participating countries," Trump wrote.

"We can do it the easy way, or the hard way - and the easy way is always better," Trump added.

Saudi Arabia has its own priorities

It is unclear how Saudi Arabia's new investment in the US aligns with its economic priorities.

In 2016, Saudi Arabia launched its Vision 2030 plan to transform its oil-dependent economy into a more diversified one boosted by tourism and sports. The kingdom has already pumped billions into its economic pivot, with some investments going to the US.

But Saudi Arabia's sovereign wealth fund, the Public Investment Fund, said last year that it would focus more on its domestic economy. The PIF is the world's sixth-largest sovereign wealth fund, per the Sovereign Wealth Fund Institute.

The PIF's governor, Yasir Al Rumayyan, told delegates at Saudi Arabia's Future Investment Initiative business conference in October that the fund was planning to cut the proportion of foreign investments from 30% to between 18% and 20%.

"A lot of people would come looking for our money to be invested abroad. But that thing shifted over the years," Al Rumayyan said.

"So now, we're more focused on the domestic economy and we've been achieving and doing so many big things," he added.

• US President Donald Trump said he could impose 10% tariffs on Chinese goods from February 1.
• China's stock markets fell after Trump's comments, breaking several straight days of gains.
• Trump had said he could slap tariffs of 25% on Canada and Mexico from February 1.

On his first day in office, President Donald Trump signed a raft of executive orders and threatened Canada and Mexico with 25% tariffs that could come as soon as next month.

China got a pass on day one, but the break didn't last long.

On Tuesday, his second day in office, Trump said he could impose tariffs on China next month.

"We're talking about a tariff of 10% on China, based on the fact that they're sending fentanyl to Mexico and Canada," Trump said at a press conference.

"Probably February 1 is the date we're looking at," Trump said.

Trump previously threatened 60% tariffs on Chinese goods while on the campaign trail.

China is calling for better dialogue and cooperation for mutual benefit.

"Keeping business ties sound and stable serves the fundamental interests of both countries and both peoples, it is also conducive to global economic growth," China's Foreign Ministry spokesperson, Guo Jiakun, said at a scheduled press conference on Tuesday.

China's stock markets fell on Wednesday following Trump's comments, breaking several straight days of gains.

The CSI300 Index closed 0.9% lower. Hong Kong's Hang Seng Index closed 1.6% lower.

Trump's consistent threats of tariffs reflect his "American First" trade agenda, which he outlined in a presidential memo on Monday.

In the memo, Trump asked the US Trade Representative to assess China's compliance with a trade deal the two countries signed in early 2020 and recommend actions — including tariffs — as needed.

China did not meet the import requirements in the trade deal, economists from Nomura wrote in note on Tuesday.

"The concern here is that this gives the Trump administration another reason to impose additional stiff tariffs or trade demands on China to force compliance with the original trade deal," the economists wrote.

On Tuesday, Trump also took aim at the European Union.

"We have a $350 billion deficit with the European Union. They treat us very very badly, so they're going to be in for tariffs," Trump said.

• President-elect Donald Trump's inauguration is slated to be full of major business CEOs.
• Nvidia CEO Jensen Huang isn't among them — he's celebrating the Lunar New Year in Asia.
• Huang met with tech leaders and attended local celebrations in Taiwan over the weekend.

Many of Silicon Valley's tech titans are getting ready to attend President-elect Donald Trump's inauguration today — but not Nvidia CEO Jensen Huang.

On Friday, Huang was in Taiwan, where he told reporters he wouldn't be at Trump's inauguration as he will be celebrating Lunar New Year with employees.

"The year-end party is very important for us because the employees work so hard and it's my opportunity to thank everyone," Huang said, referring to festivities ahead of Lunar New Year, which starts on January 29.

Huang also told reporters he hasn't spoken with the incoming Trump administration but is looking forward to congratulating the team.

During his visit to Taiwan, Huang attended year-end parties at Nvidia and Wistron, a Taiwanese supplier, according to local media reports.

He also hosted a lunch with tech leaders including TSMC Chairman CC Wei and Foxconn Chairman Young Liu, highlighting the key role Taiwan plays in the world's tech supply chain amid geopolitical tensions with Beijing, which claims the island as its territory.

Huang's Taiwan trip also included a visit to his regular hair salon, stops at night markets, and dinner plans at TSMC founder Morris Chang's residence. Huang left Taipei on Sunday morning and is in China, according to local media reports.

An Nvidia spokesperson told Business Insider it doesn't comment on the travel schedules of its company executives.

Last year, Huang was also in Asia celebrating Lunar New Year in China.

'Jensanity' in Taiwan

Huang's 55-hour visit to Taiwan ignited excitement on the island, where he was swarmed by the media and by fans wanting his autograph.

Seen as the local boy who made good, Taiwan-born Huang is a star in Taiwan. The phenomenon has been coined "Jensanity."

During a visit to the island in June, Huang received a rockstar's reception and even signed one woman's chest. On Halloween, at least one Taiwanese kid dressed up as Huang, with his mom telling BI at the time that her 5-year-old son knew he was "dressed as a very remarkable person."

Huang has also become a tech celebrity, with his memo-writing style, fashion sense, and organizational style becoming topics of discussion.

Nvidia is the leading producer of AI chips — a key domain the US and China are competing in. The company's share price has skyrocketed in the past two years.

Nvidia is now one of the world's most valuable companies, with a market capitalization of $3.4 trillion. Huang is the 12th-richest person in the world, with the Bloomberg Billionaires Index estimating his net worth at $117 billion.

Nvidia shares closed 3.1% higher on Friday. They are up 2.6% year to date and 131% higher over the past year.

Tech leaders in the US prepare for Trump 2.0

Trump's four-day inauguration celebration kicked off on January 18.

Major tech CEOs — including Amazon's Jeff Bezos, Meta's Mark Zuckerberg, Tesla's Elon Musk, Google's Sundar Pichai, and TikTok's Shou Zi Chew — are expected to be at Trump's inauguration.

The inauguration has also drawn donations from tech giants. Google and Meta each donated $1 million to the event.

Earlier this month, Huang said he had not yet met Trump, but that he would be "delighted" to get an invite to visit Mar-a-Lago, Trump's Palm Beach resort.

Nvidia declined to comment to BI on whether the company or Huang has donated to Trump's inauguration.

Trump's inauguration also coincides with the first day of Davos in Switzerland, which draws heads of business and state from around the globe.

• China's economy grew 5% in 2024, meeting its growth target.
• Analysts expected China's GDP growth to be 4.9%, close to the 5% target.
• China faces challenges like property crisis, youth unemployment, and deflation.

In a news release on Friday morning, China's National Bureau of Statistics reported its economy grew 5% in 2024 from a year ago, meeting its official target.

Analysts polled by Reuters had expected China's full-year GDP growth to come in at 4.9%, just shy of the official target of around 5% — which analysts had said was ambitious.

Helen Qiao, the chief economist for Greater China at BofA Global Research, told Bloomberg TV that China's GDP numbers look "pretty awesome."

China's policymakers have not yet released their GDP growth target for 2025.

Markets got a slight bump from China's positive GDP release, with the benchmark CSI 300 Index and Hong Kong's Hang Seng Index both closing 0.3% higher on Friday.

In its data release, the NBS referenced some of the challenges the country is facing.

"We must be aware that the adverse effects brought by external environment are increasing, the domestic demands are insufficient, some enterprises have difficulties in production and operation, and the economy is still facing difficulties and challenges," the NBS wrote.

What boosted China's 2024 GDP?

Analysts attribute China's better-than-expected GDP growth to a strong fourth quarter, notably in retail spending.

China's economy grew 5.4% in the fourth quarter from a year ago — better than the 5% analysts had expected — after the government unleashed aggressive measures in September.

Last year, authorities rolled out measures to boost domestic consumption, including a trade-in program for consumer products, including household appliances.

Retail sales hit 4.5 trillion yuan in December. For the fourth quarter, retail sales rose 3.8% to the fastest pace of the year.

Full-year retail sales grew by 3.5% — well lower than the 7.2% growth in 2023.

China's economy continued to be supported by its exports, which sent the country's full-year trade surplus to nearly $1 trillion.

In December, industrial production jumped 6.2% as factories rushed to meet a frontloading of export orders ahead of US President-elect Donald Trump's inauguration on January 20. Trump has threatened to impose a 60% tariff on all Chinese goods, which would raise costs for importers.

All eyes on consumers

Consumer sentiment in China, however, has been lackluster. People aren't spending enough, and some are trading down for cheaper products.

"The key question is if we can see consumer confidence bottom out and begin a meaningful recovery. Pessimism has grown quite entrenched as of late, and it will take a lot of effort to break out of the doldrums," wrote Darren Tay, the head of Asia Pacific country risk at BMI.

China's economy has been struggling to recover from the pandemic. It's facing numerous challenges, including a yearslong property crisis, high youth unemployment, and deflation.

In the longer term, China is grappling with a demographic crisis. The country's population fell for a third straight year in 2024.

Some analysts are calling for caution on China's uneven two-speed economic growth.

"While economic conditions are improving overall, not every sector is benefiting, underscoring potential challenges in job creation," wrote Dilin Wu, a research strategist at the online trading platform Pepperstone.

But bad news could turn into good news for China, Wu added, as an increasing number of challenges may prompt additional stimulus measures during the country's annual parliamentary meetings in March.

How to read China's data releases

Despite the strong showing in China's GDP growth last year, there are longstanding concerns over the accuracy and quality of the country's official data releases.

Gao Shanwen, a prominent Chinese economist, said recently that China's official GDP figures may be inaccurate and higher than actual growth numbers.

Analysts at Rhodium Group wrote in a December report that China's official data needs to be read in the context of implicit "authority bias," as Beijing highlights some positive and stable data while excluding other more negative data.

Notably, China has reported just a modest slowdown in real GDP growth from pre-pandemic levels — from 5.2% in 2023 to 4.8% on a year-to-date basis by the third quarter of 2024 — but authorities have launched a series of aggressive stimulus measures such as a 10 trillion yuan refinancing program for local government debt and a mechanism to support the stock market directly.

"No government adjusts economic policy like that to counter a minor slowdown," the analysts wrote.

• China is loading up on soybeans amid US trade war fears.
• China's soybean imports rose 6.5% in 2024, hedging against potential Trump trade policies.
• Intensifying US-China trade tensions could hit the soybean trade, impacting US farmers and rural economies.

China is stockpiling more than semiconductor chips amid its trade war with the US.

Last year, China imported a record 105.03 million metric tons of soybeans — a key crop that was embroiled in Donald Trump's tariff war with China during his first presidency.

China's import of US soybeans, in particular, also spiked last year, rising 6.5% from 2023, according to Reuters' calculations of official customs data.

Buyers from China — the world's largest soybean consumers — were likely stocking up on the crop to hedge any geopolitical risks ahead of Trump's second term, analysts said.

Trump has threatened to put 60% tariffs on all Chinese goods during his second presidential term, igniting fears of an intensification in trade tensions.

"If the US ramps up tariffs on Chinese imports, China could target US agricultural imports as retaliatory tariff countermeasures," Rajiv Biswas, an international economist and the author of "Asian Megatrends," told Business Insider.

"US soybean imports are likely to be a key target for China's retaliatory tariff measures due to the very large scale of China's soybean imports from the US," he added.

The power of the soybean market

The US is the world's second-largest soybean producer after Brazil. It accounts for about a quarter of China's import of the oilseed, which it typically uses for animal feed.

During his first term as president, Trump slapped heavy tariffs on Chinese imports.

In response, China imposed 25% tariffs on US agricultural produce, including soybeans, sending American soybean exports to China sharply lower.

The tariffs on some of these farm imports were waived ahead of the US-China trade deal in January 2020.

Impact on American farmers

A replay of retaliatory tariffs during Trump's second presidency could hit US soybean farmers.

"In a scenario where China imposes retaliatory tariffs on US soybeans in 2025, the impact would again likely be a substantial economic loss for the US soybean industry," said Biswas.

A study from the American Soybean Association and the National Corn Growers Association shows that a new trade war would result in an "immediate drop in corn and soy exports to the tune of hundreds of millions of tons."

"Brazil and Argentina would claim the lost market share, which would be extremely difficult for American growers to reclaim in the future," the two associations said in October, cautioning against a trade war.

There isn't enough demand from the rest of the world to offset a major loss of soybean exports to China, they added.

A trade war would create a "ripple impact across the US, particularly in rural economies where farmers live, purchase inputs, use farm and personal services, and purchase household goods," wrote the two agriculture trade associations.

As it is, Chinese soybean importers have diversified their sources since Trump's first presidential term, with Brazil a major beneficiary of the trend.

Any decline in Chinese soybean demand — made worse by the country's ongoing economic downturn — would also weigh on the trade in a well-supplied market.

"Although a Trump presidency could reignite US-Mainland China trade tensions and potential Chinese tariffs on US soybean exports, we anticipate that the expected decline in Chinese demand will mitigate price impacts," BMI Research wrote last week.

• The Russian central bank has dismissed rumors of freezing retail bank deposits.
• Freezing deposits would harm financial stability and undermine trust, the bank said.
• Last year, the central bank hiked rates to 21% in an attempt at cooling Russia's wartime economy.

Russia's central bank has taken to Telegram to publicly dismiss rumors that its citizens' bank deposits may be frozen.

The idea that retail bank deposits could be frozen is "absurd" and "unthinkable," the Central Bank of Russia wrote in a Telegram post on Monday.

"In addition to the fact that this is a gross violation of the right of citizens and companies to manage their assets, such a step will undermine the foundations of the banking system and the financial stability of the country," the regulator wrote.

The concerns came after Elvira Nabiullina, Russia's central bank governor, hiked rates to 21% late last year in a bid to cool soaring inflation — an economic pain point President Vladimir Putin has acknowledged.

The high interest rates attracted a flood of bank deposits. Recently, rumors emerged that retail deposits could be frozen, prompting Russians to swarm the central bank with questions, the bank wrote in its Telegram post.

"It is quite obvious that in any market economy, of which bank lending is an integral part, such a step is unthinkable," the bank wrote in the post dismissing the rumors.

The rumors about frozen deposits are a reflection of the nervousness in Russia's wartime economy.

This is not the first time Russia's central bank has addressed concerns that Russians' savings could be frozen and interest withheld.

In November, Nabiullina dismissed such concerns as "nonsense," Russia's RBC news outlet reported. She was responding to a question from the lower house of Russia's parliament.

Russia has been under a slew of Western sanctions since it invaded Ukraine in February 2022. It has managed to avoid going bankrupt thanks in part to growth from its massive spending on military and defense activities. It has also managed to pivot to alternative export markets such as China and India.

However, the Russian central bank has warned that the economy is at risk of overheating.

Russia's economy faces multiple issues like high inflation, a decline in the value of the ruble, and a severe manpower shortage.

In November, the country's inflation rate hit nearly 9%. Prices of staples from butter to potatoes in the country have risen sharply, putting a strain on the finances of ordinary citizens.

As the war in Ukraine nears its fourth year, Russia's economy could run out of cash before the end of this year, a Swedish economist wrote on Tuesday. This could hit its ability to continue financing the war and its economy.

• The latest US sanctions on Russia's energy sector impact China and India, altering trade dynamics.
• The sanctions target Russian oil giants and tankers, raising oil prices to a four-month high.
• China and India may seek oil from other regions, while Russia might offer discounts.

The US' latest move to hit Russia's energy revenues is changing up the industry's global trade flows.

On Friday, the US Treasury Department— together with the UK — slapped new sanctions against Russia's key energy sector, including restrictions against oil giants Gazprom Neft and Surgutneftegas.

The Biden administration also imposed sanctions on 183 tankers associated with Russia's oil trade. Last year, that group of ships transported about one-quarter of Russia's energy exports, mostly crude oil, Goldman Sachs analysts estimated in a Sunday note.

Buyers from China and India — Russia's top oil customers — are likely to be impacted by the new sanctions, changing the world's energy trade dynamics.

Traders in China and India look to the Middle East, Americas

China will be impacted by the latest sanctions because most targeted tankers ship oil to the country, wrote Matthew Wright, the lead freight analyst at analytics firm Kpler, on Friday.

The sanctions, which would impact oil shipping, trading, and insurance, sent prices of the commodity up to a four-month high on Monday.

International benchmark Brent crude oil futures were 1.7% higher at $81.15 a barrel at 2.10 a.m. ET. The US benchmark West Texas Intermediate futures were up 1.9% at $78 a barrel.

Both Brent and WTI oil futures are up 8% this year to date.

Traders told Reuters that China and India will be forced by the new sanctions to seek non-sanctioned oil from the Middle East, Africa, and the Americas.

A Singapore-based trader told the news agency the sanctioned tankers shipped close to 900,000 barrels per day of Russian crude oil to China over the past 12 months and that these exports are going to "drop off a cliff."

Even before this round of sanctions, oil traders in China and India have been anticipating higher curbs on Russian oil. They have increased crude oil purchases from the Middle East and the Atlantic Basin, Bloomberg reported on Friday.

These latest developments illustrate the fast-changing pace of the world's energy flow since Russia's full-scale invasion of Ukraine in February 2022 triggered sweeping sanctions against the energy giant.

They also come just days before US President-elect Donald Trump takes office. The incoming American leader has pledged to lift energy output and boost the US' energy exports.

Russia is a top supplier of crude oil to both China and India.

Not a 'game-changer'

The incoming US administration's stance on the energy sector is one reason why recent oil price gains may not continue, wrote Vishnu Varathan, Mizuho's head of macro research for Asia, excluding Japan.

Varathan said in a Monday note that while the latest oil sanctions against Russia are boosting the market, they are not a game-changer.

Not only is the potential of higher US supply expected to hold up the market, but demand from China — the world's second-largest economy — has also slowed amid prolonged economic malaise.

Goldman Sachs analysts also cited the high spare capacity in oil as a factor that could weigh on prices.

Meanwhile, Russia is likely to pull out countermeasures to the US' latest sanctions package.

"Russian oil can discount to incentivize continued shipping by a dynamic shadow fleet and continued purchases by price-sensitive buyers in new or existing destination countries, with both the ships and buyers being less sensitive to Western sanctions," Goldman Sachs analysts wrote.

• China has expanded its trade-in program to boost consumer spending on home appliances.
• The program, launched in March, includes subsidies and has shown positive results.
• China faces economic challenges including deflation fears and low consumer demand.

China's cautious consumers are spending less, prompting Beijing to dish out incentives even for small home goods.

On Wednesday, China added home appliances, including microwave ovens, water purifiers, dishwashers, and rice cookers, in a trade-in program designed to spur demand.

The program, which was first rolled out in March, already included bigger appliances like refrigerators, washing machines, TV sets, and air conditioners. The Chinese government subsidizes up to 20% of the price of a new appliance.

The Chinese government, which had allocated 81 billion yuan, or $11 billion, for the trade-in program, said on Wednesday that the program had yielded positive results.

Li Gang, a Chinese commerce ministry official, said at a press conference on Wednesday that the trade-in program resulted in 920 billion yuan worth of auto sales and 240 billion yuan worth of home appliances sales last year.

China is trying to boost consumption in the world's second-largest economy, which is beset by multiple challenges including a property crisis and high youth unemployment.

China deflation fears

Economists are especially worried about a deflation spiral, which would result in a vicious cycle of dampened consumer demand and lower prices.

Official inflation data released on Thursday gave little cheer, with China's consumer price index last year inching up just 0.2% from a year ago.

In December, China's CPI edged up just 0.1% more than a year ago in its fourth straight month of decline, with food price declines dragging inflation down. In comparison, November CPI was 0.2% higher than a year ago.

The headline inflation figure did not fall into deflation territory thanks to non-food inflation — which edged up 0.2%.

However, the data about non-food prices "does not inspire too much confidence in an uptick of consumption yet," wrote Lynn Song, the chief economist for Greater China at ING, on Thursday.

Prices of clothing, education, and healthcare moved up in December.

However, prices of transportation, communications, daily use goods, and rent were in the deflationary zone.

Factory gate prices were in deflation for the 27th straight month.

Analysts generally expect China's inflation data to pick up this month thanks to seasonal factors as Chinese New Year, which starts on January 29.

However, official data about wholesale farm product prices in China so far this month point to food prices being "subdued and weaker than traditional seasonality suggests," wrote Nomura economists on Thursday.

• Russian President Vladimir Putin ordered his government and a big bank to work with China on AI.
• Russia has been seeking tech alternatives post-Ukraine invasion due to Western sanctions.
• A Russia-China AI partnership could raise concerns over censorship, among other issues.

Russian President Vladimir Putin continues seeking to expand his challenge of the West's order — this time in tech.

The Russian leader has ordered his government and Russian banking giant Sberbank to work with China on artificial intelligence, according to a December 30 post on the Kremlin's website.

Putin instructed his government and Sberbank to "ensure further cooperation with the People's Republic of China in conducting technological research and development in the field of artificial intelligence," according to the Kremlin's post. It was published three weeks after Putin announced a BRICS AI Alliance Network.

Putin delegated Prime Minister Mikhail Mishustin and Sberbank CEO German Gref to lead the AI effort. A progress report is expected by April.

Russia's building parallel systems to the West

Putin's instructions came 34 months after Russia's full-scale invasion of Ukraine, which triggered sweeping Western sanctions against his regime.

The trade restrictions have hit Russia's access to financial payments technologies, prompting the country to seek substitutes in the form of parallel imports and domestic substitutes.

Russia has also been setting up alternative systems to process payments transactions and ship sanctioned oil around the world.

However, finding tech alternatives to Western products has not been easy.

A former top Russian finance official told Reuters in September 2022 that Russia would be using second-grade tech for years and spending "huge resources" to recreate what already exists. Goods heavily impacted by Western sanctions include semiconductor chips, aviation parts, and medical products.

Sberbank CEO Gref said in April 2023 that graphics cards for AI and supercomputers were the hardest to substitute.

The US has restricted sales of advanced computer chips to Russia since 2022 and further tightened restrictions on third-party chip exports to Russia last year.

Alexander Vedyakhin, the first deputy CEO of Sberbank, told Reuters last month that Russia was six to nine months behind the US and China in AI in a range of parameters.

Vedyakhin told the news agency that Russia would focus on developing large language models rather than building massive data centers.

A potential Russia-China partnership in AI could cause concerns beyond sanctions skirting.

China's foray into AI is raising concerns about censorship in the country, where expression is tightly controlled.

Chinese officials have tested Chinese large language models to ensure they embody "core socialist values," according to a Financial Times report in July.

• Transnistria is facing heating cuts after a halt in piped Russian natural gas supplies to Europe via Ukraine.
• The gas halt follows Ukraine's decision to not renew a gas transit contract with Russia.
• EU countries, like Slovakia, still rely on Russian gas, highlighting geopolitical risks.

A European region is grappling with freezing temperatures in winter after Russian natural gas stopped flowing to Europe via Ukraine.

On Monday, local energy company Tirasteploenergo warned residents in Transnistria, a breakaway region of Moldova, that heating and hot water services would be cut from 7 a.m. on Wednesday — the first day of 2025.

Hospitals and critical infrastructure still received heating, but the situation is precarious for Transnistria's population, which numbered about 475,000 at its last census in 2015.

Tirasteploenergo advised residents to take basic measures to keep warm, as temperatures could dip to 23 degrees Fahrenheit in the capital city of Tiraspol in the coming days.

"To keep the room warm, seal the cracks in the windows and balcony doors, hang blankets or thick curtains over them. Place all family members in one room, temporarily closing the rest of the rooms," the company told customers.

Tirasteploenergo also advised consumers to use electric heaters but to limit energy use.

"Dress warmly and take preventive medications for acute respiratory infections and flu," it added.

A company employee told Reuters on Wednesday that she did not know how long the situation would persist.

Tirasteploenergo did not respond immediately to a Business Insider request for comment outside regular business hours.

The halt in services came following the termination of a five-year Russian gas transit to Europe via Ukraine after Kyiv refused to renew the deal over the war in Ukraine. The pipeline's shutdown marked the end of an era for Russia's oldest gas route to Europe.

The cessation of gas supplies would hit Transnistria particularly hard since the region has been getting gas free of charge from Russian state-owned giant Gazprom.

Transnistria declared a 30-day economic emergency last month ahead of the impending energy crisis.

Moldova has also declared a 60-day state of emergency as the landlocked country still gets much of its gas from Transnistria.

'A historic event'

Ukrainian Energy Minister German Galushchenko hailed the halt of Russian gas to Europe as a "historic event."

"Russia is losing its markets and will suffer financial losses," Galushchenko said in a Wednesday statement.

The developments illustrate the region's geopolitical and economic entanglements with Russia, an energy giant.

Many European Union countries have weaned themselves off Russian piped gas, which used to account for nearly 40% of the bloc's supply, but some — like Slovakia and the Czech Republic — are still reliant on Russian gas.

The EU as a whole also still imports seaborne Russian liquefied natural gas.

The Czech Republic — a landlocked country that cut Russian piped gas imports in the summer of 2023 — imported more of the fuel in 2024 because it was cheaper than LNG, Bloomberg reported in November.

Meanwhile, Slovak Prime Minister Robert Fico appealed to the EU to find a way to keep Russian gas flowing via Ukraine. Slovakia made as much as 500 million euros, or $518 million, a year in Russian gas transit fees and would pay about 90 million euros more a year for alternative gas sources.

"Halting gas transit via Ukraine will have a drastic impact on us all in the EU — but not on the Russian Federation," Fico said in his New Year's address.

• The US Treasury has been hacked by China-backed actors in what the agency called a "major cybersecurity incident."
• Hackers accessed "certain unclassified documents" through Treasury workstations, wrote a Treasury official.
• The US is also probing years-long hacking from China. Microsoft named the group "Salt Typhoon."

China-backed hackers have accessed some US Treasury Department computers, the agency told Congress in a letter on Monday.

The Treasury learned of the hacking on December 8 when BeyondTrust, a third-party software provider, notified the agency that a hacker had gained access to a key used by BeyondTrust to get into a cloud-based service that provided remote technical support.

Aditi Hardikar, the Treasury's assistant secretary for management, wrote in the agency's letter that the hackers accessed "certain unclassified documents" through Treasury workstations.

The breach is considered a "major cybersecurity incident," wrote Hardikar. The hackers do not still have access to the agency's information, per her letter.

The Chinese embassy in Washington DC hit back at the accusation, saying in a statement to Bloomberg that the US was making "smear attacks against China without any factual basis."

"The US needs to stop using cybersecurity to smear and slander China, and stop spreading all kinds of disinformation about the so-called Chinese hacking threat," added the Chinese embassy.

The embassy did not immediately respond to a Business Insider request for comment outside regular business hours.

A BeyondTrust spokesperson told BI that a "limited number of customers" were involved in the security incident. The customers have been notified and offered support, he added.

Georgia-based BeyondTrust holds over $4 million worth of federal government contracts, according to a Bloomberg compilation of government data.

The news of the Treasury's hacking comes as the US government continues to probe what US security officials say is a a years-long hacking campaign that originates in China.

The investigation started in the summer following alerts from Microsoft, which named the hacker group Salt Typhoon.

White House Deputy national security advisor Anne Neuberger told reporters earlier this month that while data belonging to millions of Americans was likely compromised, the hack targeted senior US officials.

"We believe the calls they recorded and took was really more focused on very senior political individuals," she said.

• Russian President Vladimir Putin traveled extensively this year, despite being sanctioned by the West.
• His meetings were mostly in Russia or Asia. The International Criminal Court issued a warrant for his arrest.
• But ICC member Mongolia did not arrest Putin, citing its reliance on Russian energy.

Russian President Vladimir Putin was a social butterfly this year, traveling to various countries and meeting foreign dignitaries at home — even though he is heavily sanctioned.

The Russian leader started the year mostly in his country ahead of the presidential election in March in which he won by a landslide.

Soon after, Putin started traveling and hobnobbing with dignitaries, primarily at home and also in Asia.

In all, Putin took 11 international trips this year, according to TASS state news agency.

Since Putin is wanted by the International Criminal Court, his travel was still limited — but some world leaders came to him instead. He took part in over 220 events with 54 world leaders, per TASS.

In July, Putin met Indonesia's then-President-elect Prabowo Subianto, who was visiting in his capacity as defense minister. Prabowo described Russia "as a real friend" during his visit with the Russian leader.

In September, Putin met Malaysian Prime Minister Anwar Ibrahim on the sidelines of an economic forum.

In October, Putin hosted the BRICS summit involving a group of major emerging economies, where he met a number of world leaders including Chinese leader Xi Jinping, Indian Prime Minister Narendra Modi, and South African President Cyril Ramaphosa.

Away from home, here's who Putin met and what he did.

Putting on a full bromance display with Xi in May

The first notable person Putin met this year was Chinese leader Xi Jinping. The Russian leader traveled to Beijing to meet his Chinese counterpart.

Xi rolled out the red carpet for Putin in Beijing with a show of pomp and pageantry featuring a marching band, a guard of honor, a 21-gun salute on Tiananmen Square, and flag-waving children.

Putin was also treated to a banquet featuring delicacies like Peking Duck, sea cucumber, and sea bass in shrimp cream.

For Xi, Russia is a strategic partner against Western dominance. For Putin, the Chinese connection is more than geopolitics.

China has been a closing trade partner of Russia even before the invasion of Ukraine, and ties between the two have only gotten tighter since the war started.

Since the EU's sweeping sanctions against Russia, Moscow has steered the country's trade — especially in oil — eastward, particularly to China and India.

Trade between Russia and China hit a record $240 billion in 2023, a 26% jump from 2022.

Putin followed his international itinerary by visiting the former Soviet republics of Belarus and Uzbekistan in the same month.

North Korea

In June, Putin made his way to Pyongyang, where he spent a day cozying up to North Korean dictator Kim Jong Un.

The last time the Russian leader visited the isolated nation was in 2000.

Kim showered Putin with presents, a welcoming ceremony involving a large crowd, a banquet, and a concert.

Among the gifts Kim gave Putin were what appears to be a portrait of the Russian leader, a bust bearing Putin's likeness, a Russian-made Aurus limousine, several white horses, and a pair of Pungsan hunting dogs for the avid hunter.

Vietnam

In June, Putin visited Vietnam, a supply chain hot spot for many multinational companies diversifying their operations outside China.

The US embassy in Vietnam issued sharp criticism of the visit, saying that "no country should give Putin a platform to promote his war of aggression and otherwise allow him to normalize his atrocities."

During his visit, Putin was gifted with an installation art performance featuring a sculpture of "whinnying war horse, galloping majestically under the canopy of a birch forest," according to information from a Vietnamese government website.

The late Vietnamese leader Nguyen Phu Trong, who died the following month, presented Putin with the gift, which was accompanied by a light show. The light show featured images of a young Putin and the Russian leader today.

It's unclear if Putin took the sculpture home with him.

Mongolia

In the second half of the year, Putin visited several Central Asian countries, including the former Soviet republics of Azerbaijan and Turkmenistan.

He also went to Kazakhstan for the Shanghai Cooperation Organization summit.

Among Putin's trips in the later part of the year, his September visit to Mongolia raised eyebrows.

Mongolia is a member of the International Criminal Court, so it is supposed to enforce the organization's arrest warrant for Putin.

But that didn't happen.

Instead, Mongolia gave Putin a lavish welcome and the Russian leader left a free man.

Mongolia explained that Russia is too important for its energy security.

"Mongolia imports 95% of its petroleum products and over 20% of electricity from our immediate neighborhood, which has previously suffered interruption for technical reasons. This supply is critical to ensure our existence and that of our people," a Mongolian spokesperson told Politico.

• Germany's foreign minister urged new European Union sanctions on Russia's dark fleet.
• As part of a probe into a cut cable, Finland said last week it detained a ship that may be from the dark fleet.
• The case is being investigated as "aggravated criminal mischief," Finnish police said.

Germany's foreign minister has called for further sanctions against Russia's dark fleet of oil tankers following damage to an underwater cable linking Finland and Estonia last week.

"Ships are damaging major undersea cables in the Baltic Sea almost every month," German Foreign Minister Annalena Baerbock told the Funke media group.

"Crews are leaving anchors in the water, dragging them for kilometers along the seafloor for no apparent reason, and then losing them when pulling them up," Baerbock said, per an AFP translation.

"It's more than difficult to still believe in coincidences. This is an urgent wake-up call for all of us," she added.

Baerbock urged new European Union sanctions against Russia's dark — or shadow — fleet of oil tankers that transport sanctioned Russian oil and energy products.

The EU has also sanctioned 79 vessels from Russia's shadow fleet. These ships are banned from accessing EU ports and services.

Many of these vessels are aging, operating under opaque ownership, and sailing without adequate insurance coverage. They pose environmental and financial risks to coastal countries. A heavy storm earlier this month caused two tankers to spill thousands of tons of low-grade fuel oil into the Kerch Strait, between the Russian-occupied Crimean Peninsula and Russia.

Baerbock's comments came after Finnish authorities detained the Eagle S oil tanker on Thursday as part of an investigation into the cutting of an undersea cable in the Baltic Sea. The cable transmits electricity from Finland to Estonia.

The case is being investigated as "aggravated criminal mischief," Finnish police said in a press release.

Finnish customs authorities and the European Union's executive commission said the tanker might be part of Russia's dark fleet of tankers.

The Kremlin declined to comment on Finland's seizure of the oil tanker on Friday.

"I cannot say anything for sure, for this is a highly specialized issue that the presidential administration is hardly in a position to comment on," Kremlin spokesperson Dmitry Peskov said in response to a question on the Finnish move.

On Friday, NATO Secretary General Mark Rutte said on X that he had spoken to the Finnish president about the investigation into the "possible sabotage of undersea cables."

"#NATO will enhance its military presence in the Baltic Sea," Rutte added.

• Taiwan has held its first tabletop war game amid rising tensions with China.
• The exercise simulates military escalation and involves government and civil groups.
• Taiwan aims to train 50,000 volunteers for emergencies amid China's military drills.

Taiwan's Presidential Office held its first-ever tabletop war games on Thursday in a sign of heightened tensions with Beijing.

The exercise simulates a military escalation with China, which claims Taiwan as its territory. It took place at the island's Whole-of-Society Defense Resilience Committee meeting.

"The Taiwanese society must race against time to build capabilities that can counter threats of large-scale disasters and deter enemy aggression," Lai said at the opening of the event, without naming any country as an aggressor.

The three-hour wargame exercise involved central and local governments, as well as civil groups. It simulated various scenarios, including one in which self-governed Taiwan is "on the verge of conflict" and "high intensity" grey-zone warfare, Lai said.

Liu Shyh-fang, Taiwan's interior minister, said the island's government aims to train over 50,000 volunteers to respond to emergencies by next year. Authorities hope to involve a range of people, including taxi drivers and security guards, in the effort.

Taiwan's focus on emergency preparedness comes amid escalation with China in recent years. Beijing conducted two major exercises around Taiwan this year, in addition to other drills.

In October, China's military surrounded Taiwan during the "Joint Sword-2024B" exercise to show it could blockade key ports, execute strikes, and assault positions.

In May, China launched the "Joint Sword-2024A" exercise following the inauguration of Lai, whom Beijing has branded a separatist.

"The peace and stability in the first island chain is being collectively challenged by authoritarian states," Lai said, referring to an arc of archipelagos from Indonesia to Japan.

Taiwan's tensions with China are not just about the two sides.

Taiwan — a $775 billion economy with a population of about 23 million — is the world's semiconductor chip hub, so any national security development on the island has broader implications for the global economy.

Meanwhile, the US is obliged to ensure that Taiwan has the means to defend itself under the Taiwan Relations Act.

Just last week, the US State Department approved $295 million in arms sales to Taiwan. China said that it "strongly deplores and firmly opposes" the move.

Taiwanese President Lai has challenged the notion that mainland China is Taiwan's "motherland." In July, he said the government of Taiwan — whose official name is the Republic of China — is older than Beijing.

• Russian interest rates on deposits and loans have risen faster than its central bank's key rate.
• A central-bank official said lending might have slowed too quickly in the battle to lower inflation.
• Russia's central bank has kept its interest rate at 21% to avoid excessive cooling in its economy.

Russia's central bank has been hiking rates consistently in the second half of this year in an attempt to cool high inflation — but it may be running ahead of the curve.

Bank lending has slowed, but there's a risk that it's "faster than necessary" in the fight to bring down inflation to Russia's target rate, a central-bank official told Interfax on Tuesday.

Andrey Gangan, the director of the Central Bank of Russia's Monetary Policy Department, told the news agency that bank interest rates on deposits and loans were rising faster than the central bank's benchmark rate, slowing lending activity.

The development prompted the central bank to keep its benchmark interest rate at 21% on Friday. Analysts polled by Reuters had expected Russia's central bank to hike its key rate to 23%.

"Throughout December, we received increasing confirmation of tighter monetary conditions, culminating in Friday's decision," Gangan said.

Citing official data, Interfax reported that corporate bank lending grew 0.8% in November, down from 2.3% in October.

Lenders are planning to expand their loan portfolios at a lower level next year, Gangan said.

Putin called for a 'balanced' decision on interest rates

Gangan's comments followed speculation that Russia's central bank had been under pressure from President Vladimir Putin and the business community to hold back on rate hikes.

A day before the central bank's meeting, Putin called for a "balanced" decision about the interest rate.

Russia's top central banker, Elvira Nabiullina, said at a press conference following Friday's interest-rate announcement that she was worried about "excessive cooling" in the country's overheated economy.

Despite the slowdown in bank lending that prompted Russia's central bank to keep rates steady, inflation remains high, reflecting challenges in the country's sanctions-hit economy.

Russia's inflation rate hovered at about 8% in the year to November, compared with the target rate of about 4%, according to government figures.

Gangan told Interfax that full-year inflation was expected to be about 9.6% to 9.8%. Price raises are expected to peak in April 2025 before falling.

"The current price growth we are observing is the result of factors that have accumulated over most of this year," he said.

But the central bank still needs to keep rates steady this time so that the slowdown in bank lending — which leads to economic cooling — would not be "faster than necessary for bringing inflation back to the target," Gangan said.

• Russia's natural-gas transit deal with Ukraine is set to expire soon, which would cut billions in revenue.
• The deal's possible end affects European countries relying on Russian gas via Ukraine.
• Russia has shifted much of its energy exports to India and China amid Western sanctions.

Russia is set to lose yet another source of income for its war chest in days — and it's Ukraine calling the shots.

An agreement to let piped Russian natural gas transit via Ukraine to Europe is set to expire at the end of the year, depriving Moscow of billions of dollars in income for its wartime economy.

European countries receiving gas from the pipeline have voiced concerns about the end of the supply, but Ukrainian President Volodymyr Zelenskyy has repeatedly said that the five-year agreement will not be renewed.

Russia has meanwhile said it's ready to extend the agreement — though President Vladimir Putin said last week that it was "clear" there wouldn't be a new contract.

Still, the situation could change.

Zelenskyy said last week that Ukraine could consider continuing the arrangement if Russia doesn't receive payments for the fuel until the war ends.

On Monday, the Kremlin's spokesperson, Dmitry Peskov, said the gas transit was complicated.

"The situation here is very difficult, requiring greater attention," Peskov said, according to the TASS state news agency.

Russia is probably making $5 billion in gas sales via Ukraine this year

The end of the five-year transit deal would be a blow for Russia, which could make about $5 billion from gas sales via Ukraine this year alone, according to Reuters' calculations based on Moscow's gas price forecast.

It would also impact several European countries that still depend on Russia for gas, including Slovakia, the Czech Republic, and Austria. There are alternative energy sources and pipelines available, but they could be pricier.

Ukraine could lose hundreds of millions of dollars a year in transit fees — a Kyiv consulting firm told Bloomberg in September that this amounted to about $800 million.

But Ukraine's $800 million revenue from transit would just be a "paltry 0.5% of the country's annual GDP," analysts at the Center for European Policy Analysis, a think tank, wrote in a report last week.

They argued that it was "simply preposterous" to think that continuing the transit deal would offer Ukraine a security guarantee as Russia would want to preserve its gas flows to Europe.

This is because "Russia always put itself first," the analysts added.

Russia diverts energy flows away from Europe

The end of the Ukraine transit route for Russia's gas would put more pressure on Putin's wartime economy, which has plummeted because of sweeping Western sanctions targeting its massive oil and gas trade.

Energy accounts for about one-fifth of Russia's $2 trillion GDP. The country's energy revenue fell 24% last year on the back of sanctions and continues to be under pressure this year as Europe weans itself off Russian gas.

Russia once accounted for as much as 40% of Europe's gas market, but the EU has cut its reliance on the fuel since the Ukraine war.

In response, Russia has diversified its energy customer base, diverting most of its previously Europe-bound oil to India and China.

On Friday, the Russian energy giant Gazprom said in a Telegram post that it delivered a record amount of gas to China via an eastern Siberian pipeline. It didn't specify the volume of gas it delivered but said it was above its contractual obligations with the state-owned China National Petroleum Corporation.

• Russian President Vladimir Putin maintains alliances despite sanctions, keeping Russia's economy afloat.
• Countries like India and Vietnam balance relations with both Russia and the West.
• These alliances are crucial for Russia to navigate trade restrictions and economic challenges.

Russian President Vladimir Putin may be heavily sanctioned and running a country that faces sweeping trade restrictions, but he still has friends.

Russia's friends — or frenemies — aren't all pariah states or US rivals. Some of them, like India and Vietnam, have good relations with the West, too.

"Putin is eyeing strategic swing nations like India, which opposes China and trades with Russia," Sean McFate, a military strategist and author of "The New Rules of War," told Business Insider in September.

Moscow is also trying to emerge from diplomatic isolation, looking to forge strategic relationships beyond autocratic partners like China, North Korea, and Iran, he said.

Still, among the nations Putin has been cozying up to, some are more important to Russia because they keep trade humming.

These are five key countries for Russia's sanctions-skirting economy:

1. China

It's no secret that China and Russia have a special relationship.

Not only did Beijing and Moscow declare their "no limits" friendship in a joint statement on February 4, 2022, when Putin visited China for the Beijing Winter Olympics, but the Russian leader wasted no time buttering up China after his election victory in March this year.

China was the first country Putin visited after he was inaugurated for his fifth term as president.

As authoritarian regimes, Russia and China have close historical and political roots. Beijing's rivalry with the US and the West also plays right into Russia's script.

China has consistently ranked as one of Russia's most important trading partners since the mid-2000s.

Last year, China's trade with Russia jumped 26%, to a record $240 billion.

2. India

While China's ties with Russia are based on their antagonistic relationships with the West, Moscow's relationship with India is more nuanced.

New Delhi has been getting closer to the US in recent years. The world's largest democracy, India is a member of the Quadrilateral Security Dialogue, a security pact that includes the US, Japan, and Australia.

It's also a top supply chain hotspot alternative to China.

At the same time, India has become one of Russia's top trading partners after Moscow pivoted most trade away from Europe, following sweeping sanctions.

Russia's relationship with India goes back to the Cold War, and trade between the two countries has grown since Russia started the war in Ukraine. India is a major buyer of Russian oil and Russia is India's biggest arms supplier.

In June, Indian Prime Minister Narendra Modi visited Russia and met Putin, showing New Delhi isn't afraid to forge its own path in diplomacy.

3. Brazil

Russia and Brazil have what each other needs, making for a mutually beneficial relationship.

Russia exports oil and fertilizers to Brazil and Brazil exports agriculture products — including soybeans, coffee, and meat — to Russia.

In 2023, bilateral trade between Russia and Brazil reached $8.4 billion, off a record high of nearly $10 billion in 2022.

In recent years, Brazil has become important to Russia as part of the BRICS group, which Putin sees as a counterweight to the West-led world order.

Like Putin, Brazilian President Luiz Inacio Lula da Silva backs a multipolar world and has championed an alternative to the almighty US dollar in global trade and payments.

"Every night I ask myself why all countries have to base their trade on the dollar," the Brazilian leader said in April 2023.

4. Turkey

Putin and Turkish President Recep Tayyip Erdogan are both longtime strongmen leaders.

Russia is one of Turkey's top trading partners, so there are compelling reasons why Ankara would want to deepen ties with Russia.

Just half a year into Russia's invasion of Ukraine, Erdogan took up Putin's offer to create a "natural gas hub" as Europe weaned itself off natural gas imports from Russia.

Since the war's outset, Turkey — a NATO member — has been positioning itself as an intermediary between the West and Moscow, brokering grain export deals between Russia and Ukraine and offering to host peace talks between the two sides.

Turkey has also expressed interest in joining BRICS — which Russia is a member of — and has been given partner country status.

5. Kazakhstan

Former Soviet republics, Russia and Kazakhstan are close trade partners and their economic relationship has only deepened amid the Ukraine war.

In 2024, trade turnover between the two countries reached $27 billion — nearly 40% higher than the $19.7 billion in 2019.

Kazakhstan has come under scrutiny for its role as a key hub of goods to and from Russia, including parallel imports. The Kazakhstan government has been cracking down on such deals, but some trade persists.

In August, Serik Zhumangarin, Kazakhstan's deputy prime minister and its minister of trade and integration, told Bloomberg that some sanctions against Russia have affected the central Asian country's economy.

Kazakhstan "won't blindly follow the sanctions" if it means major local companies are affected, Zhumangarin said.

• Russia's central bank has kept the key interest rate at 21%, bucking expectations of a hike to 23%.
• Russia's top central banker said she is eyeing "excessive cooling" in the economy.
• Russia's high interest rates are impacting business investments and profits, business leaders complain.

Russia's economy has been running hot on wartime activities, prompting the country's central bank to hike rates up to 21% — but it's now worried about too much cooling.

Elvira Nabiullina, Russia's top central banker, expressed that concern on Friday when she kept the key interest rate unchanged. Analysts polled by Reuters had expected her to hike rates to 23%.

"Our politics is aimed at prevention of extreme scenarios, which means that we cannot let the economy overheat further," Nabiullina said at a press conference following the rates decision, according to TASS state news agency.

"It is necessary to make sure that overheating subsides. That said, it is necessary to avoid excessive cooling, which is why we keep a close eye on this," she said.

Nabiullina said the central bank kept the interest rate steady as monetary conditions have "tightened even more than was implied by the key rate increase" in October, when the bank raised the rate from 19% to 21%. Russia started the year with its benchmark interest rate at 16%.

"Consequently, lending growth notably slowed down in November," she said. "We will need some time to assess how steady this deceleration in lending is and how the economy is adjusting to the new conditions."

Russian business leaders complain about high interest rates

Nabiullina's comments came as Russia's inflation hovered around 8% in the year to November, compared to the target rate of about 4%. Staples, like the price of butter and potatoes, have shot up this year. But the central bank's three straight rate hikes since June may be working, the top central banker signaled.

"Tough monetary conditions have evolved in the economy, which are to provide for inflation slowdown in coming quarters," she said, per TASS.

Russian business leaders have been complaining about the central bank's high interest rates, which they say are stifling business activities.

Sergei Chemezov, the CEO of the defense conglomerate Rostec, said in October that record-high interest rates were "eating up" the profit from the company's orders.

"If we continue to work like this, then most of our enterprises will go bankrupt," Chemezov said.

Economic cracks in Russia

Even Russian President Vladimir Putin on Thursday acknowledged that his country's economy is not in a good place — and he blamed the central bank and federal government.

The Russian leader said that the central bank could have used instruments other than interest rates to cool the economy and that the federal government could have worked with economic stakeholders to improve supply.

"There are some issues here, namely inflation, a certain overheating of the economy, and the government and the central bank are already tasked with bringing the tempo down," Putin said during his marathon annual press conference.

Price rises had been an "unpleasant and bad" outcome, he said.

Given the sweeping sanctions against Russia's economy, Nabiullina faces a challenging job to keep Russia's seemingly resilient economy going.

Economic cracks are emerging as the Kremlin focuses on shoring up its defense industry for its war in Ukraine — but at the expense of other sectors, Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center fellow wrote on Friday.

Prokopenko, a former Russian central bank official, wrote that growth momentum could stall next year, with social and fiscal challenges developing into crises around 2026.