Russia’s oil revenues are under direct attack as China, its top buyer, steps back from the market. This retreat by Chinese refiners is a calculated move to avoid a new, more aggressive wave of Western sanctions.
State-owned giants Sinopec and PetroChina are canceling Russian cargoes following US sanctions on producers Rosneft and Lukoil. Smaller “teapot” refiners are also shunning Russian oil, terrified by the UK/EU blacklisting of a fellow Chinese firm, Shandong Yulong Petrochemical Co.
This collective “buyers’ strike” has had a devastating impact on Russian crude. Prices for the ESPO grade have plunged. Rystad Energy AS estimates the disruption at 400,000 barrels a day, a volume that represents up to 45% of China’s Russian oil imports.
Russia had successfully cultivated China as its primary market after the Ukraine invasion, using deep discounts to secure its position as the number one supplier. The US and its allies are now aiming to destroy that financial lifeline.
As China, the world’s biggest crude importer, looks for alternatives, other suppliers like the US stand to gain. This follows a recent trade truce between leaders Trump and Xi. The situation remains muddled, however, especially as the blacklisted Yulong is now buying more Russian oil out of necessity.