Sanctions Bite: Chinese Giants Ditch Russian Oil

Chinese state-owned oil refining giants are actively shunning Russian crude shipments. Industry leaders like Sinopec and PetroChina Co. are staying on the sidelines, canceling purchases of Russian cargoes. This retreat follows a new wave of US sanctions targeting Moscow’s key producers, Rosneft PJSC and Lukoil PJSC, which were imposed last month.
The chill extends beyond the state-controlled behemoths. Smaller, private refiners, commonly known as “teapots,” are also holding back. Their fear is palpable, driven by the desire to avoid the penalties recently imposed on Shandong Yulong Petrochemical Co. That firm was blacklisted by both the UK and the European Union, serving as a stark warning to others.
This “buyers’ strike” has directly impacted popular Russian crudes, including the ESPO grade, which has seen its price plunge as a result. Consultancy Rystad Energy AS estimates that a significant volume, around 400,000 barrels a day, is affected. This figure represents as much as 45% of China’s total oil imports from Russia, a nation that had become China’s single biggest supplier.
Russia secured that top spot largely by offering its oil at heavy discounts following its invasion of Ukraine, as other nations imposed penalties. Now, the US and its allies are escalating those sanctions, targeting both the producers and their customers. The clear goal is to choke off Moscow’s oil revenues, a critical lifeline supporting its war efforts.
This shift presents a complex picture. China, the world’s largest crude importer, will likely turn to other suppliers, potentially including the US. This comes after a trade truce was agreed upon at last week’s meeting between leaders Donald Trump and Xi Jinping. However, the sanctions game has its ironies: the blacklisted Yulong, cut off by Western suppliers, has ironically turned heavily to Russian oil as its only remaining option.