Russia is facing a significant problem as China, its biggest oil buyer, is backing away. Chinese refiners, from the largest state-owned firms to the smallest private “teapots,” are canceling orders and shunning cargoes, all due to the fear of new Western sanctions.
The panic started when the US blacklisted Russian producers Rosneft and Lukoil. It intensified when the UK and EU blacklisted a Chinese customer, Shandong Yulong Petrochemical Co. This move has made giants like Sinopec and PetroChina extremely cautious.
The “buyers’ strike” has hammered the price of Russian crude grades like ESPO. Rystad Energy AS estimates that 400,000 barrels a day of trade are affected. This is a massive blow, as it represents up to 45% of the oil China imports from Russia.
Russia’s strategy of pivoting to Asia after the Ukraine invasion, using discounted oil to lure China, is now under serious threat. The US and its allies are actively trying to dismantle this trade to cut off Moscow’s war funding.
As China, the world’s top crude importer, looks for new supplies, other nations like the US stand to gain. However, the situation is complex. The blacklisted Yulong is now paradoxically buying more Russian oil, while other teapots are also short on import quotas, adding another layer of difficulty for Moscow.
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