As West sanctions Russia, China emerges as Moscow's biggest oil buyer

Chinese companies, including state refining giant Sinopec and state-run Zhenhua Oil, have increased their purchases of Russian crude in recent months after being offered heavy discounts as buyers in Europe and the US shunned Russian energy in line with sanctions over its war on Ukraine

FPJ Web DeskUpdated: Monday, June 20, 2022, 12:26 PM IST
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China’s crude oil imports from Russia soared by 55% from a year earlier to a record level in May, displacing Saudi Arabia as the country's top supplier, as refiners cashed in on discounted supplies amid sanctions on Moscow over its invasion of Ukraine.

According to data from the Chinese General Administration of Customs, imports of Russian oil, including supplies pumped via the East Siberia Pacific Ocean pipeline and seaborne shipments from Russia's European and Far Eastern ports, totalled nearly 8.42 million tonnes in the month of May.

That comes out to roughly 1.98 million barrels per day (bpd) and up a quarter from 1.59 million bpd in April.

China has ramped up purchases of Russian oil despite demand dampened by Covid curbs and a slowing economy.

In February, China and Russia declared their friendship had "no limits".

And Chinese companies, including state refining giant Sinopec and state-run Zhenhua Oil, have increased their purchases of Russian crude in recent months after being offered heavy discounts as buyers in Europe and the US shunned Russian energy in line with sanctions over its war on Ukraine.

Discounted Russian oil too tempting to resist

The discounts of up to 30% have helped Russia to keep its coffers filled despite the sanctions from the west that are designed to cripple the country’s economy. The Kremlin raked in around $20bn from oil exports in May.

Last week, a report by the Centre for Research on Energy and Clean Air think tank said Russia earned almost $100bn in revenue from fossil fuel exports in the first 100 days of the country's invasion of Ukraine, despite a fall in exports in May.

The soaring price of oil has also played a large part, with prices up by more than 60% in the past 12 months at about $112 a barrel for international benchmark crude on Monday.

The purchases by China are also part of Beijing’s careful positioning over the Ukraine conflict, which has seen the president, Xi Jinping, offer strong implied support to his authoritarian ally in the Kremlin, Vladimir Putin.

China defies US sanctions on Iran too

Monday's figures also showed that China imported 260,000 tonnes of Iranian crude oil last month, its third shipment of Iran oil since last December.

Despite US sanctions on Iran, China has kept taking Iranian oil, usually passed off as supplies from other countries. The import levels are roughly equivalent to 7% of China’s total crude oil imports.

China’s overall crude oil imports rose by nearly 12% in May from a low base a year earlier to 10.8m bpd, versus the 2021 average of 10.3m bpd.

However, China reported zero imports from Venezuela. State oil firms have shunned purchases since late 2019 for fear of falling foul of secondary US sanctions.

Moscow turns to China and India

Russian President Vladimir Putin has been thrown a lifeline from Asian economic titans China and India, which have refused to join the sanctions, but have yet to be targeted for their dealings with Moscow, and have moved to buy more Russian oil than ever before.

China and India buy what the European Union has largely banned, and at a lower rate. Just how much the two powers, themselves rivals in the region, are willing and able to offer, however, remains the subject of debate among experts.

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