A wave of fear over new Western sanctions has prompted China’s largest oil refiners to halt purchases of Russian crude. State-owned giants, including Sinopec and PetroChina Co., have reportedly canceled Russian cargoes. This move comes in direct response to US sanctions levied last month against Russian energy titans Rosneft PJSC and Lukoil PJSC.
The hesitation is not confined to the state sector. China’s smaller private refiners, or “teapots,” are also shunning Russian oil. They are fearful of attracting similar penalties to those faced by Shandong Yulong Petrochemical Co. The blacklisting of Yulong by the UK and EU has sent a clear message that purchasing Russian crude carries significant new risks.
The impact has been immediate and severe for Russia. The widely-favored ESPO grade, a key export, has seen its price plummet due to the sudden lack of Chinese buyers. According to Rystad Energy AS, this buyers’ strike affects roughly 400,000 barrels a day, which could be up to 45% of China’s total oil imports from Russia.
This development is a blow to Russia, which had successfully established itself as China’s number one foreign supplier. That position was built on the back of steep discounts offered after the invasion of Ukraine alienated Western buyers. The US and its allies are now tightening the financial screws further, aiming to cut off Moscow’s war-funding oil revenues.
For China, the world’s biggest crude importer, this creates a supply gap that other nations may fill. The US, following a recent trade truce between Donald Trump and Xi Jinping, could be one such beneficiary. Meanwhile, other teapots are watching closely, and a separate issue—a shortage of crude import quotas—is also likely to impede their Russian oil purchases for the rest of the year.