Sanctions Choke Russia’s “China Pivot” for Oil

Russia’s successful “pivot to Asia,” which saw it become China’s biggest oil supplier, is now being choked off by a new wave of Western sanctions. Chinese refiners, the cornerstone of that pivot, are now canceling orders, fearing penalties.
The pullback is being led by the giants of China’s oil industry, Sinopec and PetroChina. Their caution is a response to US sanctions on Russian producers Rosneft and Lukoil. Smaller “teapot” refiners are also in retreat, spooked by the UK/EU blacklisting of a fellow Chinese firm, Shandong Yulong Petrochemical Co.
The impact on the market has been immediate. Prices for Russian crude grades like ESPO have fallen sharply. Rystad Energy AS estimates that a “buyers’ strike” is affecting 400,000 barrels a day, a volume that could represent up to 45% of China’s Russian oil imports.
Russia’s strategy was built on offering its oil at steep discounts after the Ukraine war alienated Western buyers. The US and its allies are now countering that strategy by targeting the customers themselves, aiming to sever the flow of revenue to Moscow.
This development creates an opening for other suppliers to China, the world’s top crude importer. The US, following a recent trade truce between Donald Trump and Xi Jinping, is a potential beneficiary. However, the situation is muddled by a separate shortage of import quotas for teapots, adding another hurdle for Russian sales.