China buys record volume of Russian oil, circumventing sanctions
China has become the largest buyer of Russian oil bypassing sanctions (Getty Images)
Russia has outpaced Saudi Arabia to become the largest supplier of crude oil to China in 2023. The world's leading oil importer has challenged Western sanctions by procuring massive volumes of discounted oil for its refineries, according to Reuters.
China's customs data reveals that Russia delivered a record 107.02 million tons of crude oil to China last year, equivalent to 2.14 million barrels per day. This significantly exceeds the supply from other major oil exporters like Saudi Arabia and Iraq.
Imports from Saudi Arabia, once China's top supplier, fell by 1.8% to 85.96 million tons as the Middle Eastern oil giant lost market share to cheaper Russian oil.
Russian crude oil, which faced avoidance by many international buyers after Western sanctions due to the Kremlin's invasion of Ukraine in 2022, traded at significant discounts compared to global benchmark prices for most of the past year. The increased demand from Chinese and Indian oil refineries for discounted oil led to a surge in prices for Russian ESPO oil in 2023. The cost exceeded the upper limit of the Big Seven price set in December 2022 at $60 per barrel, as alternative delivery and insurance options were utilized to bypass sanctions.
Meanwhile, Saudi Arabia raised prices for its flagship Arab Light crude from July, prompting some oil refineries to seek more affordable supplies.
To support prices, Saudi Arabia and Russia, two of the world's top three oil producers, announced production and export cuts last year. Saudi Arabia continues to cut production by 1 million barrels per day this quarter, while Russia stated it would increase export cuts this year to 500,000 barrels per day from 300,000 barrels per day.
China circumvents sanctions
Chinese oil refineries use intermediaries for the transportation and insurance of Russian oil to avoid Western sanctions.
Buyers also use waters off the coast of Malaysia as a transshipment point for sanctioned cargoes from Iran and Venezuela. Imports marked as originating from Malaysia increased by 53.7% last year.
Oil supply to China from the U.S. increased by 81.1% last year despite geopolitical tensions between Beijing and Washington, as U.S. oil production rose.
Overall crude oil imports to China in 2023 reached a record 563.99 million tons, equivalent to 11.28 million barrels per day.
Western sanctions led to half of Russia's oil and oil product exports in 2023 going to China, while India's share increased to 40% over two years. Europe's share in Russian oil exports plummeted to about 4-5% from approximately 40-45%.
