Chinese companies halt purchases of Russian oil following US sanctions - Reuters
Illustrative photo: Chinese refineries refuse Russian oil (Getty Images)
Chinese state-owned oil companies have halted their maritime purchases of Russian oil following extensive US sanctions against Rosneft and Lukoil. Chinese state-owned refineries buy around 500,000 barrels of oil per day, Reuters reports.
At the same time, the halt in oil purchases by Chinese companies coincided with Indian refineries also reducing their purchases of Russian oil. It is assumed that the sharp drop in demand from the two largest buyers will put pressure on Russia’s budget.
According to the outlet, Chinese national oil companies PetroChina, Sinopec, CNOOC, and Zhenhua Oil plan to refrain from buying Russian oil transported by sea. This is a short-term measure, as the Chinese are concerned about sanctions.
How much oil China receives from the Kremlin
China currently imports approximately 1.4 million barrels of oil per day by sea. Most of this volume is purchased by so-called "independent" oil refineries, including small refineries, better known as "teapots." Chinese state-owned companies purchase between 250,000 and 500,000 barrels per day.
China receives up to 900,000 barrels of oil per day by land, through pipelines. Almost all of this volume is received by PetroChina. However, there is no talk of suspending "land" purchases yet.
Prospects for purchases
The outlet notes that Unipec, the trading arm of Sinopec, has suspended purchases of Russian oil since last week — following the UK sanctions against Rosneft and Lukoil.
At the same time, sources among traders told the outlet that most of the oil arriving in China goes through intermediaries. Therefore, even if state-owned refineries actually halt purchases, "independent" refineries might at most pause them to assess the impact of sanctions, but will continue financing Russia.
Meanwhile, according to several traders, independent refineries are likely to suspend purchases temporarily to evaluate the impact of sanctions but will still aim to continue buying Russian oil. India and China are also expected to turn to suppliers in the Middle East, which will increase demand for non-sanctioned oil.
US sanctions against Russia: What is known
On the evening of October 22, the US imposed tough sanctions against Russian oil companies Rosneft and Lukoil. According to the US Treasury Department, the decision was motivated by Russian President Vladimir Putin's unwillingness to agree to peace in Ukraine.
Officially, China has reacted hysterically to the new US sanctions imposed on Rosneft and Lukoil. Beijing has stated that such restrictions have no basis in international law and were allegedly not approved by the UN Security Council.
