A “buyers’ strike” by Chinese refiners has wiped out demand for an estimated 400,000 barrels a day of Russian oil, a figure that represents as much as 45% of China’s total imports from its northern neighbor. This stark figure, estimated by Rystad Energy AS, highlights the dramatic impact of new Western sanctions.
The strike is being led by China’s most powerful players. State-owned giants Sinopec and PetroChina Co. are canceling Russian cargoes, fearful of new US penalties against producers Rosneft and Lukoil. This fear has been amplified by the recent blacklisting of a Chinese refiner, Shandong Yulong Petrochemical Co., by the UK and EU.
That move has terrified the “teapot” refiners, the smaller private companies that are crucial to China’s oil market. They are now holding off on purchases, worried they could be the next target. The collective action has caused prices for Russia’s ESPO crude to dive.
This is precisely the outcome the US and its allies were seeking. By escalating sanctions, they aim to choke off Moscow’s oil revenues, a key source of funding for the war in Ukraine. Russia had successfully pivoted to China, becoming its top supplier with discounted crude, but that strategy is now unraveling.
As the world’s biggest crude importer, China’s pivot away from Russia will have global consequences, likely benefiting other suppliers like the US. However, the situation is muddled by a shortage of import quotas for teapots, which will limit their ability to buy Russian oil for the rest of the year, even if they wanted to.
