June 20, 2022
image source,Getty Images
Russia has become China’s top oil supplier after sanctions on Russia over the war in Ukraine sent crude prices at steep discounts.
In May this year, China’s imports of Russian oil increased by 55% year-on-year, hitting a record high. Russia also surpassed Saudi Arabia to become China’s largest oil supplier.
Although Chinese demand for oil has fallen due to a combination of factors such as the new crown blockade and the economic slowdown, China has still increased its purchases of Russian oil.
In February, the leaders of China and Russia met on the eve of the Beijing Winter Olympics, and Xi and Putin also declared that the friendship between China and Russia “has no end.”
Great discount
In recent months, Chinese companies, including state-owned refiners Sinopec and state-owned Zhenhua Oil, have increased their purchases of Russian crude oil. Russia has been sanctioned because of the war in Ukraine, and European and American buyers have not purchased Russian crude oil, resulting in sharp discounts in Russian crude oil prices.
Data from China’s General Administration of Customs showed that China imported nearly 8.42 million barrels of Russian crude in May, including through the East Siberia Pacific Ocean pipeline and by sea.
Previously, China’s largest crude oil supplier was Saudi Arabia, but China imported 7.82 million barrels of crude oil from Saudi Arabia in May, ranking second after Russia.
In March of this year, in order to increase economic sanctions against Russia’s invasion of Ukraine, the United States and the United Kingdom announced an embargo on Russian oil, and the European Union gradually reduced its dependence on Russian natural gas.
At the time, U.S. President Joe Biden said the sanctions targeted “the main artery of the Russian economy.”
Energy exports are an important source of Russian income, but without Russian energy, Western consumers also suffer.
Analysis: Sweetness and Warning
BBC international trade correspondent David
With energy prices soaring, it’s not just drivers who go to fill up the gas when they see a cheap place. It is not just China that is taking advantage of the fall in Russian crude oil prices, India is also increasing its purchases.
These factors, combined with soaring crude oil prices, have helped Russia’s revenue actually increase after sanctions imposed on its just invasion of Ukraine.
Before the war, China bought 10 barrels of crude oil from Russia, Britain and the United States only one barrel. Now that the UK and US are not importing, Moscow may be able to fill the gap they leave without too much effort.
However, Russia’s oil revenue has already begun to decline, which will be further exacerbated as other European countries look for alternative sources.
At the same time, Ukraine’s trade representative also issued a warning to those increasing imports from Russia. Taras Kachka told the BBC that Moscow could “weaponise” everything, using the dependence of others as a means of manipulation or extortion.
But those who turn to Moscow for supplies may not be heeded by the warnings of finding a bargain when times are bad.
Energy revenue exceeds military spending
Last week, the Centre for Research on Energy and Clean Air (CREA), a Finnish non-profit think tank, reported that in the first 100 days of Russia’s invasion of Ukraine, Russia’s total revenue from fossil fuel exports amounted to nearly $100 billion .
Among them, the EU accounted for 61%, or about 59 billion US dollars.
Overall, Russia’s oil and gas exports are falling, as are energy revenues, which peaked at more than $1 billion a day in March.
But despite the reduction in Russia’s energy revenue, in the first 100 days of the war, energy revenue still exceeded Russia’s military spending in Ukraine, which CREA estimates is nearly $876 million a day for Russia’s war in Ukraine.
Meanwhile, China imported 260,000 barrels of crude oil from Iran in May, the third time China has purchased Iranian crude oil since December last year.
China continues to buy Iranian crude despite U.S. sanctions on Iran.
