Pragmatism guides China’s purchase of Russian oil
China’s energy imports from Russia have increased significantly since Russia’s invasion of Ukraine and the West’s imposition of sanctions on Russian companies and most of the country’s energy exports. China’s purchases of Russian hydrocarbons are often viewed through that lens, and thus as a tacit show of support for Russia. However a closer examination of trade patterns suggests that the reality is more nuanced: economic factors, along with geopolitics, are driving China’s buying behaviour.
China’s oil dependence on Russia tested by US sanctions and policy shifts
In 2024 China continued to increase its crude oil imports from Russia, which accounted for 21.5% of China’s total crude imports, up from an average of about 15.5% in 2018-21. The main economic incentive for China lies in the discount on Urals oil, which typically trades well below global benchmarks, such as dated Brent Blend and Dubai. This cheaper, sanctioned oil—alongside imports from Venezuela and Iran, which are not acknowledged in trade data—was particularly beneficial for China’s independent “teapot” refineries, which account for 25-30% of the country’s total refining capacity. These smaller refineries have struggled to turn a profit owing to low margins, making discounted Russian crude an attractive option. Teapot producers are also easily targeted by regulators when the government wants to cut capacity or reduce carbon emissions.
The latest US sanctions targeting Russia’s shipping fleet and insurers have disrupted trade flows, with some Chinese ports refusing to handle sanctioned tankers. Although workarounds exist—such as ship-to-ship transfers and alternative financing channels—these measures increase transaction costs and risk, potentially slowing crude inflows. Chinese refiners are reportedly exercising caution in securing Russian shipments to avoid secondary sanctions. Additionally, given China’s green transition drive, authorities have recently announced that refiners must reduce output of refined petroleum products and switch to production of chemicals. This will further reduce demand for Russian crude, especially by teapot refiners.
The stance of the administration of Donald Trump remains uncertain. Given Mr Trump’s efforts to reach a negotiated settlement of the war in Ukraine, he may be willing to lift some restrictions in exchange for a peace deal. The prospect of Russian oil coming back on the market in the West has already put downward pressure on global benchmark prices, while also shrinking the Urals discount. However, the Trump administration has also threatened secondary tariffs on buyers of Russian oil if Russia continues avoiding a ceasefire, which would hit Russia’s oil exports. Meanwhile, the Trump administration continues to enforce the Biden-era oil-related sanctions, with China’s imports of Russian oil continuing to fall in early 2025.
Source: EIU
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