Russian oil loses Chinese buyers: what it means for global energy markets
14 March 17:28
Recently, a number of Chinese state-owned oil companies have reduced or suspended purchases of Russian oil due to concerns about the risk of US sanctions. This was reported by "Komersant Ukrainian" with reference to the Chinese newspaper Lianhe Zaobao.
In particular, Sinopec and Zhenhua Oil have suspended purchases of Russian oil for March deliveries due to fears that they will trade with companies under sanctions. In addition, the China National Petroleum Corporation (PetroChina) and the China National Offshore Oil Corporation (CNOOC) also reduced their March purchases.
These measures have led to lower prices for Russian oil, reduced revenues for the Russian government, and put additional pressure on Russia on the eve of a possible ceasefire agreement with Ukraine.
Why is China refusing to buy Russian oil?
1. Tougher US sanctions. America has recently expanded sanctions aimed not only at Russian oil companies, but also at shipping companies, insurers and financial institutions that support Russian oil exports.
As a result, Sinopec and Zhenhua Oil suspended purchases of Russian oil in March 2025, as the risk of violating sanctions became too high. PetroChina and CNOOC also reduced imports, but did not stop purchases completely.
2. Increased transportation costs. Sanctions against shipping companies that transport Russian oil have increased shipping costs. Many tankers transporting Russian oil use the “shadow fleet”, which increases the risks and difficulties with the execution of transactions.
3. The desire to avoid geopolitical conflict. China seeks to remain neutral in the conflict between Russia and the West. Beijing does not want to openly support Moscow in its oil operations in order not to aggravate relations with the United States and Europe. China is taking a pragmatic approach and wants to have flexibility in its energy policy to avoid dependence on a single supplier.
4. Shift to alternative sources of supply. Chinese companies are increasing their purchases of oil from other regions to compensate for the reduction in imports from Russia.
The main alternative suppliers:
- Saudi Arabia
- UAE
- Iraq
- African countries (Angola, Nigeria)
- Latin America (Brazil, Venezuela)
How will China’s reduced purchases of Russian oil affect the global market?
1. China is looking for alternative sources of oil
Due to restrictions on Russian energy resources, Chinese oil refiners have stepped up purchases of oil from other regions.
China is trying to avoid energy dependence on a single source and reduce the risks associated with sanctions.
2. Decline in Russia’s oil export revenues
China and India were the main buyers of Russian oil after the introduction of Western sanctions. Now, however, due to China’s reduced purchases and logistical problems, Russia may lose a significant portion of its export revenues.
The decline in exports means a drop in foreign exchange earnings for the Russian budget, which further complicates the financing of the war.
Russia will be forced to sell oil at a greater discount in order to maintain its market share and find new buyers.
3. US sanctions are changing energy flows
Washington’s recent sanctions against Russian oil traders have made it harder for Moscow to access international markets.China and India used to buy Russian oil in bulk at discounts, but now even Chinese state-owned companies are reluctant to take risks because of potential sanctions.
Russia may reorient its exports to countries that are less sensitive to sanctions, such as Iran or Venezuela.
Moscow may also intensify “shadow” oil sales schemes, using front companies and a “shadow fleet” (tankers without official routes).
What does this mean for the future of energy relations between China and Russia?
1. China chooses a pragmatic policy
Despite public statements about a “strategic partnership” with Russia, Beijing is acting solely in its own interests. Chinese state-owned companies are afraid of US sanctions and do not want to lose access to international financial markets. Russia is no longer China’s main energy partner, as Beijing is looking for more stable and secure suppliers.
2. russia is losing its market and is dependent on “gray exports”
Russia will try to circumvent sanctions and use “shadow” mechanisms of oil trade, which may further weaken its economy.
Increased illegal sales through intermediaries in Singapore, the UAE, and Turkey. Dependence on “gray” traders who charge significant commissions and create financial risks for Moscow.
Further decline in the price of Russian oil, as it will have to compete with other producers.
