The European Union’s latest sanctions on the Kremlin’s energy sector have had limited impact on China’s purchases of Russian crude, trade, refining, and shipping sources told S&P Global Commodity Insights on July 21.
China remains the top destination for Russian seaborne and pipeline crude. According to data released by China’s General Administration of Customs on July 20, China’s total imports of Russian crude via sea and pipeline in the first half of the year fell 10.9% year-on-year to 49.11 million metric tons (1.99 million b/d), with its market share dropping from 20% in January-June 2024 to 17.6%.
The EU on July 18 banned imports of refined products made from Russian crude, lowered the price cap from $60/b to [data missing]/b, and blacklisted over 100 tankers from the shadow fleet.
As the trading cycle for September-loading ESPO crude—Russia’s most popular grade—kicks off later this week, buyers from Chinese independent and state-owned refineries are assessing the new sanctions. However, nearly all sources said the EU measures would have less impact on China compared with US sanctions, primarily due to the dollar’s dominance as the global currency versus the euro’s weaker influence.
“We take delivery of Russian crude on a delivered basis, so neither shipping nor FOB prices are major concerns for us,” said a crude procurement strategist at a state-run refinery.
S&P Global Commodity Insights’ Platts assessed ESPO Blend crude for near-month loading at a discount of [data missing]/b to Platts Dubai (FOB Kozmino) at the Asian close on July 21, up $5/b from the previous day, tracking stronger Middle Eastern crude differentials. In absolute terms, this translates to around [data missing]/b.
**Exposure Risks**
“Banks have varying risk controls on credit facilities. Some skip vessel checks when dealing with cargoes already at designated ports rather than in transit,” said a Singapore-based commodity banker. “But for dollar settlements, US-based clearing banks sometimes conduct random checks on sensitive vessels, including carrier qualifications.” The banker added, implying greater exposure risks when settling Russian crude trades in dollars.
Trade and refining sources said a significant portion of Russian crude deals are settled in yuan. Paul Sheldon, chief geopolitical adviser at S&P Global Commodity Insights, said the EU’s tightened sanctions are unlikely to disrupt Russian supply. “Russia has repeatedly demonstrated its ability to move oil via shadow fleets or tolerate price-cap sales,” he noted in a July 19 report. “Moreover, the US and other G7+ nations have yet to reach consensus.”
Platts data showed lump-sum freight for an 80,000 mt Kozmino-to-North China shipment on July 21 was $1.5 million, unchanged from July 18 and 17. China typically receives around 30 Kozmino-loading ESPO cargoes monthly, each about 100,000 mt. Combined with roughly 800,000 b/d of pipeline supply under Rosneft’s long-term contracts with CNPC, ESPO accounts for about 75% of China’s Russian crude imports.
**Iranian Crude Gains Favor**
The decline in Russian crude imports is mainly due to Chinese independents favoring cheaper Iranian barrels. Platts data showed independents’ Russian crude imports fell to a four-month low of 650,000 b/d (2.66 million mt) in June, while Iranian imports rose 43% month-on-month to 1.68 million b/d.
Market sources said ESPO crude for August delivery to Shandong was offered at around [data missing]/b premium to ICE Brent in the latest trading cycle, up from about $2/b for July and [data missing]/b for June. In contrast, Iranian Light was quoted at a $3.00-[data missing]/b discount to ICE Brent futures.
Customs data showed China’s total Russian crude imports in June fell 0.3% month-on-month and 0.9% year-on-year to 8.35 million mt, despite higher state-refinery purchases. Market sources noted Iranian crude is often declared as Malaysian blend to avoid sanctions. China’s June imports from Malaysia rebounded to 7.09 million mt from May’s four-month low of 5.07 million mt.
Platts estimates that including Iranian supply, China’s Middle East crude imports rose 1% year-on-year to 6.28 million b/d in H1, while CIS imports—mostly Russian—fell 9% to 2.08 million b/d.
Source: Platts
