Washington’s sanctions against Russian oil giants are shaking the Chinese energy sector

US sanctions against major Russian energy companies are causing deep unrest in China’s oil industry, as both the government and private refiners face increasing pressure to maintain supplies while avoiding sanctions. Russian oil represented 20% of China’s crude imports – about two million barrels per day during the first nine months of this year – making Russia one of the most prominent suppliers of oil to China for refining into products such as diesel, petrol and plastics. The Trump administration’s blacklisting of Rosneft and Lukoil represents the latest in a series of actions taken by the United States, the European Union and the United Kingdom targeting buyers of Russian oil and the financial support they provide to Moscow’s coffers and its war effort in Ukraine. Also read: Washington punishes the Russian oil sector, targets “Rosneft” and “Lukoil.” A specific deadline to stop transactions. The US government said that all transactions related to the two companies must be terminated by November 21. The risk for both China and India, Russia’s biggest clients, lies in their dealings with sanctioned entities, which could expose their companies to tough secondary sanctions. These sanctions include losing access to Western banking systems and the US dollar, or excluding companies from the network of Western producers, traders, shipping and insurance companies that form the backbone of global commodity markets. Traders say the biggest concern is the role Western companies play as investors and operators in major oil-producing regions, such as the Middle East and Africa. Also read: Trump’s “secondary” sanctions: a threat to Russia or pressure on allies? Tough choices ahead for Asian refiners Chinese and Indian companies that continue to do business with sanctioned entities risk being excluded or losing opportunities to participate in many projects. If it complies with the sanctions, it risks losing the cheap oil supplies that have helped keep energy costs low for industry and consumers. Buyers outside China and India also face the consequences of sanctions against Lukoil, which is involved in the development of the Basra oil project in Iraq and the Caspian Pipeline consortium in Central Asia. UK move heightens concerns The UK’s move last week to list Rosneft and Lukoil, along with China’s Shandong Yulong Petrochemical Company over its imports of Russian oil, raised concerns among market traders. Since then, Western companies have become wary of supplying the private refinery. Recent US sanctions have also targeted major Chinese ports, including Rizhao and Dongjiakou, which are essential corridors for transporting oil shipments from Russia and Iran. Also Read: Congestion of Commodity Tankers in Chinese Ports as Reciprocal Duties Begin. Long-term contracts between Rosneft and state-owned China National Petroleum Corp are the focus of major Russia-China trade, and include the supply of ESPO crude via pipelines to domestic refineries in the Daqing region. North of the country. Traders say that these refineries are heavily dependent on Russian crude, making them highly vulnerable to any supply disruptions. Uncertainty over the impact of sanctions on supplies However, it remains unclear whether supplies via pipelines, which are estimated at around 800,000 barrels per day, will be affected by the sanctions, given the direct government nature of the project. China National Petroleum Corp. did not immediately respond to an email requesting comment, nor did it respond to phone calls. Rosneft and Lukoil are also among the companies that export ESPO crude oil from the port of Kozmino in eastern Russia to private refineries in Shandong province and on the Chinese coast. Together, the two companies represented about a quarter of Russian oil exports to China last year.

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