China has reportedly saved billions of dollars this year by importing discounted crude oil from countries under Western sanctions, according to a Reuters report. The unintentional consequence of these sanctions on Russia, Iran, and Venezuela has led to lower oil import costs for China. While international crude prices have surged since July due to tightening supply, Beijing’s purchases from these sanctioned countries have helped save about $10 billion.
Ship-tracking data from Kpler and Vortexa shows that between January and September, China imported a record-high volume of 2.765 million barrels per day (bpd) from these three major oil exporters. If Chinese importers had purchased similar oil grades from non-sanctioned producers, they would have paid nearly $10 billion more. These savings may only be a fraction of China’s overall oil import bill, but they are significant for independent refiners, known as “teapots,” which actively seek out bargains.
The influx of crude supplies from Russia, Iran, and Venezuela has crowded out alternatives from the Middle East, West Africa, and South America. These sanctioned countries accounted for 25% of China’s imports in the first nine months of the year, up from 21% last year and double the 12% share in 2020.
Despite higher oil prices and shrinking discounts on Russian crude to global benchmarks, Russia remains China’s single biggest oil supplier, surpassing Saudi Arabia. Chinese customs data shows that deliveries of Russian crude to China increased by 25% in the first eight months of the year compared to the previous year. In total, Russia delivered 71.2 million tons of crude to China as Western sanctions prompted Moscow to redirect its export flows from the EU to India and China.
These significant cost savings in oil imports have come as a result of unintended consequences of the sanctions imposed on Russia, Iran, and Venezuela. While China often criticizes such unilateral penalties, it has taken advantage of the lower costs and increased its imports from these countries. However, it should be noted that these savings may not last forever, as the global oil market continues to evolve and geopolitical dynamics in these sanctioned countries may change.
In conclusion, China’s record imports of discounted crude oil from sanctioned countries have helped save billions of dollars this year. The unintended consequence of the restrictions on Russia, Iran, and Venezuela has resulted in lower oil import costs for China. While these savings may be relatively small in the context of China’s overall oil import bill, they are significant for independent refiners. China’s reliance on these sanctioned countries for crude supplies has increased, and Russia remains its largest oil supplier. However, it remains to be seen how long these cost savings will last as the global oil market continues to face various challenges.