REFINERS, tanker operators, traders and port executives across Asia were scrambling on Monday (Jan 13) to manage the fallout from the United States’ most aggressive sanctions on Russia’s oil industry to date, and the impact on major importers China and India.
The two countries have been the main beneficiaries of cut-price Russian crude since the invasion of Ukraine in early 2022, working around a Western price cap intended to limit funds flowing back to Moscow. But a step up in punitive measures – with a range of sanctions targeting producers, insurers and vessels – has thrown that trade into disarray.
Independent refiners in China’s Shandong province, perhaps the most enthusiastic buyers of Russian oil, held emergency meetings over the weekend to try and work out if they could still take delivery of crude already en route when the penalties were announced, traders said.
In India, which relies on Russia for about a third of its oil imports, refiners were left to interpret the consequences for their purchases of Urals crude, studying the documents with their legal teams. Refinery officials said that they were bracing for major disruption in imports, which could last between three and six months.
The newly sanctioned tankers handled over 530 million barrels of Russian crude last year, accounting for about two-fifths of the country’s seaborne crude exports, data analytics firm Kpler said. Over half of this volume, around 300 million barrels, was shipped to China, adding up to roughly 61 per cent of China’s seaborne imports of Russian oil.
Independent Chinese refiners, known as “teapots”, will likely suffer losses as oil prices climb and shipping costs become more expensive. Chinese diesel prices jumped over the weekend in reaction to the new situation.
As a result, shipping operators and the teapots refiners are already beginning to consider creative ways to work around the sanctions, the traders said. Diverting Russian crude on sanctioned tankers to smaller private terminals, rather than bigger ports, and using trucks rather than pipelines to move it in China, are among the options being considered.
Ports in Shandong have been on high alert for sanctioned vessels since last week, after a company operating several terminals in the area warned of handling such vessels. The teapots have enjoyed deep discounts for Russian, as well as Iranian, oil over the past years, aided by an ecosystem of dark fleet tankers, local financiers, as well as ports and storage operators who continued to support the largely yuan-denominated trade. BLOOMBERG
