Sanctions War Escalates: Customers, Not Just Producers, Now Targets

The West’s economic war against Russia has escalated, with sanctions now actively targeting the customers of Russian oil, not just its producers. This new phase has triggered a retreat by Chinese refiners, who fear being caught in the crossfire.
The blacklisting of Chinese refiner Shandong Yulong Petrochemical Co. by the UK and EU was a watershed moment. It has terrified “teapot” refiners and given pause to state-owned giants. Both Sinopec and PetroChina are canceling Russian cargoes, especially after new US sanctions on Rosneft and Lukoil.
The impact has been immediate. Prices for Russian ESPO crude have dived as demand from its biggest market, China, has vanished. Rystad Energy AS estimates the “buyers’ strike” affects 400,000 barrels a day, or as much as 45% of China’s Russian oil imports.
Russia had built its status as China’s top supplier on the back of steep discounts. Now, the US and its allies are proving that the risk of sanctions can outweigh any discount. The goal is to choke off the oil revenues funding Moscow’s war in Ukraine.
This shift will likely benefit other oil suppliers. The US, in particular, may see an opening after last week’s trade truce between Donald Trump and Xi Jinping. The summit, however, was silent on Russian oil, leaving the market in a state of confusion.