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Saturday, April 1, 2023

Russia overtakes Saudi Arabia as China’s largest oil supplier

Ukraine war has become a blessing in disguise for nations seeking oil on discount as Russian forex reserves continue to gain strength.

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Despite sanctions during the Ukraine War, Russia has overtaken Saudi Arabia as China’s top oil supplier.

Russian oil imports increased by 55 percent from the previous year to a record level in May, unseating Saudi Arabia as China’s top supplier.

Despite Covid restrictions and a sluggish economy reducing demand, China has increased its purchases of Russian oil.

China and Russia proclaimed their friendship had “no limitations” in February.

Additionally, Chinese firms, such as state-run Zhenhua Oil and state-owned Sinopec, have increased their purchases of Russian crude in recent months after being given steep discounts as European and American consumers avoided Russian energy due to sanctions over its involvement in the conflict in Ukraine.

Read more: Stalemate in the Russia Ukraine War

According to data from the Chinese General Administration of Customs, the imports into China, which comprise supplies pumped through the East Siberia Pacific Ocean pipeline and  by sea, totaled close to 8.42 million tonnes last month.

Saudi Arabia, who had previously been China’s top crude oil supplier, dropped to second place with 7.82 million tonnes as a result.

As the West intensifies its economic response to the invasion of Ukraine, the US and UK announced in March that they will boycott Russian oil, and the European Union has been seeking to reduce its reliance on Russian gas.

Not just drivers are filling up when they see a discount because gas prices are so high. India has increased purchases as well, so it’s not just China that has benefited from Russia’s reductions as the latter strives to attract new business.

In the early wake of its invasion of Ukraine, this helped Russia really increase revenues along with rising crude prices.

Additionally, the UK and US collectively purchased one barrel of Russian oil for every ten that China regularly purchased before to the conflict. Given that those two countries are shifting their business elsewhere, Moscow may not have too much trouble filling at least some of the vacuum.

But as other European countries look for alternate energy sources, Russia’s oil revenues have already begun to decline and will continue to do so.

For those who decide to increase their purchases from Russia, the Trade Representative of Ukraine has a stern warning. According to Taras Kachka, Moscow would “weaponize anything,” utilise its reliance as a tool for manipulation, and hold nations ransom. However, individuals sending business to Russia may be reluctant to heed this caution as they want a (relative) bargain during a difficult period.

The action, according to then-US President Joe Biden, “hit the primary artery of Russia’s economy.”
Although Russia depends heavily on its export of energy, the decision is also expected to have an impact on Western customers.

Despite a decline in exports in May, the Centre for Research on Energy and Clean Air think tank said last week that Russia made about $100 billion (£82 billion) from the sale of fossil fuels in the first 100 days of its invasion of Ukraine.

Approximately $59 billion worth of these imports, or 61%, came from the European Union.
Overall, Russian oil and gas exports are declining, and Moscow’s energy sales revenue has decreased from a peak of well over $1 billion a day in March.

The CREA estimates that Russia is spending almost $876 million per day on the invasion, although income nevertheless outpaced costs over the first 100 days of the Ukraine war.

Read more: China backs Russia despite pressure from Washington

China received 260,000 tonnes of Iranian crude oil last month, its third supply of Iranian oil since last December, according to information released on Monday. Despite US sanctions on Tehran, China has continued to purchase Iranian oil.