Reported by Chen Aizhu and Muyu Xu

China has reaped savings this year of nearly $10 billion through record purchases of oil from countries under Western sanctions, according to Reuters’ calculations based on data from traders and shiptrackers.

An unintended consequence of sanctions imposed by the United States and others on Russia, Iran and Venezuela has been to lower the oil import costs for refiners in top economic rival China, which often criticises such “unilateral” penalties.

Reuters’ analysis of China’s savings on oil purchases from the three sanctioned countries compares what Chinese importers would have paid by purchasing similar grades from non-sanctioned producers.

The lower-priced imports have been a boon by bolstering throughput and margins for the world’s second-largest oil consumer and refiner, especially small independent operators known as “teapots“, and facilitating lucrative exports by state-owned refiners of diesel and gasoline as the country faces economic headwinds.

China’s purchases are also a revenue lifeline for Moscow, Tehran and Caracas, whose economies are otherwise curtailed by Western sanctions and a decline in investment.

China shipped in a record 2.765 million barrels per day (bpd) of crude by sea from Iran, Russia and Venezuela in the first nine months of 2023, according to an average of data provided by tanker trackers Vortexa and Kpler.

The three countries accounted for a quarter of China’s imports between January and September, up from about 21% in 2022 and double the 12% share in 2020, Reuters’ analysis found, displacing alternatives from the Middle East, West Africa and South America.

While the savings are a fraction of China’s oil import bill, they matter for independent refiners that are “opportunistic buyers and actively look for bargains”, said Kang Wu, global head of demand research at S&P Global Commodity Insights.

Read full report: https://www.reuters.com/markets/commodities/china-saves-billions-dollars-record-sanctioned-oil-imports-2023-10-11/