The blacklisting of a single Chinese refiner, Shandong Yulong Petrochemical Co., has served as a chilling warning to China’s entire oil industry. The move by the UK and EU has effectively frozen Russian oil trade, as private “teapot” refiners flee the market.
This fear is compounding the caution already shown by state-owned giants. Sinopec and PetroChina are also canceling Russian cargoes, wary of new US sanctions on Moscow’s top producers, Rosneft and Lukoil. The collective fear of secondary sanctions has proven powerful.
The market impact has been swift. Russian ESPO crude, a favorite among Chinese buyers, has seen its price tumble. An estimated 400,000 barrels a day are in limbo, according to Rystad Energy AS. This volume represents a significant chunk—up to 45%—of the oil China imports from Russia.
This is a major blow to Moscow, which had pivoted its sales to China at steep discounts after the Ukraine invasion. The US and its allies are now demonstrating that they will target not just Russian sellers but also their international buyers, as they escalate efforts to defund Russia’s war.
In a strange twist, the blacklisted Yulong has been forced to become more reliant on Russian oil, as Western suppliers have canceled their cargoes. Other teapots, however, are not only scared but also constrained by a shortage of import quotas.
