Reports, citing data from traders and shippers, suggest that China could potentially save close to $10 billion in costs this year as a result of procuring record quantities of oil from nations subjected to Western sanctions.
The unintended consequences of sanctions imposed by the United States and other Western countries on Russia, Iran, and Venezuela have led to a reduction in the cost of importing oil for Chinese buyers, a significant economic player frequently targeted by such unilateral sanctions.
The analysis of these cost savings for China stems from a comparison between the prices that Chinese importers would pay for oil from the three embargoed nations and the prices for similar grades of oil from producers not subject to sanctions.
These more affordable imports are providing a boost to China’s production and profits. As the world’s second-largest producer and consumer of oil, China is reaping the benefits of reduced costs, particularly among small, independent entrepreneurs often referred to as “teapots.” These enterprises have facilitated lucrative exports alongside state-owned entities that manufacture diesel and gasoline, helping to address the country’s economic challenges.
Furthermore, China’s oil purchases are not just advantageous for its own economy; they also provide a much-needed source of income for Russia, Iran, and Venezuela, nations that have experienced significant economic hardship due to Western sanctions and diminished foreign investments.
A compilation of data from tanker tracking sources Vortexa and Kepler reveals that, in the first nine months of 2023, China imported a record 2.765 million barrels per day (bpd) of seaborne crude oil from Iran, Russia, and Venezuela.
According to a Reuters analysis, these three countries accounted for 25% of China’s crude oil imports between January and September, a notable increase from approximately 21% in 2022 and a doubling of the figure from around 12% in 2020. This has led to a displacement of traditional import sources in the Middle East, West Africa, and South America. As China strategically secures its energy supplies and capitalizes on lower costs, the global dynamics of the oil trade continue to evolve, yielding both economic benefits and geopolitical implications.