The Sanction Paradox: Blacklisted Chinese Firm Now Russia’s Last Resort?

In a bizarre paradox created by Western sanctions, a blacklisted Chinese refiner has become one of Russia’s last resorts. Shandong Yulong Petrochemical Co., after being blacklisted by the UK and EU, has seen its Western suppliers flee, forcing it to turn heavily to Russian oil out of necessity.
Yulong’s situation is the exception that proves the rule. Its blacklisting has terrified other Chinese refiners. State-owned giants Sinopec and PetroChina are canceling Russian cargoes, as are the smaller “teapot” refiners, all of whom are fearful of attracting similar penalties.
This widespread “buyers’ strike” is a response to new US sanctions on Russian producers Rosneft and Lukoil. The collective fear has tanked the price of Russian ESPO crude and taken a huge bite out of Russia’s sales to its most important customer.
Rystad Energy AS estimates the disruption at 400,000 barrels a day, which could be as much as 45% of China’s Russian oil imports. This is a major blow to Moscow’s strategy of using discounted crude to fund its war in Ukraine after being cut off by the West.
As China, the world’s biggest importer, looks for alternatives, other suppliers like the US may gain. But the situation remains muddled. Other teapots are constrained not only by fear but also by a shortage of crude import quotas, making the Yulong case a strange outlier in a market defined by fear.