Russian Crude Oil Piles Up Near Chinese Coast After US Sanctions

The US sanctions on Russian crude oil exports have not only failed to curb Russia's oil exports but have also led to an accumulation of Russian crude oil near the Chinese coast. According to data from S&P Global Commodities at Sea and Maritime Intelligence Risk Suite, Chinese tanker operators lifted 18.9 million barrels of Russian crude oil in June 2024, outnumbering tanker operators of any other nationality for the first time since the price cap came into force. This trend suggests that Chinese tanker companies are actively transporting Russian crude oil to India, bypassing US sanctions and the G7 price cap.

The increase in Russian crude oil exports to China and India can be attributed to several factors. First, Russia has been increasing its crude oil exports to offset the loss of European markets due to sanctions. In June 2024, seaborne Russian crude exports rose to 3.7 million b/d, supported by stronger demand from top buyer India. Second, Chinese tanker companies have been actively transporting Russian crude oil, particularly the Eastern Siberia-Pacific Ocean (ESPO) blend, to India. In June 2024, Chinese tanker companies lifted 18.9 million barrels, outnumbering tanker operators of any other nationality for the first time since the price cap came into force. Third, Indian demand for Russian crude oil has been increasing, with India importing close to 2.1 million barrels daily of sanctioned Russian crude in June 2024, representing a 4.2% monthly increase and a 12% annual increase. Lastly, many Russian crude oil exports are transported by tankers operating outside of the G7's price cap, allowing Russia to circumvent the cap and sell its oil at higher prices. In June 2024, more than 80% of Russian crude exports were transported by tankers operating outside of the price cap regime.

The geopolitical dynamics between the US, Russia, and China are likely to have a significant impact on the trend of Russian oil exports and the effectiveness of the G7 price cap. The increasing involvement of China and India in Russian oil exports, despite the sanctions and price cap, has the potential to undermine the US-led effort to limit Russia's revenue and fund its war against Ukraine. This situation may also have broader geopolitical implications for the relationships between these countries.

In conclusion, the US sanctions on Russian crude oil exports have not only failed to curb Russia's oil exports but have also led to an accumulation of Russian crude oil near the Chinese coast. The increasing involvement of China and India in Russian oil exports, despite the sanctions and price cap, has geopolitical implications for the US and its allies. As these countries continue to engage with Russia, they may be seen as undermining the effectiveness of the G7 price cap and the broader sanctions regime against Russia. This situation may also have broader geopolitical implications for the relationships between these countries.