Bessent: China is big purchaser of sanctioned Russia, Iran oil

Bessent: China is big purchaser of sanctioned Russia, Iran oil

China's strategic position as a major purchaser of sanctioned Russian and Iranian oil has emerged as a critical geopolitical player in the global energy market. As the world's largest oil importer, China has been instrumental in navigating the volatile landscape shaped by U.S. sanctions, Middle East instability, and the energy transition. This strategic approach has significant implications for investors and financial professionals.

Since the Israel-Iran conflict in June 2025, China has been actively stockpiling crude oil to hedge against potential disruptions in supply. According to [3], China's crude oil imports surged to 12.14 million barrels per day in the second quarter of 2025, with surplus levels averaging 1.06 million barrels per day. This buildup is a calculated response to geopolitical risks, particularly the threat of a Strait of Hormuz disruption.

China has been facilitating the import of discounted Iranian and Russian crude, utilizing clandestine ship-to-ship transfers and yuan-denominated transactions. Iranian crude exports to China hit 6.8 million barrels per day in the first half of 2025, while Russian supplies increased to 1.38 million barrels per day in April 2025 [3]. These flows are supported by a shadow supply chain involving aging tankers, bonded storage in Chinese ports, and financial obfuscation via offshore banking networks.

The European Union has taken notice of China's role in facilitating the movement of sanctioned oil. The EU recently blacklisted Iranian oil trader Hossein Shamkhani and his Dubai-based firms for helping move Russian oil [2]. This move is part of the EU's 18th sanctions package, which also includes a dynamic price cap on Russian oil and a full SWIFT ban on 20 Russian banks. The sanctions aim to tighten the noose around Russia's oil revenues, which are still booming due to exports to China and India.

China's strategic petroleum reserves (SPR) have expanded significantly, reaching 531 million barrels by March 2025, with plans to add 60 million barrels by March 2026 [3]. This growth is supported by state-owned giants like CNPC, Sinopec, and CNOOC, which are expanding storage facilities in coastal hubs such as Shandong, Zhoushan, and Dalian. Investors should focus on companies directly involved in storage expansion, such as Shandong Port Group and China Shipping Development.

China's refining sector is also benefiting from this strategy. With refining throughput hitting 15.15 million barrels per day in June 2025, state-owned refiners like Sinopec and CNOOC are producing diesel and gasoline at record margins. The surplus of 1.42 million barrels per day in June allowed refiners to lock in discounted Iranian crude priced at a $6–$7 discount to UAE benchmarks [3].

In conclusion, China's strategic role in the global oil market, particularly its purchase of sanctioned Russian and Iranian oil, highlights its geopolitical influence. This approach not only ensures energy security but also creates unique investment opportunities in oil infrastructure, logistics, and alternative energy sectors.

References:
[1] https://www.reuters.com/world/europe/europeans-warn-iran-un-sanctions-if-no-concrete-progress-nuclear-issue-2025-07-17/
[2] https://www.cryptopolitan.com/eu-iranian-oil-trader-sanctions-russia/
[3] https://www.ainvest.com/news/china-strategic-crude-oil-stockpiling-geopolitical-implications-energy-markets-2507/