China's imports of Russian oil rose by nearly one-quarter in January-February 2023 compared to the same period in 2022. The Far East country buys discounted Russian crude, refines it and exports it to Europe as Chinese petroleum products.

Russia overtook Saudi Arabia to be China’s top oil supplier in the first two months of 2023, according to Chinese government data. This is due to sanctions imposed on Russia allowing buyers to snap up sanctioned Russian oil at steep discounts.

Arrivals from Russia totalled 15.68 million tonnes in January-February, or 1.94 million barrels per day, up 23.8 per cent from 1.57 million barrels per day in the corresponding 2022 period, data from the General Administration of Customs revealed.

Imports of Saudi crude totalled 1.72 million barrels per day in the two-month period, down from 1.81 million barrels per day a year earlier.

Independent Chinese refiners, many of them based in Shandong province, have been among the main beneficiaries of this shift in pricing power. These plants currently refine cheap Russian crude oil and trade it at a high price on the global market.

However, with domestic fuel demand rising after the lifting of coronavirus restrictions, state-owned Sinopec and PetroChina resumed their purchases of Russian crude in larger volumes.

Chinese refiners use intermediary traders to handle shipping and insurance of Russian crude to avoid violating Western sanctions. In the end, an officially Chinese product is exported from the country, but it happens to be based on Russian raw material.

Customs data also showed that imports from Malaysia were 0.65 million barrels per day over the examined period, up 144.2 per cent from the same period last year. Malaysia is often used as an intermediary point for sanctioned cargoes from Iran and Venezuela, thus supplying China with cheap oil. The problem is that Venezuela, despite possessing one of the largest oil reserves in the world, cannot be considered a reliable supplier due to the political turmoil in the country, especially after Tareck El Aissami, Venezuela’s oil minister for three years, has resigned amid a corruption probe into the state oil company.

Meanwhile, China started to increase its exports in January 2023. Experts say it is China’s attempt to reduce the shortage in the world market caused by the sanctions imposed by the European Union. Russian crude oil refined in China is sold on the world market, including to the European Union – which decided to ban only Russian crude. Statistics suggest that the Netherlands’s oil imports from China was 1.25 billion dollars in 2022, meaning that although the route is different, Russian oil can still find its way into the territory of the European Union.