Fear of Sanctions Disrupts Russia-to-China Oil Flows — But For How Long?

Date: November 18, 2025
Source: Bloomberg

Expanding Western sanctions are choking the flow of Russian and Iranian crude oil to China, the world’s largest importer, creating turbulence in global energy markets. While analysts believe the slowdown may be temporary, the current disruption underscores the growing impact of U.S. and European measures on trade routes once considered resilient.

What Triggered the Slowdown?

The U.S. recently imposed sanctions on Rosneft PJSC and Lukoil PJSC, two of Russia’s biggest oil producers, as part of efforts to curb Moscow’s revenue streams amid the ongoing war in Ukraine. Restrictions accompanied these measures on key Chinese infrastructure, including the Rizhao oil terminal, which handles nearly 10% of China’s crude imports. The European Union and the UK also blacklisted Shandong Yulong Petrochemical Co., a major buyer of Russian oil.

Impact on Oil Flows

• Russian crude imports to China could fall by 500,000 to 800,000 barrels per day, a drop of up to two-thirds from normal levels.
• Iranian oil flows may decline by 200,000 to 400,000 barrels per day, or about 30%.
• A glut of unsold Russian and Iranian crude is building up, with 48 million barrels of Iranian oil now stored at sea, the highest level in over two years.

Market Reaction

Chinese state-owned refiners have paused purchases of ESPO crude, Russia’s flagship grade for the Far East. Even private refiners—known as “teapots”—are showing caution, partly due to limited import quotas and fear of secondary sanctions. Discounts on ESPO have widened to $4 per barrel below benchmark prices, tempting some buyers to consider covert methods like ship-to-ship transfers and transponder shutdowns to mask cargo origins.

Global Ripple Effect

Indian refiners are also scaling back Russian purchases, signaling that Western sanctions may finally be denting Kremlin revenues. However, analysts warn that enforcement will determine whether these disruptions persist. Ports like Dongjiakou, already sanctioned, continue to handle sensitive cargoes, suggesting that flows could rebound if scrutiny weakens.

What’s Next?

Experts predict that Chinese refiners will adopt a “wait-and-see” approach until new procurement channels and supply chains are established. If additional import quotas are granted, some refiners may resume buying discounted Russian barrels despite the risks. For now, the sanctions have injected uncertainty into a market that thrives on predictable flows.