Description: China’s state – owned Sinopec Corporation, the world’s largest oil refiner, stepped up purchases from Russia’s Eastern Siberia-Pacific Ocean (ESPO) due to shortages in fuel supply and increased shipping costs caused by the war in Iran. Sinopec acquired approximately 30 to 40 shipments from ESPO, estimated for energy costs for the last quarter of the year. US sanctions on Russia’s Rosneft and Lukoil prompted Sinopec to previously cut down transactions with Russian state – owned entities, however, due to the escalating trade war with the US and the fact that China refuses to recognize unilateral sanctions, Russia’s crude oil became the major supplier in the last couple of months. The transactions between Sinopec and ESPO in the past couple of months were made through intermediaries to avoid US sanctions, primarily towards the Russian supplier. China has closed oil exports since Mar and rationed energy supplies for domestic use as the war in Iran escalated.
Impact: Sinopec’s increased acquisition of Russian oil likely emphasizes the long – term effects of the energy crisis the war in Iran has caused so far and points towards increased embeddedness of energy ties between Russia and China. China in the past aimed at diversification of its energy ties likely due to achieving goals such as strategic partnerships with countries that dominate the oil trade such as Saudi Arabia, however, in times of crisis Beijing would likely reiterate to its closest partner. The downturn caused by the Iranian war likely enables China to form exclusive energy ties with Russia and prop up Russia’s struggling economy in its war with Ukraine. China’s bans on fuel exports are likely to continue between the mid and long – term, depending on the developments of the war in Iran. China is also likely to focus in the immediate term towards pressing forward energy diversification partnerships and alternative energy sources to maintain the high pace of its export oriented and manufacturing driven economy.