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Report: China Helps Russia Ship, Insure and Sell its Oil

Kozmino
Kozmino Oil Terminal (File image courtesy Nakhodka Maritime Services)

Published Jul 30, 2023 11:52 PM by The Maritime Executive

A top U.S government intelligence agency has accused China of aiding Russia’s war on Ukraine by supplying Moscow with key technology, military hardware and helping the country evade western sanctions, particularly on crude exports.

The Office of the Director of National Intelligence (ODNI) said in a newly declassified report that Beijing pursues a variety of support mechanisms for Russia that reduce both the impact of western sanctions and export supplies.

Apart from supplying Russia with a ready market for its crude, which has largely been locked out of the European market and other parts of the world, China has also opened its financial system for commercial interactions with Moscow, allowing Russian entities to conduct financial transactions without Western interference. Beijing also faces accusations of supplying Russia with key technology and dual-use equipment used in Ukraine.

One area that China has greatly helped Moscow escape the impacts of the sanctions is in oil and gas exports. With Russia’s trade with western countries taking a major nosedive in 20022, the report shows that China has come in handy to close the gap. During the year, total bilateral trade between Beijing and Moscow hit a record high of $190 billion, a 30 percent increase from 2021. Russia’s exports to China increased by 43 percent to hit $114 billion.

Last year, Beijing’s purchase of Russian energy rose to $81 billion compared to $52 billion in 2021. In March this year, crude imports from Russia hit 1.65 million barrels per day, overtaking India as the largest buyer of Russia’s crude. In May, Moscow exported a near record of two million barrels per day to China, an increase of about 25 percent compared to the first quarter of last year and accounting for about 15 percent of China’s demand.

While a majority of Russia tankers have been slapped with sanctions, China continues to aid the transportation of Russia’s Urals crude by providing supertankers and insurance coverage to move the crude to Chinese ports. The report, citing trading sources and tracking data, suggests that as of January this year at least four Chinese supertankers were shipping Russian Urals crude to China. Over the year to date, a total of 18 Chinese supertankers and another 16 Aframax-sized vessels have been used to ship Russian crude. The capacity is enough to transport 15 million tonnes, or about 10 percent of total Urals exports.

The report, citing press investigations, also observes that China has become the main conduit for Moscow’s purchasing of semiconductors, with millions of dollars’ worth of U.S-made or U.S-branded semiconductors flowing to Russia despite sanctions and export controls. During the nine-months period from January 2022 to September 2022, China’s semiconductor exports to Russia increased by 19 percent compared to the same period in 2021.  

The report also shows that China has significantly opened up its financial system to Russia based on the increased share of bilateral trade settled in yuan and expansion of use of both country’s domestic payment systems. In fact, the share of Russian exports paid for in yuan rose by 14 percent in September 2022, up from 0.4 percent before the start of the war.