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Biden’s Sanctions Are Finally Taking a Toll on Russian Oil as Prices Drop and Chinese Buyers Pull Back
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![Vlad Litnarovych]( "Vlad Litnarovych")
The Biden administration’s sanctions on Russian oil exports are beginning to take a toll, slashing Moscow’s revenues and forcing suppliers to cut prices, The Moscow Times reported on February 11.
Chinese refineries scaled back their purchases of Russian oil due to the sanctions and mounting logistical issues, while shipping costs for non-sanctioned vessels have soared, pushing Russian suppliers to offer steep discounts.
According to Bloomberg, shipments of ESPO crude from the Far Eastern port of Kozmino for March loading are being sold at just $2-3 per barrel above Brent prices—down from a premium of over $5 in January. Unlike Russia’s Urals crude , which is exported from western ports, the low-sulfur ESPO grade typically trades at a premium to Brent.
To maintain sales, traders are even offering oil delivered via sanctioned tankers at deeper discounts. Chinese state-run refiners have so far refused to sign new contracts for February ESPO deliveries, weighing potential risks and repercussions.
Meanwhile, independent refineries, many located in Shandong province, have slashed processing rates by more than half, dropping to the lowest levels since the pandemic’s peak in March 2020. For these refiners, the skyrocketing transport costs have made Russian oil too expensive.
Freight rates surged fivefold in the latter half of January, following the introduction of sanctions on January 10, which targeted most of the tankers handling ESPO and Sokol crude shipments to China.
To keep the ESPO trade alive, buyers and sellers are exploring alternative options, such as unloading at lesser-known oil terminals outside Shandong or conducting ship-to-ship transfers at sea. However, these workarounds significantly increase costs, a burden many refineries are currently unable to bear.
Earlier, China and India suspended their trade in Russian oil as US sanctions have triggered a sharp increase in tanker freight rates.
The trade of Russian oil loaded in March has stalled in Asia due to a significant price gap between buyers and sellers in China. This disparity arose after freight costs for tankers unaffected by US sanctions surged.
