Asia Adjusts to New Sanctions on Russia, Turns to Alternative Oil Suppliers

Asia’s crude oil markets are swiftly adapting to the latest sanctions imposed on top supplier Russia, purchasing as many cargoes as possible before restrictions take full effect while simultaneously seeking alternative sources for future deliveries.

As the world’s largest oil-importing continent, Asia is expected to receive approximately 3.23 million barrels per day (bpd) of Russian crude in February, based on data compiled by LSEG Oil Research. This marks a 7.4 percent decline from January’s figure of 3.49 million bpd. However, the distribution of shipments reveals a shift, with India increasing its purchases while China reduces its intake.

Currently, India and China are the primary buyers of Russia’s seaborne crude in Asia, though Myanmar also imports small volumes. India’s imports of Russian oil are projected to reach a three-month high of at least 1.71 million bpd in February, a number that may rise further as additional cargoes are assessed.

India emerged as Russia’s top crude buyer after Western sanctions cut off European demand. Under previous U.S. and Western policies, India was permitted to purchase Russian oil at discounted rates. This strategy aimed to keep Russian crude circulating in global markets while simultaneously limiting Moscow’s revenues following its February 2022 invasion of Ukraine.

The latest U.S. sanctions, introduced last month by former President Joe Biden, targeted Russia’s so-called shadow tanker fleet in an effort to restrict its ability to transport oil. This led Indian refiners to rush and secure as much Russian crude as possible before the new regulations took effect, driving the increase in February imports. However, a decline in purchases is expected by March.

Chinese refiners, on the other hand, reacted more swiftly in scaling back Russian crude imports. February seaborne shipments to China are forecasted to reach approximately 500,000 bpd, significantly lower than the previous three-month average of about 1.05 million bpd.

China, the world’s largest crude importer, is set to receive a total of around 10.35 million bpd in February, maintaining stability with January’s figure of 10.10 million bpd but falling from the 11.16 million bpd recorded in February 2024. This suggests that China is substituting Russian crude with supplies from other sources, primarily Angola and Brazil.

Supplier Switching

Asia’s imports of Angolan crude oil are forecasted to surge to 1.13 million bpd in February, a sharp increase from 670,000 bpd in January. Similarly, shipments from Brazil are expected to climb to 1.05 million bpd, up from 930,000 bpd.

Beyond February, the situation is becoming more complicated, particularly in light of China’s recent decision to impose a 10 percent tariff on U.S. crude imports. This move is a direct response to new President Donald Trump’s imposition of a 10 percent tariff on all imports from China.

The Chinese tariff is substantial enough to render U.S. crude uncompetitive in the Chinese market. However, it will take several months before the impact is fully visible in physical imports due to the lag between purchase agreements and cargo deliveries.

For the time being, China’s imports of U.S. crude are expected to rise significantly in March and April. According to commodity analysts at Kpler, March arrivals are estimated at 339,000 bpd, while April shipments are projected to reach 461,000 bpd. This increase is attributed to cargoes that were either already en route or previously arranged.

By May, China’s imports of U.S. crude are likely to decline, but India may step in to compensate for the loss, as part of its broader strategy to diversify away from Russian crude. 

By fLEXI tEAM