Russia has found a new way to circumvent sanctions: Arctic oil supplies to China have increased
17 April 21:48
Exports of Arctic oil from Russia to China surged in April due to an increase in the number of ship-to-ship transfers on the high seas. This scheme avoids US sanctions, as tankers entering the ports do not appear on US sanctions lists, Komersant ukrainskyi reports citing Reuters.
According to Vortexa analysts, at least 4 million barrels of Arctic oil were transshipped last week, and another 16 million have arrived or are expected to arrive in the South China Sea this month.
The Arctic oil business accounts for a tenth of Russia’s maritime oil exports, which were hit by expanded US sanctions in January. The restrictions affected almost all tankers carrying the ARCO and Novy Port crude oil grades, as well as Russian producer Gazprom Neft.
To circumvent the sanctions, transshipment takes place in international waters near Singapore and Malaysia. The oil is reloaded onto large tankers (VLCCs), which are not subject to sanctions, before heading to Chinese ports.
Chinese imports of Russian Arctic oil averaged 25,000 barrels per day in March. China officially declares its disagreement with unilateral sanctions, but Chinese buyers still try to avoid ties with sanctioned tankers for fear of secondary restrictions.
For example, the Atila tanker loaded 2.07 million barrels of ARCO from two sanctioned tankers in March in waters off Singapore and delivered the cargo to China’s Duning port in April.
The Arctic crude oil grades – ARCO, Novy Port and Varandei – are produced in the northern regions of Russia, where harsh weather conditions make production difficult. Currently, deliveries to China take two months because tankers go through the Suez Canal and the shorter Northern Sea Route is closed until July.
India, which used to be the main buyer of Arctic oil, has reduced purchases due to sanctions. This month, Indian authorities banned a tanker from transshipment of Russian oil near the port of Mumbai.
Other buyers of Arctic oil include Syria, which received its first shipments earlier this year, and Myanmar.
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How to hurt Russia over oil prices
It is well known that Russia is critically dependent on its energy exports. First and foremost, on oil exports. In 2024, the Russian federal budget revenues from oil sales amounted to 9.19 trillion rubles (approximately $89.4 billion). Total budget revenues for this period amounted to 36.71 trillion rubles. Thus, the share of oil revenues in the total structure of Russian budget revenues in 2024 was approximately 25%
This indicates that, despite international sanctions and attempts to diversify revenue sources, oil remains a key source of financing for the Russian budget.
Russian Urals oil, the main product of the Russian Federation, is traditionally sold cheaper than Brent and WTI, and is also subject to additional factors that raw materials from other countries do not experience, namely Western sanctions. However, during all three years of the full-scale war with Ukraine, Russia has been successfully selling its oil – its main buyers today are China and India.
The federal budget of the Russian Federation for 2025 included an oil price of $70. Meanwhile, due to the collapse in the global oil market caused by Donald Trump ‘s trade war and OPEC’s decision to further increase production, the price of Russian Urals oil, according to the Ministry of Finance, was $59 per barrel on April 17.
So far, market analysts’ forecasts do not promise Russia any serious problems related to the price of oil, as it still has a very large backlash for sales. According to economic expert Oleg Pendzin, even a price of $50 per barrel is still acceptable for Russia.
“Currently, the direct cost of Russian oil production is about $37-38 per barrel. This is the direct cost. The critical figure for Russia is the sales price of $45,”
– the economist explained exclusively for .
So the more likely way to hurt Russia over oil is still to increase sanctions, including secondary sanctions against its buyers. The point of this step is to make it physically impossible for Russia to sell large volumes of oil and thus receive funds to continue its aggressive war of aggression.
However, back during his election campaign, after making statements about ending the war in 24 hours or 100 days, Donald Trump made a very realistic statement. He said that in order for Russia to lose the ability to fight, it would be enough to simply collapse oil prices. And he seems to be going to do that if Russia does not make concessions. Whether Trump realizes it or not, this is exactly what is happening now.
The Russian economy is already slowing down significantly at $59 per barrel of oil, the industry is stagnating, and recession looks like a very real prospect.
And if the current downward trend in prices continues, the $45 per barrel figure no longer looks fantastic.
