U.S. Sanctions on China’s Oil Firms Are Just the Beginning Under Trump
Among the swathe of Chinese entities last week placed by the U.S. Department of Defense (DOD) on a blacklist of firms believed to be supporting Beijing’s military were several from its energy sector. Most notable of all, perhaps, were the China National Offshore Oil Corporation’s (CNOOC) international oil trading arm and the COSCO Shipping Corporation. As the DOD blacklist focuses on companies deemed a threat to U.S. national security, it should not surprise anyone that such Chinese firms are now on it. As highlighted by OilPrice.com back in the first presidency of Donald Trump, a sea-change had already emerged in China’s political and economic organisational structure following Xi Jinping’s assumption to the role of General Secretary of the Communist Party in November 2012, and then to President in March 2013. A key element of this was the increasingly pivotal role of the Communist Party in all main areas of economic and commercial management in the country. This aligned with Xi’s statement that: “Government, military, civilian, and academic, east, west, south, north, and centre, the [Communist] Party leads everything.” In practical terms, this meant that from that point board directors and company executives — including those in the energy sector — were under the standing instruction to ‘execute the will of the Party’. And as China expert Jonathan Fenby exclusively told OilPrice.com at the time: “This political-economic nexus is set to bring growing divergence from the U.S. as part of the wider agenda of the ‘national strengthening’ being pursued by Xi Jinping.” He added: “Beijing is shifting from being an economic adversary to the U.S. to a geopolitical alternative and this could result in a step change in the nature of the confrontation between the two countries.” President-elect Trump has long seen China as at minimum an ‘adversary’ rather than as a ‘competitor’ as President Joe Biden did, and this has not changed, according to senior sources in his first and current presidential team exclusively spoken to by OilPrice.com. Given the metamorphosis in the degree of interconnectivity in China’s political, economic and military elements during Xi’s rise in 2012/2013, Trump’s view appears well-founded. Even more so in one of Beijing’s national priority areas of securing its energy needs to power future economic growth. This is turn is used to expand its allied territories under the umbrella of the ‘Belt and Road Initiative’ (BRI), which in turn was always eventually aimed at enabling China to establish itself as a viable superpower alternative to the U.S., as analysed in full in my latest book on the new global oil market order. A taste of what was to come for the world’s greatest repository of oil and gas – the Middle East – came in December 2022 when former key ally of the U.S., Saudi Arabia’s Crown Prince Mohammed bin Salman, hosted a series of meetings in Riyadh between President Xi and the leaders of countries in the Arab League. This expanded upon all the key themes stated in January of that year when senior officials from the Chinese government met with foreign ministers from Saudi Arabia, Kuwait, Oman, Bahrain, and the secretary-general of the Gulf Cooperation Council (GCC). The basic theme was to forge a “deeper strategic cooperation in a region where U.S. dominance is showing signs of retreat” — in this instance centred on the signing of a China-GCC Free Trade Agreement. The new pact pledged cooperation in just about everything a country does, including finance and investment, innovation, science and technology, aerospace, oil, gas, and renewable energy, and language and culture. Following the signing of these all-consuming cooperation agreements, Xi then identified two priority areas that he believed should be addressed as quickly as possible: first, transitioning to using the Chinese renminbi currency in oil and gas deals done between the Arab League countries and China; and second, bringing nuclear technology to targeted countries, beginning with Saudi Arabia. On the first of these, China has also long been acutely aware that as the largest annual gross crude oil importer in the world since 2017 it is subject to the vagaries of U.S. foreign policy tangentially through the oil pricing mechanism of the U.S. dollar. This view of the greenback as a weapon was reinforced after Russia’s invasion of Ukraine and the accompanying U.S.-led sanctions that followed, the most severe of which was exclusion from use of the U.S. dollar. As the former executive vice-president of the Bank of China, Zhang Yanling, suggested in a speech in April 2022, China should help the world “get rid of the dollar hegemony sooner rather than later.” The second of Xi’s announced priorities at that time caused equal consternation in Washington, as it followed the discovery by U.S. intelligence agencies that Saudi Arabia was manufacturing its own ballistic missiles with the help of China. Even more concerning was that the same intelligence agencies also found that China had been building a secret military facility in and around the UAE port of Khalifa. The subsequent advance of China’s influence across the Middle East via the mechanism of the BRI and other levers had, in the zero-sum game of superpower supremacy, marginalised the influence of the U.S. and its allies in the former key cooperative states of Saudi Arabia and the UAE. It had also cemented existing opposition to it in Iran, Iraq, and Oman, among others, as detailed in full in my latest book on the new global oil market order. Crucially for Trump’s second term as president that begins on 20 January, China has yet to fully recover economically from its disastrous three years of Covid, which is constraining its ability to reach the finish line in the superpower race. As a senior source who works closely with the new presidential team exclusively told OilPrice.com recently: “China’s finances are failing [with struggling economic growth], Russia’s military has failed [in Ukraine and Syria], Iran’s proxies have been incapacitated [Hezbollah, Hamas, Houthis et al], North Korea is on the sidelines, and now Trump is back.” The
India rushes to pay for Russian oil ahead of sanctions cutoff
India’s state refiners are rushing to speed up payments for Russian crude, hoping to complete their trades before a dramatic expansion of Washington’s curbs on Moscow’s oil industry effectively comes into force next month, people familiar with the matter said. Pressure to stay clear of sweeping US sanctions means the refiners are now aiming to settle payments for the discounted barrels in just two days instead of the previous five, said the people, who declined to be named as the discussions are private. The fate of at least 4.4 million barrels of Russian crude currently on their way to Indian ports hangs in the balance. At least six sanctioned tankers have loaded different grades and are sailing toward ports including Jamnagar, Chennai, Paradip and Visakhapatnam, and are due to discharge at these ports before the wind-down period ends, according to ship-tracking data from Bloomberg and Kpler. The Mercury is expected to reach Paradip in eastern India this weekend, one of the earliest vessels to arrive. It is hauling more than 1 million barrels of Urals from Russia’s Sheskharis terminal, loaded in mid-December. Two sanctioned tankers discharged more than 1.4 million barrels at Indian ports in the state of Gujarat on Jan. 12, according to Kpler data. The Zaliv Amurskiy unloaded Urals at Jamnagar, while the Arjun delivered to Vadinar. Indian banks — increasingly cautious in expectation of tougher measures from Washington, even before Friday’s announcement — have been demanding additional paperwork since late last year, undertaking name screening and tracking incoming shipments. They are now ready to settle the payment on the basis of the bill of lading, the people said. Banks have also stopped processing payments in US dollars, to avoid having to adhere to the $60-a-barrel price cap on Russian crude set by Western nations in 2022. All payments for cargoes from Gazprom Neft PJSC, sanctioned on Friday, are being settled in rubles, the people said. The US Office of Foreign Assets Control has set a deadline of Feb. 27 for the delivery of all crude cargoes that were loaded on sanctioned vessels prior to Jan. 10, the day sanctions were made public — a “wind down” period that Indian buyers are keen to make the most of. India gets about a third of its oil imports from Russia. Government concerns with containing inflation have made the discounted crude particularly attractive, crowding out India’s more traditional counterparties. The latest round of sanctions — targeting two large producers, as well insurers, traders and more than 180 vessels — have put that cheap supply at risk.
OPEC, IEA to launch reports on India’s oil & gas sector at IEW 2025
he India Energy Week (IEW), government’s annual flagship oil and gas sector conference, will witness top international agencies such as OPEC and the International Energy Agency (IEA) launch their oil and gas reports on the world’s third largest energy consumer. The development indicates India’s growing importance as an energy consumer. At IEW 2024, the International Energy Agency (IEA) has launched a report on the oil outlook till 2030 in the world’s third largest energy consumer. The IEW 2025, which is scheduled to take place in New Delhi from February 11 to 14, is expected to witness participation from more than 20 Energy Ministers and Deputy Ministers representing advanced economies, largest energy producers, and key nations of global south. The event will also feature heads of leading international organisations and 90 CEOs from some of the world’s largest Fortune 500 energy companies including BP, TotalEnergies, QatarEnergy, ADNOC, Baker Hughes and Vitol. “IEW 2025 offers a platform where global stakeholders can freely exchange ideas, explore opportunities, and witness India’s leadership in navigating complex energy transitions. As a springboard for collaboration on key energy projects, including green hydrogen technologies, solar innovations, or advanced exploration techniques, this event represents a crucible of global energy innovation,” Oil Secretary Pankaj Jain said. Besides, the event will see OPEN launching the India oil demand report, while the IEA will launch a report on India’s natural gas sector.
US ban on Russian oil may not have instant impact
The recent sanctions imposed by the US on the Russian oil are unlikely to have an immediate or direct impact on India’s oil supply. Any major effects are expected to be felt in next two months, as per a senior official in the petroleum ministry. The official said, on condition of anonymity, the worst-case scenario of the sanctions on Russian crude would be that India will no longer receive discounted or cheaper crude and will have to purchase crude at the market price. “In the next two months, we don’t see major problems. It is too early to say,” said the official. The US imposed sanctions on Russian oil producers Gazprom Neft and Surgutneftegas on Friday, along with 183 vessels. The purpose of sanction is to disrupt revenue stream Moscow uses to fund its war with Ukraine. Many of these tankers have been used to ship oil to India and China, as Western sanctions and the price cap imposed by the Group of Seven (G7) countries in 2022 shifted flow of Russian oil from Europe to Asia. Some of the vessels carry oil from Iran, which is also under sanctions. However, the official maintained that he was hopeful that within next two months, new market dynamics would evolve. Indian refineries will study the market and subsequently buy crude from wherever they can get it at the cheapest price. The official said there would be no disruption as oil supply is not a concern and there are sufficient alternative suppliers. He pointed out that any shortfall in supply could be addressed by OPEC, which has spare capacity. Outside of OPEC, countries like Guyana, the USA, Canada, Brazil, and Suriname could step in to meet India’s needs. As per the official, while one of the sanctioned entities was not a major supplier to India, the other supplied a major amount of crude. “There will certainly be disruption, but it will not be immediate. This is because there is a transit period. For example, cargo already in transit will still reach us. The key is to have a window of six-eight weeks, during which current shipments can arrive. This six-eight week period provides time for buyers and producers to find solutions. It is possible that a producer might be willing to sell at a discounted price,” the official added.