Russian oil exports pivot east with hefty discounts, costing companies billions in lost revenue
The redirection of Russian oil exports to the East following Western sanctions and a European embargo has resulted in multibillion-dollar losses for Russian oil companies.
Compelled to offer discounts in order to secure Chinese buyers, the Russian oil producers have missed out on approximately $9 billion in revenue.
From March to December 2022, the total discount provided to Chinese buyers of Russian oil was $5.3 billion, and from January to September 2023 it was a further $3.7 billion, according to estimates by the Gaidar Institute.
China obtained its maximum discount in the summer of 2022, which reached 16% compared to other suppliers. By the end of 2022, the size of the discount had reduced to 4-9%, but then started to rise again when the European Union imposed an embargo on Russian barrels, cutting off domestic companies from their largest export market.
In May 2023, the discount for China was 11%, the Gaidar Institute calculated, and by June again started to reduce and stood at about 4% in September-October.
Oil is the primary commodity that China purchases from Russia, accounting for half of exports, or $49.2 billion out of $106 billion. The physical volume of deliveries from January-October 2023 reached 88.5 million tons, 23% higher than last year and 35% above pre-war levels.
Despite Russian president Vladimir Putin's assertion that Russia is no longer a "petrol-station economy", 70% of its trade with China is still fuel.
Along with oil, over 10 months in 2023 Russia sold China 86 million tons of coal (up 93% compared to 2021), 7.11 million tons of LNG (up 87% on 2021), as well as more than 11 million tons of oil products (an increase of 5-7 times depending on the type).