As China shops around for a good deal to refill its strategic crude stockpiles, Russia — with few other countries to sell to — is offering its oil at a tantalizing discount.
Beijing is in discussions with Moscow to buy additional supplies of crude oil, according to a new Bloomberg report—a sign that China is strengthening its energy ties with Russia as the country stands largely isolated after waging its war against Ukraine.
While it is not yet clear how much oil China intends to buy or whether an agreement will be made, it isn’t the country’s first time buying Russian oil.
Iran’s crude exports to China have fallen sharply since the Ukraine war began, according to a new report by data and analytics firm Kpler, indicating Beijing has been buying up Russian Ural—the benchmark for Russian crude—at a heavy discount since February.
While the price of oil has rallied above $110 in Western markets since Europe began preparing a ban on the export, Russian Ural is trading at a $34 discount to brent per barrel.
“China is now clearly buying more Urals cargoes. Exports of Urals to China have more than tripled. That comes despite a weakening in Chinese imports,” Homayoun Falakshahi, a senior analyst at Kpler said in Al Jazeera.
Oil on offer
When asked at a press briefing on Friday, whether China supports Russia by buying more energy and other commodities, Chinese Foreign Ministry spokesman Wang Wenbin, said: “China and Russia will continue to conduct normal trade cooperation in the spirit of mutual respect, equality, and mutual benefit.”
Wenbin noted that China does not agree with resolving issues with sanctions, which they claim “lack the basis of international law.”
He goes on to add “reality has long proven that sanctions not only fail to resolve problems but will create new ones.”
While the U.S. and U.K. have both outright banned the import of Russian oil, the European Union has been taking similar steps in the same direction.
European Commission President Ursula von der Leyen announced a ban on all Russian oil from Europe in early May, telling the European Parliament: “Putin must pay a price, a high price, for his brutal aggression.”
Since the import ban, there has been a shift in the way global oil markets operate, with analysts predicting the 2.5 billion barrels of oil a day that was originally headed to the EU will no longer find a home.
“We’re going to see a structural change in the global oil market, really, in the form of Europe no longer being reliant on Russian energy,” Caroline Bain, chief commodities economist at London-based economic research firm Capital Economics, previously told Fortune.
“It is a permanent shift, not a temporary response.”
But while Western countries turn their noses up to Russian oil, the heavy discount may be too good an opportunity for Asian countries to pass up.
India has also been trying to negotiate deeper price cuts on Russian oil, aiming for deals as low as $70 a barrel, Bloomberg reported .
While China and India may still willing to buy up the remaining oil, they also face higher transportation costs.
Redirecting Russian oil by sea to China and India would require supertankers making weeks-long journeys from the Black Sea to the Mediterranean, and then through the Suez Canal before reaching Asian ports.
Even if prices were low enough to make such trips worthwhile, many shipping companies would likely shy away from the mammoth task for fear of being hit by sanctions.