Despite strict US sanctions, Russian oil and LNG continue to reach China through ship-to-ship transfers and non-sanctioned vessels.

In recent weeks, a crude oil shipment transferred from three sanctioned tankers and an LNG cargo loaded in the Barents Sea successfully arrived at Chinese ports.

A Panama-flagged VLCC, Daban, carrying two million barrels of Russian Sokol crude, unloaded its cargo at a terminal run by Qingdao Haiye Group in China on March 13, according to ship tracking data.

The vessel took an unusual month-long route from Russia’s Far East, much longer than the typical one-week voyage.

Before reaching China, the Daban loaded its cargo through STS transfers in Nakhoda Bay, Russian territorial waters, from three Aframax-sized tankers-Vladimir Arsenyev, Captain Kostichev, and Victor Konetsky-on February 3, 9 and 10 respectively.

These three vessels were among those sanctioned by the US on January 10.

STS transfers of Russian oil happen in international waters near Malaysia and Singapore, but this one in Nakhoda Bay attracted the attention of traders.

Initially, the Daban was set to deliver its cargo to Yantai Port in Shandong province, a key destination for Russian oil.

However, Shandong Port Group, a state-owned entity, rejected the cargo, forcing the vessel to change course.

Eventually, the shipment was discharged at Qingdao’s privately controlled Haiye terminal, where some other privately managed Chinese terminals have continued accepting Russian oil despite US sanctions, industry sources said.

Following the US sanctions, the transportation cost for Russian oil has skyrocketed. Freight rates for an Aframax tanker carrying crude from Russia’s Far East to North China surged fivefold in February, reaching $7.5 million per voyage.

Alongside crude oil, Russian LNG shipments have also reached China through similar transfer operations. The North Moon, a 174,000 cbm ice-strengthened LNG carrier, delivered its cargo to Dalian’s LNG terminal on March 17 after picking up its load via an STS transfer in the Barents Sea.

The shipment originated from Russia’s Yamal LNG and was transferred to the North Moon from the 172,600 cbm Arc7 Nikolay Urvantsev in late January near Murmansk.

The North Moon is owned by Mitsui OSK Lines and chartered by Novatek. Three other sister ships-North Light, North Ocean, and North Valley-are also heading towards Asia, with estimated arrivals on March 31, and April 12, and pending delivery, respectively.

Unlike the three sanctioned LNG vessels-Sputnik Energy, East Energy, and Nova Energy-which have remained idle at Nakhodka Bay, the North Moon and its sister ships have not been targeted by US, EU or UK sanctions.

The three sanctioned LNG carriers had previously offloaded their cargoes into Russia’s 361,000 cbm floating storage unit, Koryak FSU, off Kamchatka instead of making direct deliveries to China.

On February 10, China imposed 15% retaliatory tariffs on US LNG imports. According to market analysts, from October 2024 to January 2025, US LNG accounted for only 2.7% of China’s total LNG imports.

An industry expert speaking at a gas market briefing reported that China has not imported any US LNG cargoes since February 10. Instead, Chinese LNG buyers are reselling contracted US LNG cargoes to Europe.

Analysts predict that these resales could triple or quadruple compared to 2024, with companies like China National Offshore Oil Corp (CNOOC) and Sinopec expected to redirect their LNG shipments to European markets.

Reference: Reuters

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