China Quietly Ramping Up Purchases of Cheap Russian Oil

Reuters May 20, 2022 By Chen Aizhu and Florence Tan

SINGAPORE, May 20 (Reuters) – China is quietly ramping up purchases of oil from Russia at bargain prices, according to shipping data and oil traders who spoke to Reuters, filling the vacuum left by Western buyers backing away from business with Russia after its invasion of Ukraine in February.

The move by the world’s biggest oil importer comes a month after it initially cut back on Russian supplies, for fear of appearing to openly support Moscow and potentially expose its state oil giants to sanctions.

China’s seaborne Russian oil imports will jump to a near-record 1.1 million barrels per day (bpd) in May, up from 750,000 bpd in the first quarter and 800,000 bpd in 2021, according to an estimate by Vortexa Analytics.

Unipec, the trading arm of Asia’s top refiner Sinopec Corp 600028.SS, 0386.HK, is leading the purchases, along with Zhenhua Oil, a unit of China’s defense conglomerate Norinco, according to shipping data, a shipbroker report seen by Reuters and five traders. LivnaShipping Ltd, a Hong Kong-registered firm, has also recently emerged as a major shipper of Russian oil into China, the traders said.

Sinopec declined comment. Zhenhua and Livna did not respond to requests for comment.

The firms are filling the hole left by western buyers after Russia’s invasion of Ukraine, which Russia calls a “special military operation.”

The United States, Britain and some other key oil buyers banned imports of Russian oil shortly after the invasion. The European Union is finalizing a further round of sanctions, including a ban on Russian oil purchases. Many European refiners have already stopped buying from Russia for fear of running afoul of sanctions or drawing negative publicity.

Vitol and Trafigura, two of the world’s biggest commodity traders, phased out purchases from Rosneft, Russia’s biggest oil producer, ahead of an EU rule that came into effect on May 15 barring purchases unless “strictly necessary” to secure the EU’s energy needs.

“The situation began taking a drastic turn after the exit of Vitol and Trafigura that created a vacuum, which could only be filled by companies that can provide value and are trusted by their Russian counterparts,” one Chinese trader, who asked not to be named, told Reuters.

More Russian Oil Heading East Squeezes Iranian Crude Sales to China

The low price of Russia’s oil – spot differentials are about $29 less per barrel compared with before the invasion, according to traders – is a boon for China’s refiners as they face shrinking margins in a slowing economy. The price is well below competing barrels from the Middle East, Africa, Europe and the United States.

China separately receives some 800,000 bpd of Russian oil via pipelines under government deals. That would bring May imports to nearly 2 million bpd, 15% of China’s overall demand. For Russia, oil sales are helping to cushion the blow to its economy from sanctions.

More:

https://gcaptain.com/china-quietly-ramping-up-purchases-of-cheap-russian-oil/

China Has Militarized Seafarers Says US Navy Report

May 20, 2022

by Captain John Konrad (gCaptain) Over the many years of reporting maritime news, the idea that China could militarize its commercial maritime fleet has been dismissed by most of the shipping community, but a new report published by the US Naval War College shows that this is not only a possibility but has already been accomplished. This report comes weeks after a CSIS report detailed how China militarized its commercial shipyards.

The report – Civilian Shipping and Maritime Militia: The Logistics Backbone of a Taiwan Invasion – by Lonnie Henley, a former Rhodes Scholar and senior Army intelligence officer, looks at the integration of commercial shipping and China’s seafarers with the People’s Liberation Army Navy (PLAN), along with the use of Chinese seafarers – aboard both China flagged ships and Non-Chinese flagged ships – during a planned invasion of Taiwan.

In 2019 we spelled out the importance of training and integration between the US Navy and US Merchant Marine and how broken the current United States commercial shipping system is. Despite receiving high-level attention, little was done to remedy the problem. China however, has taken these lessons to heart.

Read: Editorial: Admiral, I Am NOT Ready For War

“Civilian shipping is the central feature of the PLAN approach to an invasion of Taiwan,” says Henley. “The PLA has spent over two decades developing the bureaucratic apparatus, laws, and regulations to organize, train, and manage this force (of civilian seafarers). This seems to be how Chinese leaders, civilian and military, think the PLA should function, leveraging the enormous resources of China’s civilian economy to support military operations.”

The report does mention some weaknesses of the Chinese system to leverage commercial shipping but overall paints a picture in stark contrast to how American and Western merchant mariners are integrated with Naval command.

China’s Merchant Marine Training

The report states that unlike the U.S. Merchant Marine model, where government officers and crews take control of leased ships, regular crews of civilian ships are inducted as militiamen and required to attend military training under the direction of the China’s National Transportation War Preparedness Office. Training includes the following topics:

marshaling, assembly, and sailing in formation;

use of military communications equipment and procedures;

self-defense and mutual defense; rescue and first aid;

military loading and unloading techniques;

basic knowledge of the operating environment from a military perspective;

operation of equipment particular to their assigned support tasks;

knowledge about their supported unit and their role in that unit’s mission;

knowledge about enemy threats they will face; and topics such as “dockless unloading”

This is the type of training that has not been provided to US Merchant Mariners since the US Maritime Administration closed down the Global Maritime and Transportation School in 2012.

When people talk about the Chinese Navy not having a global presence, they need to remember that the Chinese merchant marine, in particular @COSCOSHIPPING, does have such a presence. Much like the early history of the US, in China the commercial side supports the military. https://t.co/ye2SlKooz5

— Sal Mercogliano (WGOW Shipping) ???????? (@mercoglianos) May 13, 2022

China’s War Preparedness Office also provides guidance and training in more specialized topics, including “Modifying Civilian Ships for Military Transportation.” This guidance instructs seafarers on how to mount and interface specialized military equipment, including reconnaissance and surveillance gear, medical treatment facilities, firefighting gear, and emergency repair facilities.

More:

https://gcaptain.com/warning-china-has-militarized-its-seafarers/