Briefly
According to Reuters, citing Vortexa Analytics and Kpler, Russian crude oil shipments to China could reach around 2.07–2.083 million barrels per day in February — a new record after January's ~1.7 mb/d. At the same time, the Urals grade is selling at a discount of $9–11 per barrel to Brent, which means: volumes are rising, but revenue for the Kremlin is falling.
Why are shipments to China increasing?
The explanation is complex. First, since November China has become the largest seaborne buyer of Russian oil, partly because India cut purchases following trade arrangements with the United States. Second, some private Chinese refiners have shunned Iranian oil due to uncertainty around possible strikes on Iran, so they sought alternative supplies — and found them in Russia. The result is a redistribution of flows, but not a change in the market's fundamentals.
"Shipments to China are rising amid reduced demand from other buyers and attractive discounts — it's a rerouting of flows, not a solution to the Kremlin's budget problems"
— Reuters, based on comments from traders and data from Vortexa and Kpler
Economic effect for Russia
More barrels do not mean better revenues. Because of large discounts on Urals, oil and gas export revenues are falling; Reuters reports that Russia's oil and gas revenues in January were halved compared with the same period last year. In other words, the Kremlin is forced to make up for falling prices with volumes — a strategy that has limits and increases the budget's vulnerability to long-term sanctions and market shocks.
What this means for Ukraine and the market
Two points matter for Ukraine: first, pressure on Russian revenues is a strategic resource for sanctions pressure and diplomacy; second, the redistribution of flows in Asia changes logistics and pricing on the global oil market, which can affect price volatility and the region's energy security. Analysts warn that if the discounts persist, it will not only be Russian finances under pressure, but also partners who will be forced to balance politics and economic gain.
Conclusion
The rise in shipments to China is an adaptation of Russian export routes, but not a return to pre-crisis conditions. Now the ball is in the partners' court: will they turn these markets and figures into intensified political pressure on the Kremlin, or will they allow Russia to recover some lost revenues through deep discounts?
