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Oil traders in Asia—except in China—are alarmed that they could soon struggle to procure enough crude if the West imposes sanctions on Russian oil trade or cuts Russia from the SWIFT banking system, market participants told Energy Intelligence after Russia attacked Ukraine early on Thursday.
The general perception among Asian oil traders is that the situation is "quite complicated," one trader told Energy Intelligence.
Two-thirds of Russia's crude oil exports are seaborne, from ports in the Black Sea and the Baltic Sea.
After Russia invaded Ukraine on Thursday, the United States, the European Union, and the UK vowed to impose another round of sanctions against Moscow. None of the first sanctions announced by the U.S. or the European Union, or the UK, targeted any Russian bank dealing with Russia's oil and gas transactions.
This morning's invasion, however, prompted world leaders to vow "massive" strong sanctions against Russia. U.S. President Joe Biden said that "the United States and our Allies and partners will be imposing severe sanctions on Russia" later on Thursday.
If the West were to use the "nuclear option" and sanction Russian oil and/or cut Russia from the SWIFT system of global payments, Asian oil importers that are U.S. allies will likely comply with the sanctions. Those include major crude importers such as Japan and South Korea.
But China, the world's top oil importer, is unlikely to heed any sanctions and continue importing Russian oil, Energy Intelligence notes. China, for example, has continued buying Iranian and Venezuelan crude oil, even after the U.S. imposed sanctions on those two countries' exports.
"If anyone is to buy sanctioned stuff, you can count on [the] Chinese," a trader working on the Chinese market told Energy Intelligence.
China refused today to describe the Russian invasion of Ukraine as "invasion" and said that "It may not be what everyone wants to see."
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com