LONDON — Broad sanctions targeting Yulong refinery by the UK and EU after an Oct. 15 listing of China’s Shandong Yulong Petrochemical complex have driven major Western oil suppliers, lenders and traders to scramble to cut links and redraw crude flows through Asia. Photo taken Tuesday, Nov. 26, 2025. The efforts to strangle Russian energy revenues — which have been funding the war in Ukraine and stockpiling armaments — are backfiring, they add, insofar as they are merely diverting inexpensive Russian crude to China’s newest megarefinery while also isolating such trade from global financial and trading venues.
How the Yulong refinery’s fall destroyed Western relations
The Yulong refinery sanctions kicked off with London targeting Shandong Yulong Petrochemical and a number of its associated port operators under its Russia (Sanctions) regime, taking aim at firms that “have supported the Russian energy sector through substantial contracts for crude oil production.” The EU took its cue from asset freezes on important third-country purchasers of Russian oil as part of an October package that hit dozens of entities linked to Kremlin revenue. The authorities in Moscow have, however, declined to name the UK calf pyrexiglass manufacturer that has been banned from continuing its shipments as part of Russia’s wider sanctions response against countermeasures against Russia’s oil industry. Official information about those blacklisted is available on the British government’s list of sanctions targets relating to Russia, which includes Shandong Yulong Petrochemical, among others, who are identified as supporting Russia’s energy sector.
When sanctions on the Yulong refinery came into force, they hit Western counterparts hard and fast. European majors BP and TotalEnergies, Middle Eastern suppliers Saudi Aramco and Kuwait Petroleum, and trading house Trafigura took steps to scrap crude supply deals to the 400,000-barrel-per-day plant, while Chinese state trader PetroChina International also backed away. A painstaking Reuters reconstruction of the fall illustrates how banks in Singapore, commodity exchanges and data providers shut down Yulong’s trading office, forcing its staff to desperately search for an alternative after routine facilities vanished overnight.
Suppliers even contemplated cancelling cargoes they had already been paid for, with compliance departments treating the Yulong refinery sanctions as quasi–secondary sanctions and worrying that they might get caught up in future enforcement actions. A sanctions lawyer quoted in the Reuters report said the designations formed part of a “developing trend” in which UK and EU authorities had directly targeted third-country entrants who were undermining perceptions of Russia. A previous Reuters exclusive on cancelled Yulong oil deals detailed at least half a dozen Middle East and Canadian shipments that were cut or diverted after the sanctions were announced.
Page A27 A dramatic Russian oil pivot as Yulong refinery is sanctioned
Stranded by a wide range of mainstream suppliers, Yulong has turned sharply to Russia for supply. Russian grades, including ESPO and Urals, made up some 40% to around 50% of the plant’s crude slate prior to the Yulong refinery sanctions, traders said. Now, industry data and analyst reports indicate that Russian oil accounts for almost all of its imports, with Yulong snapping up at least 15 cargoes from Russia alone for delivery in November and preparing for more in December — effectively doubling its usual purchases in a month.
Analysts say the Yulong refinery sanctions have unwittingly strengthened the relationship between Moscow and a single Chinese buyer at a time when some Russian state-run importers in China and India are backing away from taking supplies over fears of breaching U.S. sanctions. And with reduced-price Russian barrels now reported to cover some 350,000 bpd of Yulong’s around 90% utilisation rate, the refinery has turned, compared to isolation, into a cost advantage, cutting feedstock costs just as it diverts more petrochemical output onto China’s domestic market. The switch is “a blessing in disguise,” said one Chinese trader of Russian oil who spoke to Reuters, as inexpensive crude dulls the pain of skinnier margins in overcapacity Asian product markets.
An example to test the future strategy of sanctions
For policymakers in London and Brussels, the Yulong refinery sanctions are a test of whether going after large third-country purchasers can make a material dent in Russia’s oil earnings. Legal experts said that by targeting a high-profile Chinese complex, his toughest action yet goes beyond past measures aimed at smaller traders trading on sanctioned firms or those caught skirting U.S.-imposed price caps and could deepen the division into a heavily policed “clean” market and an unruly shadow network of companies under sanctions, which wear like badges of honour.
For Beijing, Yulong is a flagship project in its campaign to consolidate and modernise Shandong’s fractured “teapot” refining sector, split between private owners such as Nanshan Group and the state-controlled Shandong Energy Group. So long as Russian crude prices are at a significant discount to Middle Eastern grades—and technically still within Western price-cap rules—industry sources expect the refinery to deepen its Russian pivot, while seeking workarounds such as greater reliance on Chinese non-bank financiers and potential restructuring of its corporate web to protect unsanctioned units.
A much broader pattern preceded the Yulong refinery sanctions. Western oil majors have slowly withdrawn from Russian upstream and refining projects since Russia’s full-scale invasion of Ukraine in 2022, writing off billions of dollars’ worth of assets as they exited joint ventures like Sakhalin. Deals like Exxon Mobil’s 2022 exit from a major Sakhalin oil project illustrate how sanctions pressure first pushed international companies out of Russia; Yulong’s case suggests the pressure is now reaching far into the global customer base for Russian crude.
Whether that approach ultimately whittles away at Moscow’s war chest or merely reroutes barrels through willing buyers such as Yulong will help define the subsequent phase of Western sanctions policy. For now, the Yulong refinery sanctions have cleared out the plant’s Rolodex of Western partners — and made it one of the single most critical entry points for Russian oil into China.
