Hormuz Shock Sends China and India Racing for Russian Crude
The crisis around the Strait of Hormuz has become a severe stress test for both Gulf crude suppliers and their key buyers. Despite repeated assurances from U.S. officials that the waterway was never formally blocked, satellite tracking suggests that no oil or product tankers transited the strait since March 1. The disruption immediately placed the…
The crisis around the Strait of Hormuz has become a severe stress test for both Gulf crude suppliers and their key buyers. Despite repeated assurances from U.S. officials that the waterway was never formally blocked, satellite tracking suggests that no oil or product tankers transited the strait since March 1. The disruption immediately placed the world’s largest importers under pressure. China and India together consume tens of millions of barrels per day, and both remain structurally dependent on Gulf crude. China has steadily expanded purchases of Russian oil since 2022, yet roughly 1/3 of its crude imports originate in the Gulf. India, meanwhile, has been deliberately reducing its earlier heavy reliance on Russian barrels and replacing them with Middle Eastern supplies. With the Iranian crisis unfolding and no quick normalization of Hormuz traffic in sight, both Asian giants may turn to their long-standing supplier in Moscow like never before. The key question is: does Russia have sufficient export capacity to meet the sudden surge in demand?
The shift in India’s purchasing pattern has been particularly visible in recent months. Indian imports of Russian crude declined steadily from 1.85 million b/d in November 2025 to just 1.06 million b/d in February 2026. Much of the remaining flow has been concentrated in a single outlet: the Vadinar refinery operated by Nayara Energy, partly owned by Rosneft. By February, roughly half of the Russian crude delivered to India (around 510,000 b/d out of the 1.06 million b/d total) was imported there. In November 2025, the share was markedly smaller, with 560,000 b/d flowing to Vadinar out of the 1.85 million b/d imported overall. The retreat from Russian supply was largely driven by mounting pressure from Washington, prompting Indian refiners to stop buying Russian barrels. By February 2026 crude from Iraq, Saudi Arabia, the United Arab Emirates and Kuwait accounted for more than half of India’s total imports of 5.18 million b/d, reaching roughly 2.8 million b/d compared with just 2 million b/d in November 2025. The nearly 1 million b/d increase reflected a belief that Gulf crude offered legal stability and relatively low prices. That assumption is now being severely tested, as a significant share of those cargoes is effectively stranded in Gulf waters waiting for safe passage through the Strait of Hormuz. The disruption is likely to force New Delhi to reconsider its recent distancing from Russian supply – assuming those barrels are still available.
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China faces a challenge of its own. In February 2026, its seaborne imports of Russian crude reached a new record of 1.92 million b/d. Yet the Iranian crisis affects Chinese refiners on two fronts. Unlike India, China was also a major buyer of Iranian crude, importing roughly 1 million b/d in February. Combined imports from Kuwait, Iraq, the UAE and Saudi Arabia totalled about 3.4 million b/d in the same month. Taken together, the potential loss of Iranian supply and disruption to Gulf shipments threatens more than 1/3 of China’s crude imports. In this context, Russian barrels appear both politically and logistically attractive. Overland pipeline flows and shipments from Russia’s Far Eastern ports offer one of the few large-scale supply channels that bypass the Gulf entirely.
Recent tanker movements underline how the market is already adjusting. A wave of U.S. enforcement actions against Venezuelan oil exports has left a number of numerous VLCCs idle in Asian waters. Many of these vessels had previously been used to collect Venezuelan crude through ship-to-ship (STS) transfers. With those flows disrupted, several of the VLCCs became redundant. Russia appears to have quickly stepped into that logistical vacuum. Although Russian exporters rarely relied on VLCCs in the past, at least 8 such vessels are currently positioned in the Arabian Sea and near Singapore, either en route to China or waiting offshore. There’s 12 million barrels of medium sour Urals alone that are carried by VLCCs, not counting Russia’s Far Eastern grades, surpassing the previous record carry of 9.8 million barrels from February 2023. Most of the cargoes they carry are already committed to Chinese buyers, offering little hope for India’s supply concerns.
How much of the spare Russian oil is available now? Floating storage suggests that Russia’s spare export capacity may be limited. Inventories of Russian crude at sea climbed steadily through late January 2026, reaching about 19.6 million barrels. Since then, they have declining continuously. By early March, only 12 vessels remain in floating storage, holding roughly 7 million barrels in total, and several of those tankers are already anchored near Chinese ports awaiting a signal to offload. In other words, the pool of unsold Russian crude available on short notice has shrunk significantly.
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Pricing dynamics are shifting as well. Market insiders report that the Hormuz disruption has narrowed the discount of Russia’s Urals grade to Brent from roughly $10/bbl to $5-6/bbl. At the same time, Russia itself may soon have additional crude available for export because domestic refining activity has slowed. Russian refinery throughput fell from about 5.5 million b/d in December 2025 to roughly 5.15 million b/d in February 2026. Part of the decline followed drone strikes on two refining facilities, including the Volgograd refinery (300,000 b/d capacity) and the Ukhta refinery (80,000 b/d capacity). Planned maintenance at several other plants scheduled for March and April is expected to further reduce domestic crude demand, potentially freeing additional barrels for exports.
Moscow’s most likely strategy in the current environment will be to play its two largest Asian customers against each other. In previous months, Russian exporters often stored unsold cargoes in tankers near Singapore or along the Chinese coast, a tactic that unintentionally signalled oversupply and widened price discounts. The current market situation is markedly different. With most floating cargoes already allocated and supply chains disrupted across the Gulf, the next wave of Russian barrels is not yet visible. That scarcity gives Russian sellers leverage to raise prices by pointing to strong demand from competing buyers. For both India and China, the Hormuz crisis may therefore lead to the same conclusion: Russian crude remains one of the few reliable alternatives – but it may no longer come as cheaply and abundantly as before.
By Natalia Katona for Oilprice.com
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