Yukos cuts crude deliveries to China

The Russian budget will suffer up to $90 million of losses

Chinese consumers of oil became first victims of the 'Yukos case.' The oil giant cut the export of crude to China by one million tons. Yukos made the decision on the threshold of the meeting between Russian and Chinese prime ministers. The two officials were supposed to sign governmental agreements to increase the export of the Russian crude to China. The agreement was also supposed to settle all problems pertaining to Russia's entry in the WTO.

Yukos announced that it would cut oil export to the Chinese national oil and gas corporation by one million tons until the end of the current year. A spokesman for the company said that the decision had been made as a temporal measure, on account of expensive shipping costs and customs duties ($150-170 per ton of crude). Since Yukos is restricted in accessing its own accounts, the company would not be able to cover such costs.

Yukos is the only supplier of the Russian crude to China. The oil giant planned to deliver about 6.5 million tons of crude and petroleum products, the Chinese oil and gas corporation was supposed to receive 3.8 million tons. The Russian budget will suffer up to $90 million of losses until the end of 2004 because of the Yukos's decision to cut the export to China.

Yukos will meanwhile continue deliveries to another Chinese company, Sinopec. “We believe that Russian deliveries are more critical for Sinopec, that is why we think it would be correct to supply the company with crude continuously,” a spokesperson for Yukos said.

Yukos made such a surprising decision shortly before negotiations between Russian and Chinese prime ministers. The talks are to take place in Moscow on September 23-25. Russian Minister for Energy, Viktor Khristenko, said earlier that the two countries had agreed upon a considerable extension of Russian crude deliveries to China up to 15 million tons by 2006. China is very interested in the Russian crude. Khristenko visited Beijing at the end of August and agreed that Yukos would be given a $3 billion loan to guarantee extended deliveries by 2005-2006. The Russian Ministry for Economic Development and Trade has refused to comment the Yukos decision and its influence on the forthcoming talks.