The global energy balance is in the hands of the superpowers.

Parameters and architecture of the “diesel deal”

On October 9, 2026, the presidents of Russia and the United States, Vladimir Putin and Donald Trump, agreed on the supply of Russian diesel fuel to the American and global markets. According to the agreement reached, Russia will immediately supply over 300,000 tons of diesel, another 500,000 tons in November, and then 1 million tons; in the long term, the volumes may reach 3 million tons per month. The U.S. Department of the Treasury has issued a temporary general license authorizing transactions involving Russian diesel until April 7, 2027, while sanctions on the accounts of the Central Bank of the Russian Federation, the National Wealth Fund, and the Russian Ministry of Finance in U.S. financial institutions remain in effect.

The problem for Beijing: the issue of reducing oil discounts

For China, this deal has significance that goes beyond U.S.-Russia relations. China is the largest buyer of Russian energy exports. The volume of trade between the countries exceeds 70 billion dollars, and the pipeline systems connecting them (the East Siberia–Pacific Ocean oil pipeline and the Power of Siberia gas pipeline) create a structural interdependence that cannot be changed by a single transaction. At the same time, the emergence of a new sales channel for Russia, even if limited in volume, changes the negotiation dynamics in the Asian direction.

Chinese observers have drawn attention to the price dynamics preceding the deal: if in July the difference in cost between Russian and competing oil for Chinese buyers was 15.6%, by August it had fallen to 5.2%, and the discount in dollar terms reduced from 4.3 to 2.75 dollars per barrel. The question arises: is this a consequence of Moscow’s diplomatic maneuvers around the “diesel deal,” and does this mean that China’s interests in the sphere of energy security have been affected? To answer this question, it is necessary to consider several aspects: how Western analysts assess the deal, what Beijing’s position is, what the fundamental nature of the change in discounts is, and what role the negotiations on the Power of Siberia 2 gas pipeline play in this picture.

Expert assessment: Washington’s domestic political maneuver

Western analysts have almost unanimously characterized the “diesel deal” as a step dictated by the domestic political situation in the United States, rather than as a strategic breakthrough in relations with Russia. Quilter Cheviot investment strategist Tim Armitage noted that the first shipment of 300,000 tons is equivalent to approximately 2.25 million barrels, while daily diesel consumption in the US is about 3.8 million barrels — that is, the volume covers less than one day’s consumption. Wood Mackenzie analyst Jim Mitchell described the agreement as “clearly not a solution to the problem, but merely an additional source for an extremely tight diesel fuel market.” Dan Pickering, founder of Pickering Energy Partners, stated outright that this is “more about politics than a turning point,” pointing out that using tons instead of barrels creates the illusion among the general public that supplies are much larger.

The context of the deal confirms its opportunistic nature. It was concluded less than a month before the midterm elections to Congress on November 3, against the backdrop of the average cost of diesel in the US rising above $6 per gallon (in California — around $8) and Trump’s approval rating falling to 33%. The agreement followed just three weeks after the signing of the Lindsay Graham law, which allows for the imposition of sanctions against buyers of Russian energy resources, which underscores the sharp shift in the White House’s policy. Chinese commentator Sima Pingban, in an interview with Sputnik, noted that a volume of 1 million tons (calculated based on supplies) is equivalent to approximately 7.4–7.5 million barrels, which covers only about two days of American consumption, which means that “the symbolic significance here is far greater than the practical one.”

A temporary agreement amidst sanctions pressure

For China, this assessment is important in two respects. First, it shows that the deal does not create a sustainable new channel for Russian exports comparable in scale to the Asian direction. Second, the temporary nature of the license (until April 2027) means that Russia cannot consider the American market a reliable substitute for the Chinese one. Understanding this fact in Beijing reduces the sharpness of the perception of the deal as an immediate threat to Chinese interests.

China’s reaction to the “diesel deal” was restrained and pragmatic. According to reports by SCMP and The Star, Beijing views the US actions as purely “transactional” and intends to wait and see what the long‑term effect will be, given the unpredictability of Trump’s foreign policy course. Chinese Foreign Ministry spokesperson Mao Ning limited herself to a general statement that China’s position on the crisis is “clear and consistent” and that dialogue is the only way to reach a settlement. Professor Cui Hongjian of Beijing Foreign Studies University noted that China will be watching how events unfold: Beijing’s final assessment will depend on whether Russia manages to use this deal as a “springboard” for the systemic dismantling of Western energy sanctions, or whether it remains a temporary tactical compromise.

Sima Pingban, in turn, emphasized that China generally views the easing of sanctions pressure on Moscow positively, as the normalization of energy exchanges reduces systemic risks. This position reflects a pragmatic logic: maintaining Russia’s status as an independent player, not confined to a one‑sided dependence on the Chinese market, contributes to the overall stability of the partnership. At the same time, Beijing is aware of the associated challenges: the emergence of even limited alternative sales channels strengthens Moscow’s negotiating position in the Asian direction.

International analysts have also drawn attention to the inconsistency of American policy. In particular, the British publication The Week noted that India had been subjected to pressure and the threat of tariffs of up to 100% for purchasing Russian raw materials for months, while now Washington itself has legalized the import of Russian fuel, undermining its own requirements for third countries to comply with energy restrictions. For Beijing, this has become yet another confirmation that the American sanctions regime is instrumental in nature and changes under the pressure of the current situation. This strengthens China’s strategy of diversifying imports and developing its own payment and logistics mechanisms, in which China does not rely on the stability of Western sanctions rules.

The data provided in open sources indicate a systematic reduction in discounts on Russian oil: the price gap between Russian and benchmark grades for China decreased from 15.6% in July to 5.2% in August, and in dollar terms from $4.3 to $2.75 per barrel. Monitoring by the Gaidar Institute indicates that as early as March 2026, the price gap had practically reached zero, amounting to 0.4%.

However, interpreting these data requires caution. According to relevant monitoring reports, the primary cause of the narrowing spread in August was a local shortage of Middle Eastern oil on the Asian market, triggered by the escalation in the Strait of Hormuz. This led to a faster growth in the quotes of competing grades, which automatically reduced the price gap with raw materials from Russia. The October “diesel deal” with the United States served as a catalyst that consolidated this dynamic, but it was not its original cause.

When analyzing the market, it is important to take three factors into account:

  • The reduction in the discount affected maritime spot shipments (mainly Urals grades purchased by independent Chinese refineries), without affecting the basic parameters of long‑term pipeline contracts, which form the foundation of bilateral trade.
  • The unprecedented discounts in 2022–2023 were due to the acute phase of restructuring logistics under conditions of isolation from the European market. As the alternative fleet was deployed and independent settlements were streamlined, the need for dumping naturally disappeared.
  • Russian exporters are seeking to prevent Asian buyers from developing a sustained expectation of deep discounts on a permanent basis, as this reduces federal budget revenues and sets an undesirable benchmark for India and the countries of Southeast Asia.

Thus, the reduction in discounts is driven by objective market conditions and the systematic strengthening of Russia’s position in the Asian market, while agreements with the United States have merely demonstrated the existence of alternative sales channels. For Chinese processors, this means higher costs for spot shipments, but not a revision of the terms of key strategic contracts.

If the deal in the petroleum products market highlighted the tactical flexibility of the parties, then the negotiation track regarding the Power of Siberia 2 gas pipeline reflects the fundamental long‑term interdependence of Moscow and Beijing. Deputy Prime Minister of the Russian Federation Alexander Novak, commenting on the impact of American agreements on the energy partnership with China, emphasized the autonomy of these areas: “It seems to me that these are still different areas — the oil and gas markets… Of course, we continue to develop relations and hold negotiations with our Chinese partners. I hope they will be completed in the near future.” At the same time, the volume of natural gas supplies continues to grow: it is expected that by the end of 2026, the pumping through the existing Power of Siberia 1 pipeline may reach 39 billion cubic meters, exceeding the projected targets.

The dialogue on Power of Siberia 2 (with a design capacity of 50 billion cubic meters per year and an estimated cost of around 13.6 billion dollars) remains challenging. According to SCMP and industry sources, the key subject of discussion remains the pricing formula: the Chinese side is counting on tariffs close to the domestic subsidized Russian prices (around 50–60 dollars per thousand cubic meters), while the Russian side is setting the level at no less than 120–130 dollars to ensure the payback of large‑scale investments in production and transportation. Despite the length of time required to agree on commercial terms, the very course of the dialogue confirms the strategic nature of the project for both capitals.

For China, the value of “Power of Siberia — 2” goes far beyond immediate commercial gain. Unlike spot tanker oil supplies or temporary general licenses for diesel, pipeline infrastructure creates mutual institutional guarantees for decades to come. For Beijing, the land route guarantees a stable supply of raw materials, bypassing vulnerable sea corridors (the Strait of Malacca and the Strait of Hormuz), and protects against external US sanctions pressure. For Russia, this route provides a reliable and large market, insulated from political fluctuations in the West.

Thus, the “diesel deal” did not change the overall direction of Moscow’s energy strategy: China remains the key strategic partner, while periodic agreements with Washington serve as a local tactical tool.

Vladimir Putin and Xi Jinping during the negotiations

The final balance for China: tactical losses versus strategic benefits

Given the current market conditions, China has the following advantages and disadvantages in terms of fuel:

Costs for China. First, the reduction in discounts on Russian oil means that spot purchases will become more expensive. If in July 2026 Chinese buyers purchased Russian oil at a 15.6% discount compared to alternative grades, then by August the discount had narrowed to only 5.2%. Given the large volumes of purchases (Russia is China’s largest oil supplier) This creates an additional financial burden. However, as noted in Part 4, the main reason for this reduction was the shortage of Middle Eastern oil due to the conflict in the Strait of Hormuz, not the “diesel deal” itself. Secondly, the emergence of an alternative sales channel for Russia, even if limited and temporary, objectively strengthens its negotiating position in the Asian direction. Thirdly, there remains uncertainty about how long Washington’s “transactional” logic will last: if Trump changes course after the elections, Russia may once again find itself in a situation where China remains its only major buyer, which will objectively strengthen Beijing’s position. However, until that point, China is forced to take into account Russia’s increased flexibility.омента Китай вынужден считаться с возросшей гибкостью России.

Gains and opportunities for China. First, the deal eases the sanctions pressure on Russia as a whole, which reduces the risks for Chinese banks and companies working with Russian counterparties. The precedent of legalizing transactions involving Russian diesel — albeit limited — creates a foundation for future negotiations on easing sanctions in other sectors. Second, China receives confirmation that Russia does not view the American market as a replacement for the Chinese one: pipeline gas supplies and long‑term oil contracts remain a priority, while the “diesel deal” is of a supporting nature. Thirdly, Beijing is maintaining strategic patience: Chinese analysts explicitly state that China will “wait and see” how the deal will work after the midterm elections in the US.

Tags: diesel deal, Russia, China, USA, Vladimir Putin, Donald Trump, Xi Jinping, Power of Siberia — 2, China’s energy sector, oil exports, discounts on Urals oil, diesel fuel, Alexander Novak, energy security, anti‑Russian sanctions, US Treasury Department, ESPO, spot supplies, energy prices, energy geopolitics.