Russia assembles 'shadow fleet' of tankers to help ease oil sanctions

Russia assembles ‘shadow fleet’ of tankers to help ease oil sanctions

Russia quietly amassed a fleet of more than 100 aging tankers to help circumvent Western restrictions on Russian oil sales after its invasion of Ukraine, according to ship brokers and analysts.

Shipping broker Braemar estimates that Moscow, which relies heavily on foreign tankers to transport its crude, has added more than 100 vessels this year, through direct or indirect purchases. Energy consultancy Rystad says Russia added 103 tankers in 2022 through purchases and the reassignment of vessels serving Iran and Venezuela, two countries under Western oil embargoes.

The Kremlin’s push to assemble what the oil shipping industry calls Russia’s “shadow fleet” is an attempt to overcome new international restrictions on the country’s oil. These include an EU ban on seaborne imports, which comes into force on Monday, and a new global price cap of $60 a barrel, which the bloc backed on Friday and is part of. a broader G7 initiative.

Traders say the ghost fleet will reduce the impact of these measures, but fail to eliminate it.

EU and G7 punitive measures are set to cut Moscow off from much of the world’s tanker fleet, as insurers such as Lloyd’s of London will not be able to cover ships carrying Russian oil – no matter where they go – unless it is sold below the Scheme Ceiling Price.

But Russia has long said it will not deal with any country enforcing the cap, a stance that means it could refuse to supply oil under terms set by the West.

Instead, it aims to use its new fleet to try to supply countries such as India, China and Turkey which have become bigger buyers of its oil as Europe cut spending.

The largely anonymous tanker purchases may be followed by the surge of anonymous or new buyers appearing on the records. The ships are typically 12 to 15 years old and are expected to be demolished in the next few years, said Anoop Singh, head of tanker research at Braemar.

“These are buyers that we, as long-time brokers, don’t know about,” Singh said. “We are confident that the majority of these ships are destined for Russia.”

In 2022, Russian-linked operators are believed to have bought up to 29 supertankers – known as VLCCs, very large crude carriers – each capable of carrying more than 2 million barrels, Braemar told the International Energy Agency during a presentation last month. The country has also likely added 31 Suezmax-sized tankers capable of carrying around 1 million barrels each, and 49 Aframax tankers each capable of carrying around 700,000 barrels, he added.

Andrei Kostin, head of Russia’s state-owned bank VTB, appeared to confirm the push in October when he said the country needed to spend “at least 1 billion rupees ($16.2 billion)” on “expanding the fleet of tankers”. Russian Deputy Prime Minister Alexander Novak said in March that the country would strengthen its oil “supply chains”. On Friday, the Kremlin did not respond to a request for comment on the tanker purchases.

“The number of ships Russia will need to transport all of its oil is simply mind-boggling,” said Craig Kennedy, a Russian oil expert at Harvard’s Davis Center who has tracked the Russian ship buildup. “We have seen a number of sales to anonymous buyers in recent months, and within weeks of the sale many of these tankers are showing up in Russia to take their first load of crude.”

Kennedy wondered if the VLCCs would be used by Moscow because they were too large to load in Russian ports, although some could be used for ship-to-ship transfers. Not all ships purchased by anonymous or unknown buyers can be exclusively for Russian service, he added.

Russia is still expected to face a shortage of tankers and may struggle in the early months of 2023 to maintain export levels, pushing up prices, analysts said.

The shortfall could increase when the EU ban extends to Russian refined fuels in February, Kennedy said. Russia will need access to even more tankers than usual as the duration of each trip will be longer; oil that would previously have been sold in Europe will be sent to new buyers in Asia.

Braemar expects the Russian deficit to be between 700,000 and 1.5 million barrels per day. Rystad estimates that Russia will miss 60 to 70 tankers and expects maritime exports to fall by around 200,000 bpd.

Total Russian volumes lost to the market could eventually reach 600,000 barrels a day if Moscow retaliates by cutting off oil supplies through pipelines to Europe – which are not subject to sanctions – before it has enough tankers to reroute them, Rystad said.

“Russia needs more than 240 tankers to maintain current exports,” said Rystad analyst Viktor Kurilov.

Kennedy of the Harvard Davis Center added: “You can come up with all sorts of clever plans, but there’s so much oil to move – they’ll always struggle to operate at the scale needed to keep Russian exports whole, with no caps on price. Sales.”

#Russia #assembles #shadow #fleet #tankers #ease #oil #sanctions

Leave a Comment

Your email address will not be published. Required fields are marked *