More than 50 oil tankers that previously transported Russian oil are now stationary and unused in various locations including the Baltic Sea, the Black Sea, offshore Russia’s Far East, China, South Korea, and near the Suez Canal.
These tankers have been targeted by sanctions from the U.S., UK, and EU in recent months as part of efforts to cut off Russia’s oil revenues. According to data from Bloomberg, only three of these tankers have loaded oil since being sanctioned by Western authorities.
The increased enforcement of sanctions has posed challenges for Russia in delivering its oil mainly to Asian customers. Despite this, the cost of transporting Russian oil has dropped to its lowest point in two years, nearly matching rates for non-sanctioned crude on similar routes, analysts estimate.
A key objective of the sanctions is to increase the cost of transporting Russian crude to the point where it becomes economically unfeasible for importers to buy it.
However, the recent decline in shipping costs for sanctioned Russian crude has mitigated the impact of Western sanctions on Russia’s oil sales and revenues. Analysts attribute this temporary trend to higher refinery processing rates in Russia, which have reduced oil exports this month, as reported by anonymous sources to Reuters.
The U.S. began escalating sanctions on entities transporting Russian oil at the end of last year, aiming to cut off revenues to President Putin and address violations of the price cap mechanism. Under this mechanism, Russian oil can only be transported on Western-owned, insured, or financed tankers if crude prices are $60 per barrel or below.
In February, the U.S. imposed new sanctions on Russia marking the second anniversary of its invasion of Ukraine and in response to the death of opposition leader Alexey Navalny. Among the 500 new sanctions targets were Sovcomflot and over a dozen tankers linked to the Russian state-owned fleet operator.
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In a separate move, the UK targeted vessels in Russia’s shadow fleet in March, the first time it directly sanctioned this fleet, estimated to include more than 600 tankers known to have transported sanctioned oil at least once. The UK’s sanctions aimed to disrupt Russia’s attempts to bypass UK and G7 sanctions through these vessels.
Following suit, the EU implemented a new sanctions package in late June, focusing on Russian LNG projects and shipments for the first time. This package also aimed to curb Russia’s use of the shadow fleet to circumvent price caps on its oil and oil products. The EU listed 27 tankers under sanctions, which it can update regularly to counter evolving tactics used by vessels aiding Russia.
Despite these measures, there has been an increase in tankers outside Western jurisdictions shipping oil from Russia, especially as crude prices remain above the $60 per barrel cap, noted Michelle Wiese Bockmann, Principal Analyst at Lloyd’s List Intelligence.
The percentage of tankers insured by the 12 clubs of the International Group of P&I Clubs has hit a record low of 37%, indicating heightened risk, while insurance details for the remainder are unknown, according to the analyst.