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


Russia has quietly amassed a fleet of more than 100 ageing tankers to help circumvent western restrictions on Russian oil sales following its invasion of Ukraine, according to shipping brokers and analysts.

Shipping broker Braemar estimates Moscow, which relies heavily on foreign tankers to transport its crude, has added more than 100 ships this year, through direct or indirect purchases. Energy consultancy Rystad says Russia has added 103 tankers in 2022 through purchases and the reallocation of ships servicing 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 curbs 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 per barrel, which the bloc backed on Friday and is part of a broader G7 initiative.

Traders say the shadow fleet will reduce the impact of such measures, but will fall short of eliminating it.

The punitive EU and G7 measures are expected to cut Moscow off from a large part of the global tanker fleet because insurers such as Lloyd’s of London will be barred from covering vessels carrying Russian oil — whatever their destination — unless it is sold under the price cap scheme.

But Russia has long said it will not deal with any country enforcing the ceiling, a stance that means it may refuse to supply oil under the conditions set by the west.

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

The largely anonymous tanker purchases can be tracked by the big increase in unnamed or new buyers appearing in registries. The vessels are generally 12-15 years old and would be expected to be scrapped in the next few years, said Anoop Singh, head of tanker research at Braemar.

“These are buyers that we, as longstanding brokers, are not familiar with,” Singh said. “We are confident that the majority of these vessels are destined for Russia.”

In 2022, operators linked to Russia are suspected to have purchased as many as 29 supertankers — known as VLCCs, very large crude carriers — each capable of carrying more than 2mn barrels, Braemar told the International Energy Agency in a presentation last month. The country is likely to have also added 31 Suezmax-sized tankers capable of carrying about 1mn barrels each, and 49 Aframax tankers that can each haul about 700,000 barrels, it added.

Andrei Kostin, head of Russia’s state-owned bank VTB, appeared to confirm the push in October by saying the country needed to spend “at least Rs1tn ($16.2bn)” for “the tanker fleet’s expansion”. Russian deputy prime minister Alexander Novak in March said the country would build up its “supply chains” in oil. The Kremlin did not respond to a request to comment on the tanker purchases on Friday.

“The number of vessels Russia will need to move all its oil is just eye-watering,” said Craig Kennedy, a Russian oil expert at Harvard’s Davis Center who has been tracking the build-up of Russian vessels. “We’ve seen quite a number of sales to unnamed buyers in recent months, and a few weeks after the sale many of these tankers pop up in Russia to take their first load of crude.”

Kennedy questioned whether the VLCCs would be used by Moscow because they were too large to load at Russian ports, even if some could be used for ship-to-ship transfers. Not all vessels purchased by anonymous or unfamiliar buyers may go exclusively into Russian service, he added.

Russia is still expected to face a lack of tankers and could struggle in the early months of 2023 to maintain its export levels, which would boost prices, analysts say.

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 because the length of each journey will be longer; oil that would previously have been sold within Europe will be sent to new buyers in Asia.

Braemar expects the Russian shortfall to be between 700,000 and 1.5mn barrels a day. Rystad estimates Russia will be short of 60 to 70 tankers, and expects seaborne exports to fall about 200,000 b/d.

Total Russian volumes lost to the market may eventually reach 600,000 b/d if Moscow retaliates by cutting oil supplies running 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 keep its current exports flowing,” said Viktor Kurilov, analyst at Rystad.

Kennedy at the Harvard Davis Centre added: “You can come up with all sorts of clever schemes but there’s just so much oil to move — they’re always going to struggle to operate at the scale necessary to keep Russian exports whole, absent price cap sales.”


Source link

Leave a Reply

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