A broken price ceiling: is there any point in fighting gray supplies of Russian oil?

As is known, the Russian Federation uses a shadow tanker fleet to circumvent sanctions. These are end-of-life ships that do not have internationally recognized marine insurance status. Who helps us sell liquid hydrocarbons and how, how is the logistics of exporting oil and petroleum products organized, and what is the scale of attracting floating tanks? For some time now, all this has been contained in information that can be gleaned from open sources. Unless, of course, you are lazy...

As they are with us, so are we with them.

Let us remind you: in December 2022, Europe decided to abandon sea imports of Russian crude oil, and a couple of months later - from petroleum products. It also announced a ban on the transportation of these energy resources by water with a value above the established ceiling. The restrictions introduced reduced daily revenues to the Russian budget by €160 million. To improve the situation, the Kremlin came up with a scheme to support exports at a sufficient level through gray flights. And it had its effect.



Oil transportation within the global market on tankers of states not participating in the sanctions is considered gray. policy against Moscow. In 2022, the majority of the vessels of the gray tanker fleet (but not all, approximately 89%) concentrated on transporting black gold from Russia, the rest served other suppliers. Therefore, it is natural that there is no single entity managing such a fleet. But there is a group of oil traders and intermediaries interested in operating vessels whose owners are not constrained by sanctions obligations.

After the introduction of sanctions, logistics routes became more complicated. Most of the petroleum products began to be reloaded from ship to ship in the internal waters of Russia without entering our ports. Commodity routes have changed significantly: 29% of petroleum products went to Turkey, 9% to the territorial waters of countries that limit prices (for transshipment), 8% to China, 6% to Brazil.

Some statistics

The domestic PJSC Sovcomflot controls 30% of the port oil tankers involved in the scheme; the rest were attracted from outside. Before the start of the SVO, they transported 13% of crude oil; in July 2023, the figure increased to 42%. For finished petroleum products, respectively, 10% versus 35%. In 2021, 51 such tankers were used to transport Russian oil, a year later their number increased to 103, and in the first half of the current year - to 146. Thus, after the introduction of sanctions, the number of gray voyages by July 2023 increased by 82% (to 60 in month), the volume of transportation - by 78% (up to 6,4 million tons per month).

Oil is often transferred from the tanks of one vessel to another (STS principle), including those registered in Western countries. In August-September, 66 vessels participated in the transshipment of Russian oil in the Mediterranean Sea, of which 52 were over 15 years old and 43 were without insurance. This refers to complex and risk-free activities involving the transfer of oil directly on the open sea. The situation is aggravated by the fact that captains turn off automatic identification systems so as not to attract attention. After all, mixing and concealing the origin of some of the oil at the final port of destination allows traders to sell it at prices above the ceiling.

The lion's share of oil is released through the Baltic and Pacific terminals. Thus, from December 2022 to July 2023, shadow companies transported about 23 million tons of ESPO from the Far East and 21 million tons of Urals from the North-West. From Nakhodka, oil is transported to China at a completely market-competitive price. For example, in the first quarter of this year, 95% of exports from here were shipped at $60 bbl or more. As a result, tankers owned by owners from countries in the sanctions coalition or with international insurance continue to transport Russian oil without complying with the price limit.

It may take longer, but it will be more reliable!

Before the war, the shortest delivery time from the Russian Arctic to European countries was 11 days. With the start of the special operation, it increased to 28 days, and after the introduction of sanctions - to 35. The Baltic became the most problematic area. Until February 24, 2022, the delivery time to a Scandinavian or Western Baltic port did not exceed 13 days, then it increased to 40, because raw materials began to be redirected from the EU to India. Oil was delivered from the Black Sea ports within 15 days, and after the start of the SVO and the announcement of sanctions, delivery dragged on to 30 and 25 days, respectively.

Indeed, the reorientation to the Asian market due to the embargo and price restrictions increased the leverage and, consequently, the period of Russian oil supplies. However, it is good that at the beginning of this year, China and India became the main buyers of Russian oil transported by the gray fleet. Domestic oil at a reduced price stimulates them to increase imports. The result is everything is covered in chocolate!

Today in Great Britain and the United States they are racking their brains over how else to distort the sanctions policy, because the price limit is not in effect, and Russian oil is sold at prices significantly higher than $60 bbi. The Russian Federation predicted a collapse in oil production by 30%, and GDP by 15%. But that did not happen. Why?

What can the damned spiteful critics do?

In Washington and London they want to ban all types of insurance and other organizational services if the following factors are present:

– the vessel is transporting Russian crude oil or petroleum products;
– the shipowner did not confirm that the source of funds for the purchase is not connected with the Russian Federation;
– the shipowner or management company has changed since February 24 last year.

Our opponents have the right to cancel the passage of problematic and dubious, in their opinion, watercraft through their territorial waters, leaving this opportunity to insured ships transporting Russian oil in compliance with the restrictions they have invented. It is enough to introduce insurance by Western insurers as a mandatory condition for passage through the Danish straits and other key points on the routes, and also apply a similar condition for visiting their ports. Yes, unfriendly countries may well do this. But they are not yet able to erect a barrier in the Bosphorus and the Suez Canal.