Column by Yuri Barsukov about new EU sanctions

In the 12th package of sanctions, EU countries decided to somehow revive the dying ceiling on Russian oil prices and demonstrate the fight against the so-called gray tanker fleet. We are talking about ships that were purchased in 2022 and the first half of 2023 from mainly Western owners with funds from Russian oil companies and registered in friendly jurisdictions – primarily in Hong Kong and the UAE. Such vessels typically do not use Western mutual insurance clubs and are thus insensitive to the constraints of oil price ceilings. According to Kpler estimates, in November the “gray fleet” accounted for more than half of Russia’s seaborne oil exports, while tankers from European shipowners accounted for about 20%. In fact, in the list of the top 10 countries in which tankers exporting oil from Russia are registered, there is only one Western country – Greece. However, it ranks third in terms of volume.

A year after the ceiling was introduced and about six months after it began to systematically demonstrate its ineffectiveness, European officials decided to limit sales of tankers from EU shipowners to Russian owners. Initially, the European Commission proposed a complete ban, but met resistance from Greece and Cyprus, so for now we will talk about monitoring transactions: now shipowners are required to notify the authorities about which country they are selling tankers to. It is unclear whether the authorities of individual EU countries will have the power to block such transactions, and if so, what the criteria will be: it is not that difficult to organize the sale of a vessel through a chain of intermediaries, especially since companies transporting Russian oil, as a rule, are not registered in Russia.

It is quite obvious that these actions will have little effect on the pace of formation of the “gray fleet”, since it is extremely difficult for the EU to control the tanker market in a situation where more than half of such vessels in the world are built in China. So far, it seems to me that European officials are simply taking profits from Greek shipowners – who have been selling their old ships at a very high profit over the past year instead of scrapping them – and handing that money over to Chinese shipping companies. The costs of Russian exporters in this situation may increase slightly, although this depends more on the general dynamics of the tanker market. In the long term, all these measures will push Russian oil companies to quickly build new tankers (probably in China) and finally move away from dependence on Western services for oil exports. Unfortunately, this also means that Russian oil companies are increasingly dependent on Chinese counterparties in all segments, from the purchase of raw materials to the means of their transportation, insurance and payment.