Russia creates a shadow tanker fleet to circumvent oil sanctions

– According to Bloomberg with reference to the participants in the commodity market, Russia is creating a “shadow” tanker fleet. According to the ship broker Braemar, our country has recently bought up 240 small and large oil vessels. Due to its own “fuel armada” Moscow is going to bypass the oil embargo, which the West is going to introduce from December 5th. Is this information true?

– This strategy is quite logical. The extent to which this tanker fleet will be created is another matter.

Of course, the transport ships of those countries that can be least accused of cooperation with Russia will be involved. Tankers will be re-registered as foreign legal entities, which will be practically impossible to suspect of any secret agreements with our country. On the agenda is the solution of another issue – how to deliver the appropriate amount of oil to the markets of European countries, where our fuel until recently was supplied through pipelines.

– Can new Western sanctions hinder the process of reorientation of supplies?

– It should be recalled that from December 5 of this year, two types of Western sanctions against energy resources from Russia should come into force. One of the restrictions will affect the shipping of Russian oil: the moratorium risks affecting all exported raw materials – no matter what selling prices are set between the seller and buyer of fuel.

On the same day, not only European sanctions, but also claims developed within the G7 come into effect. They are aimed at introducing a fixed maximum price for domestic oil – apparently at $60 per barrel. This is the latest price line, designated by the Americans. The official level of the ceiling has not yet been approved, but it is clear to all market participants that some restrictions will come into effect in early December.

– All international traders are preparing for such a decision, but it seems that so far few can truly appreciate its consequences …

– Of the specific measures that appeared on paper, only the clarification of the Office of Foreign Assets Control of the US Treasury came out, in which it is recommended to limit the cost of Russian export raw materials within $40-60 per barrel. At the same time, world oil quotes have been balancing around $90 for a long time.

After the introduction of a restrictive price corridor, each oil carrier will have to ask companies directly pumping raw materials onto cargo ships at what price hydrocarbons are supplied to a particular buyer. The same obligation will be imposed on insurance companies that protect the property interests of individuals and legal entities involved in commercial transactions.

– And what should Russia do if these requirements are met strictly and everywhere?

– To overcome these obstacles, our country needs to create its own navy, which could not report for its operations to European or American regulatory agencies. Our new major buyers, China and India, are showing they are willing to ignore Western restrictions.

For Beijing and Delhi, as well as for Moscow, their own economic benefit comes first. The formal owners of tankers can be, for example, Asian firms, and Russian specialized structures can be used as the insurer of transportation. Our country will only have to accumulate a sufficient volume of maritime transport.

Domestic exporters will sell oil to those buyers who did not agree with the price “ceiling” set by Washington and Brussels: we will trade with China and India, and not with Europe, so Moscow will not violate any sanctions.

– According to foreign media, despite the sanctions, in September oil shipments from Russia by sea exceeded the February figures. On the one hand, deliveries to Europe were reduced to a minimum, on the other hand, exports to Asia and “to unknown destinations” increased significantly. That is, the shadow tanker fleet of Russia is already beginning to manifest itself?

– The positive effect is felt not only from the tanker fleet purchased by Russia. New schemes for optimizing the costs of export routes also bring results. After all, since the beginning of March, for the insurance of any foreign tankers transshipping raw materials in domestic commercial ports, one has to pay double, if not triple insurance.

– Can you estimate the volumes of Russian oil that were exported by pipelines and sea tankers before the aggravation of geopolitical relations between Moscow and the Western community? How have these volumes changed now?

– According to publicly available statistics, at the beginning of 2021, the total number of the marine transport fleet controlled by Russian shipowners was almost 1.5 thousand ships. About 1.2 thousand ships raised the flags of our country on their flagpoles. If we talk about deadweight (mass of payload in tons. – N.M.), then more than 62% of the tonnage was accounted for by ships operated under foreign flags. At the same time, most Russian ships have already gone beyond the age of competitiveness, which does not exceed 15 years of operation. During this time, foreign manufacturers of sea tankers not only significantly increased the volume of transportation, but also became much more technologically advanced in terms of various transport features.

In Russia, there are practically no modern container ships, ships with horizontal loading or barge vehicles that deliver cargo to large offshore platforms.

It is more convenient for domestic exporters to use ships sailing under the flags of independent states: Liberia, Malta, Cyprus and Panama. The number of ships under the Russian flag is decreasing, while the number of cargo carriers moving under neutral pennants, on the contrary, is growing. Imported maritime transport services cost Russian companies $10-15 billion annually.

– According to Bloomberg, our country is actively preparing to transfer cargo from one ship to another directly at sea using giant supertankers. For transshipment of raw materials from them, small “shuttle tankers” will have to be used. Is there an offer of such vehicles on the international market?

– Similar operations have already been established – Russian oil loaders are sent to the “open ocean”, that is, to sea waters not controlled by any state. In such zones, the transshipment of raw materials from one side to the other is quite accessible. In this case, no international company can be blamed for the political “toxicity” of the transported oil.

Corresponding schemes have been used for about half a year in the main domestic export ports – both in Novorossiysk and on the Baltic Sea. Buyers who are not involved in geopolitical squabbles benefit from using such routes, so export-import deals allegedly concluded according to “shadow” scenarios grow with each new trading session, regardless of any sanctions. The so-called “shuttles” that reload oil often do not include mechanisms for notifying their maritime deployment, so it is almost impossible to find out the “citizenship” of hydrocarbons.

– But the West is certainly looking for ways to prevent such schemes. How long will Russia be able to use such schemes and how much money will we have to pay for the creation of a shadow tanker fleet?

– Western opponents of Russia are using every opportunity to control our supply of energy resources to the world market, which is concentrated in their hands. But Western regulators are not in a position to inspect every barrel delivered through pipelines.

It is also extremely difficult, but possible, to take control of all trade operations carried out by sea. By buying tankers indiscriminately, Russia is looking for a way to gain independence from Western control. The tactics are understandable and justified. But the search for a suitable transport can take years, and the amount of costs for them is not even worth predicting yet.

Our country lacks not only small deadweight shuttle tankers, but also large sea vessels capable of transporting significant quantities of raw materials. The creation of a shadow tanker fleet will cost a tidy sum: at the beginning of this year, the cost of building new tankers increased by about 20% – up to $110 million per ship. The cost of ships in use has risen to $50-70 million.

However, if participants in the international maritime freight transportation market claim that in about six months Russia bought up 240 small and large oil vessels, then we can hope that domestic companies have enough funds for these purposes, and it is beneficial for current foreign shipowners to part with their own property.