Russia is building a "shadow fleet" of tankers to sell oil to new buyers amid Western oil sanctions, Financial Times reports . Analysts say Russia will need access to more tankers than usual because the length of each voyage will be longer, oil that was previously sold in Europe will be sent to new buyers in Asia, such as India, China and Turkey.
New oil sanctions
International restrictions on Russian oil include an EU ban on its seaborne imports, which comes into force on December 5, and a new limit on world prices for fuel from Russia, which, according to the FT, is planned to be set at $60 per barrel in the near future. It is planned that restrictions on Russian oil will come into force on December 5, and from February 5, 2023 they will be extended to petroleum products. Such EU and G7 measures are expected to cut Moscow off from a significant portion of the world's tanker fleet, as insurers, including large ones such as Lloyd's of London, will be prohibited from insuring ships carrying Russian oil – regardless of their destination – unless it is sold at a limited price.
However, Russia has long said it will not deal with any country that enforces the ceiling, a stance that means it could refuse to supply oil on terms set by the West.
"Shadow fleet" for the sale of unclaimed oil
Shipping broker Braemar estimates that Russia has quietly amassed a fleet of more than 100 aging tankers to help circumvent Western restrictions. Energy consultancy Rystad reports that Russia added 103 tankers to the oil transportation chain in 2022 through the purchase and reallocation of ships serving Iran and Venezuela, two countries subject to Western oil embargoes.
More often than not, anonymous purchases of tankers can be tracked by a significant increase in unnamed or new buyers appearing on registries. Vessels being purchased are typically 12-15 years old and are expected to be scrapped in the coming years, says Anup Singh, head of tanker research at Braemar.
“These are buyers we, as longtime brokers, don't know,” Singh said. “We are confident that most of these vessels are destined for Russia.”
In addition, Braemar notes that in 2022, operators most likely associated with Russia purchased up to 29 supertankers, known as VLCC (Very Large Crude Carriers), very large oil carriers, each of which is capable of transporting more than 2 million barrels, as well as 31 Suezmax size tankers, capable of carrying about 1 million barrels each, and 49 Aframax tankers, each of which can carry about 700,000 barrels.
“The number of ships Russia would need to move all of its oil is staggering,” says Craig Kennedy, a Russian oil expert at the Harvard Davis Center who tracks the Russian fleet buildup. “In recent months, we have seen quite a few sales to unnamed buyers, and within weeks of the sale, many of these tankers are showing up in Russia to receive their first shipment of crude oil.”
Despite the purchase of ships, Russia will still face a shortage, analysts say, and in the first months of 2023 may find it difficult to maintain export levels, leading to higher prices. According to Rystad, total Russian volumes lost to the market could eventually reach 600,000 barrels per day if Moscow retaliates by cutting oil supplies to Europe through sanction-free pipelines before it has enough tankers to divert them.
“Russia needs more than 240 tankers to maintain current export volumes,” said Rystad analyst Viktor Kurilov.