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Bloomberg: Russia’s attempts to circumvent Western oil sanctions could lead to environmental disaster

May 12, 2023
in Daily News
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Russia's attempts to circumvent Western oil sanctions threaten an environmental catastrophe. Experts and oil market participants interviewed by Bloomberg come to this conclusion, as Russia currently uses a record number of obsolete tankers to transport its oil around the world. These vessels are often owned by little-known companies and do not have adequate insurance. In the event of accidents, collisions or oil spills in the water area, this threatens local ecosystems with serious consequences.

“This is a catastrophe that will happen sooner or later,” said Rolf Thor Roppestad, CEO of Gard AS. According to him, tankers with Russian oil regularly appear in Norwegian waters, which do not have proper insurance.

Moreover, experts agree that the European water area is most at risk, since tankers with Russian oil are unloaded near the European ports of Greece and Spain. As an example, the agency cites the story of two "older tankers" - Amber 6 and Catalina 7, which are used to transport Russian oil. Amber 6 loaded oil in the Russian Ust-Luga, after which it reached neutral waters near the Spanish Ceuta (an exclave in Africa).

Ceuta and the Greek bay of Laconis near the port city of Kalamata have become the most popular European points for Russian oil since the imposition of sanctions. It is here that, almost daily, fuel is transferred from small tankers to larger ships, and then the latter are sent to buyers - mainly to China or India. After Catalina7 spent approximately 30 hours pumping all the oil out of Amber 6, the tanker had a long journey to the Chinese port of Dongjiakou.

Catalina 7 had to go around all of Africa before she ended up in Chinese waters. It turns out that a total of 93 days were spent on the delivery of oil from the Russian Ust-Luga to Dongjiakou - this is one of the longest routes for Russian oil. For comparison: before the war, the average delivery time of Russian oil to the EU, its main consumer, was 8 days. Now India has become the main consumer, and the average delivery time has almost quadrupled to about 31 days. However, the Russian side is not the only one affected by Western sanctions. Traders and experts acknowledge that the key problem with Russian oil now lies elsewhere: it has ceased to be transparent.

The exodus of large oil traders has made it extremely difficult to obtain reliable data on supply volumes, buyers and delivery routes. The only way to track it is satellite data, which the agency actively uses in its analysis, as well as data from oil traders sharing information on supplies and prices. Having lost reliable and long-term partners, Russia has found a replacement for them in yesterday's startups. In a matter of months, they have become competitors to the oil majors, which now transport millions of barrels of oil.

Noname companies from the United Arab Emirates (UAE), Turkey, India and Hong Kong have replaced Vitol, Trafigura and Glencore. Since the beginning of the war, out of nowhere, 17 large companies have appeared that are actively involved in the supply of Russian oil. Moreover, three of the six largest sellers of Russian oil are now located in the UAE, namely in Dubai, the emirate that has hosted rich Russians and disgraced Russian businesses.

“Many companies are a continuation of Russian ones or are closely related to them,” said Adi Imsirovich, former head of the oil department of the London office of Gazprom (Gazprom Marketing and Trading), and now director of Surrey Clean Energy.

Companies that have risen in the trade of Russian oil use ships from the so-called “shadow fleet”, or “shadow armada”. These are tankers whose ultimate owner is hidden behind a multitude of unknown companies registered in offshore jurisdictions. Moreover, the ships of this fleet, as a rule, are already very old, have not undergone proper maintenance and create real risks for the environment. It also remains unclear how little-known firms-traders received such gigantic financing for the purchase of oil tankers. Bloomberg claims that about $3.8 billion was spent on the purchase of 187 ships. In total, the “shadow fleet” already has about 600 ships. We are talking about tankers aged ten years and older, and some of these vessels also serve other sanctions regimes - Iran and Venezuela. For example, Amber 6 is twenty years old, the last recorded MOT was in 2020. The agency notes that, if not for Russia, this tanker would have already gone for scrap.

Market participants are sure that the new oil majors are closely connected with Russia and will not last without the Putin regime. A vivid example of this is the "Indian" company Gatik Ship Management (GSM), which in less than a year has turned from a small company with two ships into a market leader with 58 ships. The reasons for the growth are simple: the company turned out to be connected with Rosneft. The new "oil majors" also combine a reluctance to speak to the press and small offices around the world, which usually have only a few employees, and even those infrequently show up on site.

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