Despite expectations that sanctions implemented last month would cause a drop in shipments, Russia has been able to keep its oil moving to global markets, as reported by The Wall Street Journal.
Adjusting to political upheaval
How Russian crude keeps flowing is explained in a modest office in a Mumbai neighbourhood. An Indian shipping firm based at that address didn’t operate a ship until 2022. Following the Russian military invasion of Ukraine, it seized control of two dozen tankers and put them to work transporting Russian crude through recently established trade routes to the Mediterranean, Turkey, and India, according to vessel ownership and tracking data.
One of the more aggressive newcomers, Gatik Ship Management has purchased outdated oil tankers to replace Western-owned vessels that are no longer doing business with Russia. According to shipping executives, brokers, vessel monitoring, ownership, and insurance data, that parallel fleet is assisting Moscow in delivering crude to buyers in Asia.
Gatik’s office phone operator acknowledged that the business managed roughly 25 tankers. He claimed to work for a business that is a subsidiary of the same conglomerate as Gatik.
According to Lars Barstad, chief executive officer of tanker owner Frontline Ltd., “the shipping market has always been able to adjust to political upheaval.”
How Russia gets its oil to market has changed as a result of an EU oil embargo and a price ceiling imposed by the United States. Due to the price cap, Russian crude that trades above $60 per barrel cannot be purchased by Western shippers or insurers. Many tanker owners have chosen to completely avoid the Russian market. As a result of the majority of Russian oil purchasers now being in Asia, longer sailings are now necessary.
Price cap
The price cap is functioning as planned, preventing an increase in oil prices due to the European embargo while making it more difficult for Moscow to profit handsomely from its exports, as evidenced by the resilience of Russian oil shipments.
Although David Wech, chief economist at Vortexa, warned that issues might arise in the future, he said there is “no genuine sign” that there is a scarcity of ships to deliver the oil.
Benchmark Brent is currently trading at about $87 per barrel, not significantly more than it was when the sanctions went into force on December 5.
The economic backbone of Russia, the oil sector, nonetheless faces significant obstacles. The biggest one is the significant discount it provides on its crude to entice purchasers. Next month, more penalties will have a negative impact on crucial exports of refined fuels like diesel.
According to commodities data company Kpler, Russia is on track to export 158 million barrels of petroleum by sea this month. That would rank among the best five months ever, but it is also a recovery from a decline in exports following the imposition of the sanctions in December.
Tanker availability is not a problem, according to Russian shipping professionals.
State-owned Russian shipping behemoth PAO Sovcomflot’s Dubai-based subsidiary is also exerting significant effort. While trading oil under the price cap, some significant Western shipping companies, including one of Greece’s largest, are also transporting Russian petroleum.
Inquiries to a Sovcomflot spokesman went unanswered.
Gatik is one of the companies offering tankers. According to a maritime database for the European Union, it has taken on 25 ships since June. When tanker owners often consider selling their ships for scrap, their average age is 17.
Penalties imposed
According to the EU database, Gatik is the manager of the ships, not the owner. Twenty of the tankers had the same Mumbai address as Gatik’s registered owners, many of whom are named after Greek mythical characters including Electra, Odysseus, and Hector. Social Club Inc. is the owner of the Gatik tanker Buena Vista, which last month transported Russian crude to India.
The shipping sector frequently uses corporate structures where different shell firms each possess a single tanker.
Gatik’s 249-meter Atalanta stocked up on Russian Urals crude in Primorsk on the Baltic Sea in the middle of January. Refinitiv and MarineTraffic data reveal that the tanker, which is registered in St. Kitts & Nevis, then travelled in the direction of Vadinar on India’s west coast.
According to vessel-tracking data, six additional Gatik tankers stocked up on Russian petroleum between December 5 and January 14, one of which made the journey twice.
Russian ports on the Baltic and Black Seas, where crude is traded below the cap, have sent out Gatik ships.
The penalties were created by the US to encourage tankers to be insured by Western and Japanese insurance clubs, organisations that offer protection against mishaps like oil spills. According to an insurance database and senior management at the club, Gatik purchased this protection-and-indemnity insurance from the American Club.
Tanker operators that transport Russian crude are required by insurers to provide a written guarantee that the price will be below the cap in order to comply with the sanctions.
Other vessels transporting oil from Moscow do so outside of the process outlined by the cap. From December 5 through January 14, more than 75 loadings of Russian crude were made onto tankers without insurance from Western and Japanese clubs, which control the maritime insurance market. 46 of the more than 160 loadings of Russian crude during that time were made by tankers operated by Sun Ship Management, a Sovcomflot subsidiary in Dubai.
Moscow’s petroleum shun
According to Yen Ling Song, an analyst at S&P Global Commodities at Sea, tankers controlled by companies in the United Arab Emirates, Hong Kong, China, India, and Russia collectively shipped more than 60% of Russian crude since the price cap went into effect, while 29% travelled on ships controlled by European companies, primarily from Greece and Turkey. In contrast, over 90% of Kazakh oil shipments from Russian ports were carried by American and European companies, demonstrating how Western shippers are shunning Moscow’s petroleum. Russian oil ships were, on average, six years older.
Several well-known tanker operators are using the price cap. Greece’s TMS Tankers Ltd., a subsidiary of TMS Group and founded by shipping magnate George Economou, is one of the busiest. According to shipping records, TMS-managed tankers loaded Russian crude 14 times between December 5 and January 14.
Requests for comment from a TMS spokesman were not answered. Russian oil was picked up by TMS tankers including Lipari, Stamos, and Lovina in January from the Baltic and Murmansk, according to persons with knowledge of the shipments.
According to a representative for the insurance association, Norway’s Gard P. & I. (Bermuda) Ltd. insured the TMS tankers. No one wants a tanker that is not insured to the ground on their coasts, she said.
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Source: The Wall Street Journal
