- Moscow is increasingly reliant on a large number of tankers that in previous years may have been demolished because of their age.
- More than 40 million barrels of Russian oil have been switched between tankers on the high seas this year.
- The EU proposed measures that could curtail the activity, while the International Maritime Organization described it as a “dangerous practice.”
While there might be some debate about the impact of Group of Seven sanctions on Russia’s petroleum trade, one thing is becoming clear: The measures are making the transportation of the nation’s oil increasingly unsafe.
New trade in Russian oil
Moscow has become more reliant on an aging armada of tankers that would in previous years often have been candidates for demolition because of how old they are.
The G-7’s measures cut off Russia’s main export market — Europe. But just as importantly, they restricted access to insurance and an array of other services for crude purchased by anyone at more than $60 a barrel.
It meant Russia needed more ships to deliver its barrels because the client countries — China and India — were thousands of miles further away.
The net effect has been to push oil transportation into the hands of faceless traders and tanker owners, the latter often operating without known cover against risks including collisions and spills.
Ship-to-Ship Transfer
Two oil tankers meet in the Mediterranean to swap 730,000 barrels of Russian oil destined for China.
It’s also a particular issue for the European Union, which led the sanctions push. More than 40 million barrels of Russian oil have been switched between tankers on the high seas this year, often near Ceuta, a Spanish exclave on the northern tip of Morocco, or in a bay in southern Greece.
Safety fears
The EU proposed measures that could curtail the activity, while the International Maritime Organization described it as a “dangerous practice.
Russian oil remains discounted, both at the point of export and of delivery in Asia. That’s giving buyers an incentive to continue purchasing heavily for now, in turn providing an army of people more reason to get around sanctions.
It’s making many oil traders, shippers and insurers nervous as the supply chain becomes increasingly risky.
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Source: Bloomberg
