- The EU is considering ending the Russian oil price cap and replacing it with a full ban on Western shipping services
- Around 43% of Russian oil exports currently rely on Western-owned or insured vessels
- A policy shift could sharply expand the shadow tanker fleet, especially in the MR segment
The European Union is reviewing whether to abandon the price-cap mechanism that limits Russian oil revenues by restricting access to Western shipping and insurance services. Instead of allowing Western vessels to carry Russian oil below a price threshold, the proposal would prohibit Western involvement altogether, regardless of cargo price.
If implemented, Western shipowners, insurers, and service providers would be barred from supporting any tanker transporting Russian crude or products. This would represent a significant change from the current framework introduced between late 2022 and early 2023.
Current reliance on Western tonnage
Over the past 12 months, around 687 tankers with Western ownership or insurance loaded Russian oil cargoes, alongside 587 shadow fleet vessels operating without Western cover. While vessel numbers appear balanced, Western-covered ships carried about 2.3 million barrels per day, equivalent to 43% of Russia’s exports.
Western vessels tend to enter Russian trades when prices fall below the cap, making them more active during weaker pricing periods. Their flexible trading patterns and backhaul opportunities have made them operationally efficient compared to dedicated shadow fleet ships.
Replacement challenge across tanker segments
If Western services are fully withdrawn, the market would need to replace a large volume of capacity. Based on current productivity levels, estimates suggest the need for around:
- 190 MR tankers
- 122 Aframaxes
- 56 Suezmaxes
- 108 Handy tankers
The MR segment faces the largest gap, as Western MR vessels currently show higher utilisation and would be harder to replace on a one-for-one basis.
Shadow fleet expansion likely
Replacing Western tonnage would almost certainly drive further growth in the shadow fleet. This could happen through higher freight rates attracting more vessels, owners switching to non-Western insurance, or ships being repurposed from other trades.
However, shadow fleet operations remain structurally inefficient. These vessels are largely locked into Russian routes, lack backhaul flexibility, and often operate with longer ballast legs, limiting overall productivity.
Enforcement remains the key risk
The effectiveness of any new regime will depend heavily on enforcement. Ownership and insurance structures remain opaque, and some operators may continue Russian trades despite restrictions. Ending the price cap would also remove a source of demand for Western vessels during periods of weaker global tanker markets.
Overall, while Russia’s export system is likely to adapt, a move away from the price cap would reshape tanker flows and push more tonnage outside the mainstream commercial market.
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Source – Kpler
