- EU, UK, Canada seek to limit Russia’s oil revenues
- Greek ships exit Russia in droves amid sanction risks
- US position leaves opening for shadow fleet operators
Greek companies led an exodus of G7-linked crude tankers from Russia in August in a precautionary move to stay compliant with a new, lower price cap by the EU and some G7 countries, reports Platts.
Last month, 23.1% of the OPEC+ members’ nearly 3.35 million b/d were loaded by tankers flagged, owned or operated by companies based in the G7, the EU, Australia, Switzerland or Norway, or insured by Western protection and indemnity clubs, according to S&P Global Commodities at Sea and Maritime Intelligence Risk Suite data.
The share was lower than 37.3% in July and 39.1% in June, then a 19-month high.
The EU, UK and Canada have lowered the threshold for companies to service seaborne Russian crude exports from $60/b to $47.60/b over Sept. 2-3 to undermine Russia’s war chest against Ukraine.
While the trade restriction comes with a grace period of 45 days and is not backed by the US, which has kept the cap at $60/b, Greek tanker companies have been reducing exposure to Russian crude trades to avoid drawing ire from Brussels.
Crude liftings by tanker operators based in Europe’s top shipowning nation fell by 23% month over month to 16.8 million barrels in August, a three-month low, according to the CAS and MIRS figures.
The development came amid diminishing trading opportunities in Russia for G7 companies planning to stay in non-sanctioned trades, with Urals — Russia’s flagship crude export grade — mostly trading between $50/b and $60/b on a free-on-board Primorsk basis since late February, based on Platts assessments from S&P Global Commodity Insights. It was last assessed at $56.11/b on Sept. 4.
The EU’s lower price cap will “effectively lock out Greek shipowners from the Russian crude market and presents a significant dilemma for sellers and buyers who need to charter tonnage,” consultancy Windward said in a recent note, adding that Greek crude shipments are “likely to hit zero in the coming months.”
Shadow fleet
A recent analysis of CAS and MIRS data has found Russia can access at least 561 ships totaling 49.9 million dwt to bypass the price cap regime, suggesting the country’s crude exports are unlikely to be affected by the Greek exit.
However, as Russia needs to rely on the shadow fleet to fill the gap left by Greek operators, market participants expect a strong upside for tanker rates in Russian trades.
Platts assessed the Aframax rate for transporting 100,000 mt of Russian crude from the Baltic to the western coast of India at $60/mt on Sept. 4, up from $56/mt at the beginning of August.
“Those that are still doing this are asking for more money,” a shipbroker said.
The non-G7 fleet, mainly composed of shadow fleet tankers, lifted nearly 77% of Russian crude exports in August, or 2.57 million b/d, according to the CAS and MIRS data. The tanker operators are often based in the Seychelles, China, Hong Kong or the UAE, with little known ownership.
Industry participants suggest the fragmenting Western sanction regimes could provide an opening for the opaque companies, with those operating ships in breach of UK and EU sanctions but not US still expected to find employment.
“The biggest buyers of Russian crude, China and India, have continued to receive cargoes loaded on EU- and UK-sanctioned tankers, blunting any wider trading impact,” Windward said. “US-sanctioned tankers face greater trading difficulties.”
Russian exports to India drop
Russian crude exports to India on G7-linked tankers dropped to 12.3 million barrels in August from 23.2 million barrels in July, while those on non-G7 tankers increased to 33.8 million barrels from 30.1 million barrels, according to CAS and MIRS.
Since Donald Trump’s return to the White House in January, the US has not expanded its sanctions program for Russia but doubled tariffs on Indian imports for the Russian oil deals.
While New Delhi remains overtly defiant in the face of US economic pressure, some analysts have suggested Indian refiners could reduce their buying of Russian oil due to the political risks and narrowing discounts.
Platts assessed the monthly average discount of FOB Primorsk Urals crude to Dated Brent at $11.635/b in August, the smallest since February 2022, when Russia invaded Ukraine.
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Source: Platts
