More than 50 oil tankers that have previously transported Russian oil are now sitting empty and idle in the Baltic Sea, the Black Sea, offshore Russia's Far East, China, South Korea, and near the Suez Canal.
All these tankers have been targeted by U.S., UK, and EU sanctions in recent months as the West ramped up efforts to choke off Russia's oil revenues. Very few of them, three to be precise, have loaded oil cargoes since they were designated by one or more Western authorities, according to tanker-tracking data compiled by Bloomberg.
The stepped-up sanction enforcement has created difficulties for Russia in shipping its oil to customers, now mainly in Asia.
However, the transport cost of delivering Russian oil has recently dropped to two-year lows and is now close to the freight rates for non-sanctioned crude on similar routes, analysts have estimated.
Part of the sanctions' objective is to drive the cost of carrying Russian crude so high that it would make it uneconomical for importers to be willing to buy Putin's oil.
But the shipping cost to transport Russia's sanctioned crude has slumped over the past month, which is currently blunting the Western sanctions' impact on Russian oil sales and revenues.
This trend may not be a lasting one because the drop in freight rates was attributed to higher refinery processing rates in Russia this month, which have reduced exports, anonymous sources told Reuters this week.
Sanctioned Tankers
The U.S. started at the end of last year to ramp up sanctions on entities carrying Russian oil, aiming to stifle Putin's revenues and address the violations of the price cap mechanism under which Russian oil can be transported on Western-owned, insured, or financed tankers only if the price is crude is $60 per barrel or below.
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Then the U.S. levied new sanctions against Russia in February on the second anniversary of the Russian invasion of Ukraine and in response to the death of opposition politician Alexey Navalny.
Among the 500 new sanctions targets, the U.S. Treasury and State are targeting Sovcomflot and more than a dozen tankers linked to the Russian state-owned fleet operator.
Last month, the UK explicitly targeted vessels in Putin's shadow fleet, used by Russia to circumvent UK and G7 sanctions, in its first sanctions directly aimed at the dark fleet, which is estimated to have grown to more than 600 tankers known to have shipped sanctioned oil at least once.
The sanctions "aim to disrupt and increase the costs of Russia's efforts to bypass UK and G7 sanctions through its shadow fleet," the UK said.
Weeks after the UK's latest sanctions, the EU adopted at the end of June a new sanctions package against Russia, targeting Russian LNG projects and shipments for the first time and looking to curb Moscow's use of the dark fleet to circumvent the price caps on Russian crude and oil products.
The EU placed 27 vessels on a sanctions list in a new measure targeting the dark fleet , which circumvents the price caps on Russian oil.
"This measure also targets tankers part of Putin's dark fleet which circumvent the EU and Price Cap Coalition's caps, while adopting deceptive shipping practices in complete disregard of international standards," the EU said.
The list of 27 sanctioned tankers "can be updated as regularly as needed to address the ever-evolving involvement of those vessels helping Russia to wage war against Ukraine," the bloc added.
In May, more tankers operating outside Western jurisdiction were tracked shipping oil from Russia as most crude prices continue to be above the $60 a barrel price cap, wrote Michelle Wiese Bockmann, Principal Analyst at Lloyd's List Intelligence.
The percentage of tankers by deadweight insured with the 12 clubs of the International Group of P&I Clubs was at a record low of 37%, while insurance for the rest was unknown, the analyst added.
Stranded Tankers
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While the dark fleet is growing, the tankers sanctioned since October 2023 are idle and empty all over the world, from the Baltic to the Pacific, according to data compiled by Bloomberg. Of the 53 ships that have been targeted by sanctions since October 2023, only three have loaded oil cargoes since being designated.
About half a dozen sanctioned tankers are idling empty each in the Baltic Sea and the Black Sea, off the Russian Far Eastern ports, offshore China and South Korea, and near Port Said, on the north end of the Suez Canal, per the data compiled by Bloomberg.
Russia, however, continues with its efforts to skirt Western sanctions, and in many cases, it is succeeding.
For example, this spring, a Russian tanker of sanctioned tanker fleet operator Sovcomflot likely managed to circumvent U.S. sanctions by surreptitiously transferring its oil cargo to another vessel offshore Singapore.
These sanction-busting attempts with cargo switching, with transponders off, suggest the lengths to which Russia and buyers willing to purchase cheap crude could go.
By Tsvetana Paraskova for Oilprice.com
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