Sanctions see Russian tanker fleet in ballast

There is now clear data to show that sanctions are hurting Russian seaborne exports of crude.

As of a month ago, the number of ballast vessels which last lifted Russian crude grades – excluding CPC blend and KEBCO – began increasing significantly, new analysis from Vortexa shows.

Ballast vessels have now surpassed laden vessels for the first time in three months (see chart below), pointing to less utilisation of the Russian fleet.

“Massive increases of Sokol discharges in China have increased ballast tonnage, because a majority of these vessels had been in floating storage offshore China after diverting from India following US sanctions on Sovcomflot,” states a new report from Vortexa, a freight data platform.

On February 23 the US Treasury’s Office of Foreign Assets Control (OFAC) targeted Sovcomflot and 14 crude tankers under its control.

Indian refineries, both private and state-run, including Indian Oil Corp, have ceased accepting cargoes from Sovcomflot tankers, as of late last week, according to broker Braemar, which noted in a new report India is looking to the Middle East and the US to replace Russian volumes.

Over the past six months, authorities in the West have started to clamp down on shipowners and service providers which were suspected of not complying with the December 2022 enforced Russian oil price cap. This led to what American tanker broker Poten & Partners described as an “exodus” of Western owners from the trade, making Russia more reliant on the dark fleet. However, around the same time, G7 countries started scrutinising – and sanctioning – an increasing number of vessels involved in the transportation of Russian crude oil.

“This enforcement clampdown has created increasing problems for both Russia and its key customers,” analysts at Poten noted in a recent weekly report.

“The Russians are trying to counter these developments by looking for alternative buyers,” Poten noted, listing small recent shipments to the likes of Venezuela, Pakistan, Ghana and Brunei.

“Much higher discounts may be needed or more Russian crude risks being stranded,” Poten suggested.

Tanker experts at rival broker Gibson have also discussed how the Russian market is becoming increasingly more difficult for many players to get involved with.

“As sanctions enforcement increases, things could become even trickier going forward,” Gibson suggested a recent weekly report.

As well as the sanctions there has been the problems the Russian export machine has encountered from repeated recent Ukrainian drone strikes on a great deal of Russian oil infrastructure.

“[E]xporting Russian crude has become more challenging as more tankers and operators face sanctions and western owners increasingly pull back from engaging in this trade,” Gibson reported.

Although overall crude export levels have remained steady since the start of the year, averaging 3.48m barrels per day, Gibson has now called the peak of these flows.

“The recent case of undelivered Sokol grade crude due to sanctions and payment issues has likely also made some buyers hesitant to increase their intake of Russian grades. The expectations of even further sanctions and compliance requirements going forward will add only further incentive to pull back from Russian linked oil trades,” Gibson suggested.

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