(Bloomberg) -- US sanctions on Russia’s oil tanker fleet are showing signs of faltering, after a clutch of blacklisted vessels loaded cargoes for the first time in more than a year to drive up the country’s crude shipments.
Washington’s measures have been instrumental in restricting Moscow’s ability to ship its oil and raise funds for the war in Ukraine. But in recent days, three blacklisted vessels loaded cargoes of Russia’s flagship Pacific grade and sailed from the country’s main regional port. And satellite imagery suggests that more ships are leaving anchorages west of the port of Nakhodka, where they’ve idled since being sanctioned.
At stake is Moscow’s ability to get oil to the world and bring down spiraling freight costs that have been denting the nation’s petroleum revenues. The more tankers it can reactivate, the more Russia can work around the west’s measures.
It has found ways around earlier ship sanctions, amassing a huge fleet of tankers owned by little-known and frequently changing entities, domiciled far from the reaches of western governments and avoiding services provided by western companies.
But the sanctions regime was bolstered in January when President Joe Biden’s outgoing administration announced a swath of new curbs, including blacklisting an additional 161 ships.
That move initially had a throttling effect on oil flows, but Biden’s successor, President Donald Trump, is pushing hard for a ceasefire in the three-year-long conflict, potentially opening the way for an easing of restrictions on Moscow’s oil trade.
Crude flows from all Russian ports in the four weeks to March 9 jumped by about 300,000 barrels a day — the biggest gain since January 2023 — to 3.37 million, the highest since the period to Nov. 10.
Delivery Difficulties and Covert Transfers
Before Biden’s Jan. 10 sanctions package, India was the destination for about 60% of Russia’s Arctic crude exports, taking about 64 million barrels last year. It was also the landing place for about 14 million barrels of Sokol crude from the Sakhalin 1 project in the first nine months of 2024, equivalent to almost 30% of total shipments in that period, though that trade dried up in the final quarter of last year.
No cargoes of Russia’s Arctic crude loaded after Jan. 10 have been delivered to India, vessel-tracking data compiled by Bloomberg show. That’s despite ports on India’s west coast initially being identified as their destinations in shipping data.
Instead of being delivered, some cargoes have been transferred covertly onto other ships off the coast of Oman. Those ships, where it’s been possible to identify them, appear to be heading for China. Other cargoes are heading directly to China.
Almost all of the 15 million barrels loaded from the Arctic since the Jan. 10 sanctions appear to be going on far longer voyages than originally planned, leaving the oil at sea for months.
Two Arctic loading tankers are identified in shipping data as heading to the Syrian port of Banias. Neither has yet reached a point in its journey where it will become possible to see whether that information is accurate.
In the Pacific, only eight of 22 cargoes of Sakhalin crude loaded since the latest ban have been delivered. Three of those were discharged into storage tanks at Yangshan port near Shanghai, tracking data show. The facility isn’t connected to any of China’s refineries, and the move could simply be designed to hide the true origin of the barrels when they are later moved to a refinery.
Shuttle tankers are continuing to transfer Sokol cargoes onto other vessels in Nakhodka Bay, with tracking data and satellite imagery indicating that at least three such transfers have taken place so far this month.
But even after they have been transferred, Pacific cargoes are not proving easy to discharge.
A supertanker that took about 2 million barrels of Sokol crude through similar transfers in the first 10 days of February is still holding its cargo after failing to discharge at Yantai and then at Dongjiakou in China. Vessel-tracking data compiled by Bloomberg show it’s now heading for a third port, Huangdao.
Russia’s difficulties in unloading its cargoes could ease should President Trump decide to reverse Biden’s measures.
Crude Shipments
A total of 32 tankers loaded 24.39 million barrels of Russian crude in the week to March 9, vessel-tracking data and port-agent reports show. The volume was down slightly from 24.71 million barrels on the same number of ships the previous week.
Daily crude flows in the seven days to March 9 edged lower by about 45,000 barrels, or 1%, from the previous week to 3.48 million.
Shipments of Russian crude from Novorossiysk slipped back to four cargoes after the previous week’s surge, but that was offset by additional cargoes from Primorsk and the Sakhalin 1 project.
Less volatile four-week average flows moved sharply in the opposite direction after the very low flow seen in the week to Feb. 9 dropped out of the calculation. That resulted in a 300,000 barrel-a-day jump in flows from the previous week using this measure, the biggest upward move since Jan. 15, 2023. It took four-week average shipments to 3.37 million barrels a day, the highest level in four months.
One cargo of Kazakhstan’s KEBCO crude was loaded during the week from Novorossiysk, with another departing Ust-Luga.
Export Value
The gross value of Moscow’s exports fell by about $80 million, or 5%, to $1.44 billion in the week to March 9.
Export values of Russian Urals crude fell by about $2.50-$2.60 a barrel, while the price of key Pacific grade ESPO dropped by about $3.30/bbl. Delivered prices in India were down by about $2.10, all according to numbers from Argus Media.
On a four-week average basis, income rose in the period to March 8 to about $1.46 billion a week, up from $1.34 billion in the period to March 2.
Flows by Destination
Observed shipments to Russia’s Asian customers, including those showing no final destination, rose to 3.21 million barrels a day in the four weeks to March 9, bringing them to their highest since May and 2% above the average level seen during the most recent peak in October.
The figures include about 670,000 barrels a day on ships showing their destination as Port Said or the Suez Canal and another 160,000 barrels a day on vessels yet to show a destination.
Turkey is now the only short-haul market for shipments from Russia’s western ports, with flows in the 28 days to March 9 slipping back to average about 160,000 barrels a day. Turkey’s biggest refiner confirmed it has halted purchases of Russian oil after earlier signaling that it would restrict them to avoid falling foul of US sanctions.
NOTES
This story forms part of a weekly series tracking shipments of crude from Russian export terminals and the gross value of those flows. The next update will be on Tuesday, March 18.
All figures exclude cargoes identified as Kazakhstan’s KEBCO grade. Those are shipments made by KazTransoil JSC that transit Russia for export through Novorossiysk and Ust-Luga and are not subject to European Union sanctions or a price cap. The Kazakh barrels are blended with crude of Russian origin to create a uniform export stream. Since Russia’s invasion of Ukraine, Kazakhstan has rebranded its cargoes to distinguish them from those shipped by Russian companies.
Bloomberg classifies ship-to-ship transfers as clandestine if automated position signals appear to be switched off or falsified — a tactic known as spoofing — to hide the two vessels involved coming together to make the cargo switch.
Vessel-tracking data are cross-checked against port agent reports as well as flows and ship movements reported by other information providers including Kpler and Vortexa Ltd.
If you are reading this story on the Bloomberg terminal, click for a link to a PDF file of four-week average flows from Russia to key destinations.
--With assistance from Sherry Su.