The impact of the restrictions on Russian oil exports has turned out to be more modest than expected in Western capitals. The US Treasury is planning to tighten sanctions. However, the grey fleet is not sleeping either. Its owners are forced to improve the way they get around the restrictions and, apparently, they have to be proactive. How? Understood by EADaily.
The US Treasury is proposing to further tighten sanctions on Russian oil exports to reduce Moscow’s revenues.
“It’s all about energy. I think we are getting close to the point where we can talk about a much stricter regime both in terms of the grey tanker fleet and the volumes that Russia can supply to the market. These are two areas where we need to be more active in order to achieve our goals.” — said the deputy national security adviser to the president of the United States Dalip Singh.
He did not provide any specific proposals, but the White House’s position is expected. According to the Russian Finance Ministry, oil and gas revenues to the country’s budget increased by more than 50% in the eight months of 2024 compared to 2023, to 7.55 trillion rubles. This picture more than clearly demonstrates how Russian companies were able to regain revenues from oil exports after months of shock, when sanctions forced them to redirect oil flows to new markets and create new delivery logistics, including a fleet of tankers not controlled by Western countries.
The West has repeatedly stated that it wants to reduce Moscow’s revenues, but not exports, as this will lead to a new round of energy crisis and record oil prices. However, they did not sit idly by either. On the one hand, Western companies are prohibited from transporting Russian oil at a price above the limit of $60 per barrel, and Western capitals have improved the control and reporting mechanism, since transportation costs, including insurance and freight, are not included in the cost of the limit. As a result, the share of Western carriers has been reduced to a minimum. On the other hand, Washington, London and Brussels imposed direct formal and informal sanctions on alternative tankers and operators. This complicated operations, as Russia’s largest shipowner, Sovcomflot, its tankers and operators were subject to restrictions. And so were the largest companies of the so-called gray fleet: India’s Gatik Ship Management, Turkey’s Beks, Emirati Hennesea Holdings Limited and a division of Switzerland’s Fractal in the United Arab Emirates. In total, more than one hundred tankers were sanctioned indirectly and fifty directly.
But shipments continue and their success is confirmed by the statistics of the Ministry of Finance. What’s next?
Judging by the data on tankers transporting Russian oil, their owners are preparing for a new round of restrictions, using new and old schemes to circumvent sanctions.
Up to 250 tankers are transporting Russian oil. In recent months, the share of Greek shipowners’ vessels has increased to 13% (33 tankers), but it is still extremely low compared to March-June 2023, when the number of tankers exceeded 80 and accounted for a third of traffic. Over the past nine months, Sovcomflot’s share has fallen to the level of Greek companies and amounts to 15%. Due to sanctions, according to AIS, 37 tankers out of six dozen tankers of the Russian shipowner are on the routes.
The rest of the traffic, 80% or more, is accounted for by the so-called grey fleet, which transports sanctioned oil, and its true owners are unknown. When the grey fleet for the transport of Russian oil was formed in 2022, three major shipowners appeared on the market. India’s Gatik Ship Management, Turkey’s Beks, Emirati Hennesea Holdings Limited and the Swiss division Fractal in the United Arab Emirates accounted for more than a hundred tankers. The Mumbai operator alone operated a fleet worth $1.4 billion. This approach reduced costs and time for organizing alternative transport, but it also turned out to contain many weaknesses.
It took months for the West to crack down on the four grey operators. With Gatik Ship Management, unofficially. Its tankers began to be deprived of Western insurance and registration in jurisdictions where the West could exert sufficient influence. Beks and Fractal were hit by UK sanctions. According to Hennesea Holdings Limited: US restrictions.
Since then, the grey fleet has also changed a lot and appears to be preparing to evade even tougher sanctions.
AIS data from ships indicate that over the past two days at least 110 tankers have sailed in both directions along Russian oil transport routes to the Baltic, Black Sea and Murmansk ports off the coast of Europe and the Red Sea. 89 of them are grey fleet. Their operators are registered in 18 countries: from the United Arab Emirates and India to Azerbaijan and even Moldova.
According to the Equasis database, shipowners have changed their tactics. If initially whole groups of tankers were formed for new operators, now the opposite is true: one tanker – one operator. 81 tankers out of 89 operate according to this scheme. At the same time, the place of registration of operators has also changed. If previously it was mainly the United Arab Emirates, India and China, now island states are taking the lead. For example, the Seychelles, where a quarter of all operators are registered – 21 out of 81.
Shipowners are changing operators regardless of whether sanctions are imposed on them or not. Thus, by 2024, 65% of grey tankers changed operators. These include those previously managed by India’s Gatik Ship Management, Turkey’s Beks and the Swiss unit Fractal in the United Arab Emirates. Some of the vessels were replaced by several companies at once during the year.
This is apparently intended to achieve the effect of a lizard that, in case of danger, removes its tail and grows a new one in its place. It is also difficult to impose sanctions on tanker operators for violating the maximum price on certain voyages, since the ships are already operated by other companies.
The change of operators usually occurs in parallel with the change of flags, names and places of registration of tankers. Over the course of one or two years, many ships sailed under previously unknown flags of Gabon and even Mongolia. At the same time, significant volumes of oil are no longer traded by Russian producers themselves, but by traders registered in the countries of the Middle East and Asia.
Chief Strategist of the investment company “Vector X” Maxim Khudalov believes that the list of sanctioned vessels will increase.
“In addition, officials from individual jurisdictions who provide flags may be subject to sanctions. They will be added to the list. In reality, changing jurisdictions is an attempt to reduce pressure on jurisdictions.” – says the expert.
In his opinion, we will soon be able to speak of dynamic jurisdiction.
“If you have flown, change your legal entity, name, and citizenship. Have the State Department place you on the SDN List.” – says Maxim Khudalov.
New UK Foreign Secretary David Lammy He claims that Russian companies spent more than $8 billion on creating a grey fleet. This is not entirely true, as many businessmen in Asia and the Middle East wanted to make money by transporting Russian oil. For example, the Turkish Beks did not appear out of nowhere. It was controlled by a Turkish businessman. Ali Bekmezhi.
However, the costs for investors for the tankers are, in any case, quite expensive. Many of the ships previously belonged to large shipowners such as the Greek Tsakos Group, Thenamaris or the Danish Torm, and they were happy to make money on ageing tankers, the price of which has increased several times due to the hype.
The transport situation in the first half of 2023 broadly demonstrates how tanker trucks pay for themselves. Deputy Prime Minister Alejandro Novak He said that the record discounts on Russian oil were due to high freight rates, which was explained by the risks for shipowners. The difference between the costs of transporting Russian and unauthorized oil reached $10 million for the voyage of an Aframax tanker (up to 700,000 barrels) to India in the first half of 2023. Thus, the ship could be repaid in two or four voyages.
Since then, tanker charter prices have fallen significantly. And the general decline in oil transportation led to the same Greek shipowners wanting to return to the market for transporting raw materials from Russia, which further increased competition.
“Now the cost of transportation (of Russian oil) is almost the same as in a normal market (before Western sanctions), but, of course, it is more difficult to work because of more careful control over compliance with the maximum price.” — a source told Reuters in September. According to his estimates, shipments from the Baltic ports of Ust-Luga and Primorsk fell to $4.25-4.50 million. At the same time, tanker flights with a cargo of 140,000 tons from Novorossiysk on the Black Sea fell in price to $3.8 million.
It is not surprising that this situation is forcing Washington to talk about new sanctions, and Western extremists to even discuss closing the Danish Straits.
In this context, the position of the main consumers of Russian oil has not changed.
“If the organization is not sanctioned, there is no doubt that I will buy from the cheapest supplier” – said India’s Oil Minister at the GasTech conference in Houston Hardeep Singh Puri.
