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Tanker Companies Race To Ship Russian Oil Ahead Of New Sanctions

Tyler Durden's Photo
by Tyler Durden
Wednesday, Jul 20, 2022 - 05:25 PM

By Tsvetana Paraskova of OilPrice.com

Western sanctions have so far failed to crush Russia’s oil exports as Moscow is redirecting crude to its more than willing Asian buyers, China and India.  European vessel owners, especially private Greek operators, are moving a lot of the Russian oil in the months before the EU ban on seaborne Russian oil imports kicks in at the end of this year. Greek tanker owners have increased their exposure to Russian oil shipping in the past two months as they race to profit from the higher demand for heavily discounted Russian oil in China and India. 

Once EU sanctions on seaborne imports of Russian oil take effect this December, Greek tanker operators will have to stop shipping Russian oil. A much bigger blow to Russian oil exports that will have dramatic consequences on the global oil tanker market and oil prices comes from provision number two in the sixth sanctions package - EU operators will be prohibited from insuring and financing the marine transportation of Russian oil to third countries. 

Until the sanctions enter into force, European, especially Greek, tanker owners are moving a lot of Russian oil to Asia, making a lot of money in the process. Shippers from Greece, China, and Turkey are eagerly taking advantage of the situation, according to data compiled by Bloomberg. By shipping Russian ESPO crude from Kozmino to the Chinese coast, a ship owner can make $1.6 million—three times what they would have made before the war in Ukraine. 

Earlier this month, Ukraine called out Greece for shipping Russian oil. 

“We see Greek companies providing almost the largest tanker fleet for the transportation of Russian oil,” Ukrainian President Volodymyr Zelensky said in a speech to a conference in Athens via video link. 

“Once again: this is happening precisely when another Russian energy resource is being used as a weapon against Europe and against the family budget of every European. I am sure that this does not meet the interests of Europe, Greece, or Ukraine,” Zelensky added. 

Greek vessel owners made 151 port calls from Baltic and Black Sea Russian ports between May 1 and June 27, up by 41% compared to the same period last year, according to data compiled by Lloyd’s List using Lloyd’s List Intelligence. Almost half of all crude and refined products exported from key Baltic or Black Sea ports were shipped on vessels Greek tanker owners beneficially own, the data showed. TMS Tankers of billionaire George Economou is the biggest Greek player in the Russian market and second overall, second only to Russia-owned Sovcomflot, which is under Western sanctions, according to the data. 

Greek tankers are also participating in ship-to-ship (STS) transfers offshore Greece, Malta, and south of Gibraltar, Lloyd’s List data showed. 

It’s difficult to predict what will happen to the global tanker market when the EU sanctions enter into force, but demand for oil remains high, so tankers will be used on other routes, a CEO at a Greek shipping firm told The Wall Street Journal

“They will travel longer distances which means they will make more money,” the executive added. 

“Dark” STS transfers of Russian crude, alongside shutting off vessel transponders and attempts to disguise the origin of the oil, are set to only increase as the EU sanctions approach, analysts say. 

David Wech, Chief Economist at energy data provider Vortexa, wrote at the end of last month: 

“The need to export crude and products in growing volumes to long-haul destinations East of Suez, ideally disguising also the origins to attract potential buyers beyond China and India, may be growing well ahead of the sixth EU sanction package coming into force around the turn of the year.”    

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