The majority of oil exported by the Russian Federation is avoiding price-cap sanctions imposed upon it by the West.
Under the sanctions, Russian oil shipped using tankers insured by Western firms cannot be sold at more than $60 a barrel, a restriction imposed last year in an attempt to curb Moscow’s ability to gain economically from the oil trade.
Moscow is finding an increasing number of ways to circumvent Western sanctions imposed on its energy industry.
Much of this centres around Russia’s so-called “shadow fleet” – tankers with unclear owners that do not sail with Western-provided insurance.
Many of these vessels have reportedly been bought from Greek shipping firms that initially worked with Russian oil suppliers at a time when other European operators opted to stay away.
“There has been an explosion in second-hand purchasing of clapped-out tankers,” said Michelle Wiese Bockmann, an analyst at Lloyd’s List.
According to reporting by the Financial Times, the sanctions have now largely collapsed, with 75 per cent of the oil exported by Russia being sold without Western insurance, allowing them to bypass the cap.
Experts now believe that Moscow will be able to earn an extra $15bn from its oil trade compared to what it would make if the sanctions were effective. The country’s oil revenues are expected to increase overall on last year due to higher prices worldwide.
Ben Hilgenstock, a member of the Kyiv School of Economics, expressed disappointment at the latest development, speculating that the West may struggle to impose effective sanctions on Russian oil in future now that the country has figured out workarounds.
“Given these shifts in how Russia ships its oil, it may be very difficult to meaningfully enforce the price cap in future,” he said.
“And that makes it even more regrettable that we did not do more to properly enforce it when we had more leverage.”
The International Energy Agency’s latest report predicts global oil demand to expand by 2.2 million barrels per day in 2023, with China alone contributing to more than 70 per cent of that increase. https://t.co/abDuwmgeMD
— Brussels Signal (@brusselssignal) August 14, 2023
With the practice of buying old tankers netting Greek companies serious profits, many firms have opted to sell their ships to the Russians after stricter restrictions were imposed on trade with the country.
Such Greek firms are described as making an “absolute killing” with the practice. UK newspaper The Telegraph reported the total value of the Greece’s second-hand tanker sales at $2.5 billion.
The cost of such tankers is now said to have doubled in value due to increasing demand for them from Russia.
“We’re beginning to see the evolution of a fleet that’s operating completely outside Western jurisdiction,” Wiese Bockmann added.
Vehicles belonging to Russian tourists in Germany are reportedly being seized by authorities as part of EU sanctions. https://t.co/zxWfPK7Ogw
— Brussels Signal (@brusselssignal) July 12, 2023
