When the West imposed restrictions on Russia’s oil exports after Vladimir Putin’s invasion of Ukraine in 2022, a number of practices emerged to maintain global supplies from the rogue state, The Telegraph reports.
Three years later, things accelerated. The use of suspicious tactics has soared to a new record number after the UK and EU increased their sanctions against oil tankers
“In the 25 years I’ve been covering Russia and global oil flows, I’ve never seen anything like what we’re facing now,” said Michelle Bockman of marine data company Windward AI. “It’s really quite overwhelming.”
One of the most common practices is for sanctioned vessels to quickly change their flag registration and manipulate their tracking signals – via the Global Automatic Identification System – to pretend they are in different locations.
This tactic, known as “spoofing”, is used in particular when Russian ships carry out illegal transfers of oil cargoes at sea to non-blacklisted vessels, laundering the cargo just before it enters ports.
According to data from Windward AI, the number of ships affected by GPS jamming has increased by 510% since the beginning of the year, reaching 11,600 between July and September.
Illicit oil supplies from Russia are facing a tipping point. New US sanctions against Rosneft and Lukoil, two of Russia’s biggest oil companies, are expected to be watershed when they hit in full force on November 21.
Crucially, the US is threatening a nuclear option for secondary sanctions against the financial institutions that process payments for oil shipments from these companies.
If Russia wants to keep trading its oil—the lifeblood of its war machine—it will have to resort to even more desperate measures.
Many of the traditional ship-to-ship transfer hotspots for Russian oil are in international waters off the coast of Cyprus, the northern mouth of the Suez Canal in the Mediterranean and areas outside China’s eastern Pacific ports, according to Bockman.
“The use of this particular area off Oman for ship-to-ship transfers of Russian crude to India is something that has only really developed this year,” she says.
The reason Russia has rapidly accelerated its use of suspicious shipping practices is the change in the Western sanctions regime.
Western allies were initially slow to crack down on Russian oil exports after the start of the war in Ukraine in February 2022.
Instead of sanctions, they imposed a $60 (£46) price cap on Russian oil exports in December 2022. This was designed to try to hurt Russia’s revenues without cutting Russian oil off the global supply chain and further increase oil prices during the energy crisis. (The price of Brent crude exceeded $110 earlier in 2022).
The EU imposed its own embargo on Russian oilbut other countries were free to buy it, provided the price was below the ceiling. This was enforced through the insurance market – ships could not get insurance on the Western market if they carried oil above the ceiling, which was lowered to $47.70 in September.
Two things happened. First, the destination of Russian oil exports has changed dramatically.
In 2021, the biggest buyers of Russian oil were China, the Netherlands, Italy, the United States and South Korea, according to Kpler, a data platform focused on the shipping industry. The latter four countries no longer buy Russian oil, and Moscow’s main buyers are India, China and Turkey.
Second, Putin began amassing a hidden fleet of old tankers that operate outside the Western insurance market and are therefore able to export Russian oil above the price ceiling.
In response, Western allies have moved to sanction individual ships from a covert fleet, with the UK and Europe dramatically increasing their blacklists this year.
To date, the UK has sanctioned 540 Russian merchant vessels, while the EU has targeted 480 (369 of the vessels overlap).
Former US President Joe Biden imposed sanctions on 183 ships at the end of his presidency. Overall, nearly two-thirds of stealth fleet vessels identified by Windward AI have been sanctioned by global regulators.
The volume of Russian oil in the water hit a record high earlier in October, suggesting that sanctions are slowing supplies and making Russian exports much less efficient, Bockman said.
No new sanctions have been imposed on Russian merchant ships. This disparity is a boon for Putin, because the data shows that American sanctions have a much greater impact than European ones.
In the five-month period after a ship was hit by US Office of Foreign Assets Control (Ofac) sanctions, its use fell by 74%, compared with just a 31% drop for those hit by UK and EU sanctions, Kpler found.
US sanctions hit much harder because companies have much greater interaction with America’s financial system due to the dominance of the US dollar.
This is one of the reasons why Trump’s decision now to target Rosneft and Lukoil is so important.
The two oil companies together account for about half of Russia’s total oil exports. Now that cash flow is facing a huge hit.
America’s threat of secondary sanctions meant that most Indian refiners, including Reliance Industries, which buys more Russian oil than any other business in India, stopped purchases of Russian oil immediately after the sanctions were announced.
It is important to note that these are also the first sanctions to directly affect Russian oil, not just its price or the ease with which it can be transported.
Trump has a global oil oversupply on his sidewhich means prices are low and the US president isn’t afraid to hit supply and raise it the way Biden did.
Chris Wright, the US energy secretary, has signaled that the US is ready to be aggressive.
“Can we give up half of Russia’s oil exports and still have a roughly balanced oil market? “Absolutely we can,” he said last week.
If the US makes it clear that it will follow through on its secondary threat of sanctions, Russian avoidance tactics will be forced into overdrive.
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