A vast ghost fleet of tankers with unknown owners are amassed for service Moscowhis interests. Intense diplomatic wrangling by the United States to ease aggressive European Union sanctions has been going on for months, but time is running out.
Will it be enough? With around six weeks to go until the bloc’s measures come into effect, it’s unclear if the measures will really be enough to help the world’s third-largest oil producer get much of its output to buyers to head off a shock. supply.
BloombergThe United States has been sounding the alarm for months EuropeSanctions against Russia could trigger such a shock. He is pushing for businesses to be allowed access to EU services – especially insurance – to avoid a price spike ahead of the midterm elections in November. To do this, buyers would have to subscribe to a controversial cap on the price of oil.
What seems certain is that a large part of the Russian flows will be managed by a complex – and often secret – network of ships, shipowners, ports and safe passages dominated by entities always willing to deal with the Russia.
“If you look at how many ships have been sold in the last six months to undisclosed buyers, it’s very clear that a fleet is being built in order to transport this,” said Christian Ingerslev, chief executive of Maersk. Tankers A/S. in Copenhagen, which manages a fleet of 170 ships, none of which serve Russia.
As December 5 approaches, when the EU is due to ban imports of Russian crude and end the provision of transport, finance and insurance to related businesses, the most important question is whether there is will have enough ships.
Shipping broker Braemar estimates that to support four million barrels a day of Russian exports to the Far East, many recently traded vessels will need to be added to the 240 vessels – 102 Aframax, 58 Suezmax and 80 very large crude carriers – – which have been shipping Iranian and Venezuelan crude over the past year to form a large shadow fleet that will support Moscow.
“There has been a surge in tanker trade since the war and in the run-up to the December 5 deadline by undisclosed entities based in countries such as Dubai, Hong Kong, Singapore and Cyprus,” said Anoop Singh, head of the tanker. research at Braemar. Many are older ships and will find their way into the ghost fleet, with Russian shipowner Sovcomflot PJSC also supplying some tankers.
Beyond this, there will also almost certainly be an increase in ship-to-ship transfers – with cargo being transferred from one tanker to another at sea. exports directly from Russian ports and the need to gather some small cargoes on larger tankers for long-haul voyages.
That, however, is a logistical challenge in itself, especially from the Baltic Sea, Russia’s top export region.
Ship-to-ship transfers involve one ship maneuvering alongside another, attaching a hose to allow cargo to be pumped between the two carriers. This can take up to two days and is best done in the calmest waters possible in good weather. Some may involve a multi-step process of transferring oil from an initial tanker to a floating storage facility, before another step to move cargo to another vessel.
While ships often used to navigate directly to European and Asian buyers — in particular China and India – look certain to become top destinations after December 5th.
Once the sanctions come into effect, European seas will almost certainly be off limits for these so-called STS transfers, and it won’t be much use for Russia or its buyers to do them inside the Baltic Sea. This is because, ideally, oil bound for Asia will be transferred on giant supertankers that are too big to get out of the Baltic with cargo on board.
The original ship would turn around after unloading its cargo on this supertanker and return for more Russia oilcreating a shuttle effect.
These STS locations may take the form of safe harbors or relatively calm offshore waters that fall outside of jurisdictions that have sanctions or restrictions against the Kremlin.
While some ship brokers offered possible locations like Gibraltar and Ceuta, others were dubious citing their ties to the UK and Spain, which restrict trade with Russia.
Another STS transfer option could be on the high seas, even in the middle of the Atlantic Ocean where the waters fall outside the maritime jurisdictions controlled by European nations. Shippers have focused on an area in the middle of the North Atlantic near a group of islands known as the Azores, an autonomous region of Portugal, as a possibility.
While STS operations tend to be expensive with an element of risk, this practice will be paramount to ensuring the continued flow of Russian crude – both logistically and to help some buyers keep their business private.
While it is not uncommon for shipments from sanctioned regimes to undergo an STS, shippers are not ruling out the possibility of two transfers – one inside the Baltic, a second outside – to help bring barrels on the market.
Over the past few months, there has been a buying spree in the used tanker market, specifically focused on the type and class of vessels that will be heavily used to move the Urals and ESPO from their terminals. export.
One such type of tanker is the Aframaxes, the smallest international mainstream tanker that can transport around 650,000 to 750,000 barrels of oil in shallower waters and from shallower ports.
Aframaxes with icebreaker capabilities have been in the spotlight as they will be essential for Urals exports from the Baltic this winter. Ice-class Aframaxes cost double the price of a year ago, with buyers preferring to keep their identities a secret.
Ship brokers have also observed an increase in trading activity for non-ice class Aframax vessels aged 15 years or older. Some of these tankers are expected to arrive in Eastern Siberia, where they will help transport Russian ESPO crude to buyers including Chinese and Indian refiners.
If all of these things aren’t difficult enough, many of these problems will be compounded by difficulties in finding industry standard insurance.
Most tankers are covered against risks, including oil spills, by 13 member organizations within the International Group of P&I Clubs, many of which are in Europe. EU sanctions mean firms in the bloc would have to stop providing cover while the IG itself could not rely on reinsurance from EU firms.
The UK has yet to fully follow the EU, meaning some coverage may still be available. The IG itself is in London.
The price cap would make European services and insurance accessible to companies that pay adhere to a price cap for Russian oil. Regardless of whether Russia would cooperate with the capping program, EU participation is far from simple.
In signing, the block had two important stipulations.
First, that shipping companies – including the giant Greek fleet – would be included. In other words, a trader could theoretically only lease a Greek tanker if he paid a capped price for the oil.
Second, EU rules as currently written state that a tanker anywhere in the world will not be allowed access to insurers and reinsurers in the bloc – for any future cargo, including non-Russian – if they are buying if they are transporting oil that hasn’t been purchased below the cap.
Europe is a center of insurance and reinsurance and without it owners risk being under-covered against risks, including oil spills. This makes compliance with EU sanctions – and the cap – a highly polarizing and uncertain issue for tanker owners. The implementation of a cap by the EU has not yet been formalized and is also dependent on other G-7 countries taking similar action.
And there are just over six weeks left.