Have Western sanctions on Russian oil begun to bear fruit?

Russian Kozmino oil port (Getty)

Since the beginning of last October, the United States has tightened sanctions on the broader fleet of Russian oil tankers, and dozens of targeted tankers have been docked since then, while more barrels of Russian diesel fuel remain in the oceans without a destination than ever before. Since 2017, according to Bloomberg, citing Kpler Analytics.

Indian oil refineries, Moscow's second largest customers after China since the start of the war in Ukraine, will not accept tankers owned by the Russian state-run Sovcomflot due to the risks of sanctions.

Bloomberg believed that these combined moves have the potential to gradually reduce Russian oil revenues, which is a major political goal for the United States and its allies as they seek to confront Russia in its war on Ukraine.

The approach adopted by the G7 in dealing with the sanctions imposed on Russia was determined by refusing to cause any harm to their economies by avoiding high oil prices, as Washington came up with the so-called maximum price policy specifically to ease the sanctions prepared by the European Union, and since the war began before... For two years, Russia continued to export large amounts of oil.

Oil prices

While no major cuts in oil supply are expected, Bloomberg asked: “To what extent will Western regulators tighten the screws (on Russian oil) while oil prices are heading toward $90 a barrel?”

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The agency quoted the head of geopolitical affairs at the consulting firm Energy Aspects Ltd., Richard Bruns, as saying: “There is increasing pressure on Russian export flows, especially to India. We are at a stage where the frictions associated with the sanctions have become very clear.”

Since October, the United States has placed 40 Russian oil tankers on the sanctions list, and 4 of the recently targeted ships continue to make deliveries, but the ships subject to sanctions have stopped since they were identified by the US Treasury Department, according to tanker tracking data compiled by Bloomberg.

Now, the increasingly difficult trading environment has dealt a powerful symbolic blow to the Kremlin, even as India, a powerful trading ally throughout the war, shuns its fleet.

At the same time, Ukraine has targeted Russian oil refineries with several recent bombings, although it is not clear how much support these bombings have in Washington.

Greg Breaux, an analyst at the Eurasia Group in New York, said: “We are certainly seeing increasing pressure from US sanctions on both Russian crude and exports. This comes as the United States struggles to send more aid to Ukraine, as Ukraine’s fortunes on the battlefield have begun to decline. "And it seems that Russia has the upper hand."

State-run Sovcomflot transported about a fifth of Russia's total crude oil shipments to India last year, and the number appeared to be declining even before news broke that the country's refineries would no longer accept the company's ships.

welcome

A US Treasury spokesman said: “We expect and welcome that global oil buyers will be less willing to deal with SOFCO flute than they have been in the past,” adding that the measures should have no impact on the oil market. Because Russia will retain an incentive to sell oil.”

Bloomberg expected that this fleet would need to look for work elsewhere, with indications that it was facing difficulties.

At least seven ships stopped in the Black Sea and disappeared from digital monitoring systems, and Sovcomflot admitted this week that the sanctions had hurt its operations.

Janice Kluge, a senior researcher on Eastern Europe and Eurasia at the German Institute for International and Security Affairs in Berlin, said: “Targeting Sovko Maflut represents a significant tightening of US sanctions against Russia... It will not solve the circumvention problem, but it will raise shipping costs and reduce Russian oil prices.”

However, Russia can still rely on the so-called “shadow fleet” of ships assembled shortly after the war in Ukraine, often old vessels without proper insurance and unclear ownership, to deliver its cargo and, by some estimates, as many as To about 600 operational tankers, in addition to Greek tankers that continue to serve trade under the G7 price ceiling.

The cost of delivering Russian oil is high, as the cost of delivering a Baltic Sea shipment to China is about $14.50 per barrel, according to Bloomberg, citing data from Argus Media, which estimates that more than half of this amount is attributable to sanctions.

Source: Bloomberg