Russia has created a shadow fleet of oil tankers to circumvent Western sanctions, but a key bottleneck emerges that could threaten flows

  • Russia has amassed a fleet of tankers to circumvent Western sanctions, but a key bottleneck emerges, reports Bloomberg.
  • The long distances that the so-called shadow fleet has to cover reduce the availability of Russian-friendly ships.
  • This means that Russia is relying on European vessels, but they are prohibited from ferrying Russian oil above the $60 price cap.

Russia’s shady oil tanker fleet was meant to bypass Western sanctions by minimizing the need for European vessels, but it has been depleted, according to a Bloomberg report.

Since Russia’s invasion of Ukraine last year, Moscow has increasingly relied on China and India as export markets as European buyers shunned Russian oil, forcing tankers to travel long distances.

The increased distance means that each vessel must spend more time on the water, reducing availability and requiring more vessels to keep up the oil flows.

But on Dec. 5, the European Union banned EU companies from providing delivery and other services for Russian oil cargo unless they met the $60 per barrel price cap.

Before the imposition of EU sanctions, European ships carried almost half of Russian oil exports from its western ports. This collapsed to about one quarter after December 5th.

But now, according to a report by Bloomberg, Russia does not have enough tankers to make all the necessary deliveries because many of them are forced to make long-haul voyages to and from Asia, so the share of trade carried out on European ships has recovered to more than one-third.

European vessels are vulnerable to EU sanctions, which also ban European companies from providing related shipping services such as insurance.

Russia’s shadow fleet was already under pressure. In December, Russia assembled more than 100 oil tankers to circumvent Western sanctions, but Rystad analysts estimate the Kremlin needed more than 240 ships to keep the oil flowing.

Meanwhile, demand for oil in Asia is growing. The latest forecast from the International Energy Agency puts global oil demand at an all-time high in 2023, largely due to the reappearance of China in oil consumption calculations.

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