Russia relies on “shadow navies” to save oil exports
Russia is said to have bought more than a hundred end-of-life tankers that could be used to evade international sanctions against black gold exports that came into force on Monday. This is only one aspect of the phenomenon of “shadow fleets”, which has become widespread in recent years.
It is called the “Shadow Fleet” or “Ghost Fleet”. Behind this very encouraging term in the media is a phenomenon that could shake the architecture of international sanctions against Russian offshore oil exports, which came into force on December 5.
“Russia has quietly built a fleet of around 100 old tankers to cope with sanctions on its oil,” the Financial Times reported on Friday, December 2. The Wall Street Journal added the next day that for several months there has been a race among some smaller shipping companies, particularly in Asia, for second-hand tankers, especially those that can “navigate frozen waters” such as are “found around”. Russian ports facing the Baltic Sea’.
The goal would be to create a parallel sector to the traditional tanker network – a “shadow fleet” – to continue exporting Russian oil as if there were no international sanctions.
These set a ceiling above $60 per barrel of oil, starting Monday, above which Russia cannot export its precious hydrocarbons to the world (in addition to a general embargo on seaborne exports of oil to Europe). To enforce this rule, the US and its allies prohibit marine insurance companies from insuring a cargo ship carrying black gold intended for sale for more than the maximum price.
The vast majority of tankers should decide to do this because insurance is key to doing business with major oil companies, having accounts in major international banks and taking advantage of services offered by major Western maritime groups, he reminds. The Wall Street Journal.
Except for the tankers of the “Shadow Fleet”. “These are old ships that should theoretically be scrapped soon, but are being bought back to go back to sea without insurance from companies that depend on G7 nations to continue trading with countries under international sanctions.” , explains Lawrence Haar, energy economist at the University of Brighton.
These ships ignore the insurance policy recognized by the G7 states. “They can also turn off their transponders [qui transmet en temps réel leur position, NDLR] “In order not to be seen at sea,” says Lawrence Haar. That’s why the name “phantom fleet” is kept in certain media.
The price of old tankers is exploding
This phenomenon is not caused by the war in Ukraine and sanctions against Russia. This also applies to Iranian oil, especially after former US President Donald Trump reimposed sanctions on Iran’s energy sector in 2018. “The same goes for Venezuelan oil.” Lawrence Haar adds.
It is difficult to estimate the scale of this phenomenon, but the American maritime business consulting company Capital Link judged in November 2022 that for the category of supertankers alone (a little less than 900 in operation) there is about 7.%. it was part of the “shadow fleet”.
This phenomenon has only increased since 2019. “Major commercial shipping companies estimate that the number of “shadow” supertankers has tripled during this period,” emphasizes the “Financial Times”.
And since the start of the war in Ukraine, it would fly away. End-of-life tankers can be sold for twice as much as a year ago. “This summer, a Greek shipowner was able to sell a 22-year-old icebreaker tanker for $32 million, while a similar vessel was sold for just $17 million last year,” the Wall Street Journal writes.
Inflation indicating the importance of demand. Francesco Sassi, an expert on geopolitics at the RIE research institute in Bologna, believes that this would be evidence that the “shadow fleet” has become the main tool the Kremlin has for circumventing international sanctions on oil exports. energy industry.
It is difficult to say whether this is enough. It must be admitted that this “shadow fleet” can be effective among the hundred tankers that Moscow bought in recent months and the small companies that are ready to offer to Russia the services they already provide to Iran or Venezuela. However, Francesco Sassi assures that “this cannot be enough to export as much oil to Russia as it did before the war.”
However, Moscow may not need it immediately. “The limit set at $60 should not hurt Russia’s export revenue, as the price is close to the discounted price that Moscow already applies to sell its oil to India or China,” he said. Lawrence Harr.
“Shadow Navy” as Insurance Police
This maximum price, set by the United States in agreement with major European countries, has angered some states, such as Poland and the Baltic states, which have campaigned for a lower ceiling. It was the only way for these countries to really hit Moscow in the wallet.
But Washington assured that this sanction is only a starting point. If necessary, it would be quite possible to tighten this screw. Thus, in the eyes of Moscow, the interest in this “shadow fleet” is “Russia’s reserve in case the Western countries decide to lower the price ceiling further,” explains Lawrence Haar.
If these “ghost tankers” were to haunt the seas, it would not be good news for maritime trade, emphasizes Francesco Sassi. “The safety of navigation at sea may deteriorate because these ships are at the end of their lives,” he said. With the increased risk of oil spills?