G7-linked tankers were carrying a higher proportion of Russian crude exports in February, reports Platts, with strong freight rates seeing the return of Greek operators, despite tighter sanctions enforcement.
Slightly over 1.1m bpd, equal to 33% of total seaborne Russian crude exports last month, were carried by tankers flagged, owned or operated by companies based in the G7, the EU, Australia, Switzerland or Norway, or insured by Western P&I Clubs, according to data from S&P Global Commodities at Sea and Maritime Intelligence Risk.
This was up from 30.1% (1m bpd), in January, which was the lowest since December 2022. That was when G7 countries and allies imposed the $60 per barrel price cap.
Tightened enforcement rules were announced last December, requiring greater due diligence and imposing more rules relating to “side costs” that could be boosted to make up for the necessarily sub-$60 price per barrel of crude. However, traders and analysts had never expected Greek companies to stay away any longer than it took them to become au fait with the new rules.
Ships operated by Greek companies carried 16.6m barrels in February, up from 11.5m barrels in longer January (which was two days longer), according to the S&P Global data. That meant Greek players were once again the largest transporter of seaborne Russian oil.
Nikesh Shukla, a freight analyst with S&P Global Commodity Insights, said major operators in Greece could have found ways to “technically” comply with the G7 regime.
While the monthly average price of Urals grade was $65/b last month on an FOB Primorsk basis, according to Platts (a part of S&P Global). there were times when Urals briefly dipped below the $60/b threshold. Shukla said that “Russia will keep the prices below the price cap to avail the services of [G7] tanker companies. Shipments of cargo sold over price cap can be done by vessels owned by Sovcomflot or shadow operators.”
Freight rates for Russia-related trades have been strong, partly due to risk premiums. The lump-sum rate for a Suezmax carry Urals from Novorossyisk to the western coast of India was touching $8m-to-$9m in early March.
While the US and UK had sanctioned tanker operators for evading the price cap in recent months, Laura Deegan, counsel at law firm Miller & Chevalier, told Platts that the EU enforcement could be “disjointed” as each member state would take action individually.
“Whether a member state cares about the G7 sanctions or chooses to enforce them is a different story. [They] might not have the resources to take sanctions enforcement seriously”, Deegan said.
The US appears to have been the most rigorous among G7 authorities in enforcing sanctions, with more than 10 companies and dozens of ships put on the sanctions list for price cap circumvention since October.
Shukla said that China and India – the largest Russian crude buyers since the war – were not expected to reject sanctioned tankers as they could design non-US dollar payment mechanisms.
“Russian exports to India and China are here to stay,” he said. “Physical flows will be there. “Tankers operating outside of the price cap, such as those operated by Russian state interests or shadow companies, were responsible for 59% of the Russian crude shipments destined for India and 82% for China last month, according to the S&P Global data.
