Sanctions on Russian oil are having a very limited impact on the price. Oil is cheaper than before the war and there seems to be no risk of shortages. However, what the sanctions seem to have done is a real revolution in the routes that oil follows, which has triggered the time that oil spends at sea and raised some doubts about its impact on the environment (now the journeys of oil tankers are much longer, which means higher emissions and risk of tragedies). This caused the Russian oil ‘floating’ in the sea to multiply in a single year.
Crude oil floating in the sea (shipped in large tankers to ports located mainly in Asia) exceeded 90 million barrels, according to the latest data published by the International Energy Agency. That amount is more than double the less than 40 million barrels of Russian oil that plowed the seas just a year ago. Russia’s ‘ghost fleet’ is working overtime to get the oil to its new destinations.
The story has been brewing since December 2022, but it also has to do with China reopening and the recovery in global demand for crude oil. On the one hand, the sanctions imposed by the West on Russia include a ban on the landing of oil from Moscow in European ports, which were its main customers. Now Russian oil has to travel thousands of kilometers to reach its new destinations. This creates two significant risks to the environment.
On the one hand, the longer routes of oil tankers mean a greater emission of CO2 into the atmosphere. On the other hand, long distances increase the risk of some kind of environmental tragedy. Shipt-to-ship operations also skyrocketed (changing oil from one vessel to another), where spills are not uncommon.
On the other hand, “thanks to the recovery in world oil demand, crude oil exports by sea have returned to pre-pandemic levels, with around 90 million barrels of oil per day (total exports, not just those from Russia) , according to Kpler,” states the IEA report.
No doubt this trend has helped Russian oil floating in the sea reach record levels, but there are other factors even more important: “The increase in exports and interruptions in trade flows due to the diversion of Russian oil to new destinations significantly increased oil in transit (oil that ‘floats’ on water that is in transit to new destinations). At the end of January 2023, the amount of oil plus Russian derivatives (gasoline, diesel, naphtha…) in transit was 150 million barrels, a value higher than the average for 2019.” the International Energy Agency itself (in its latest monthly report) that more than 90 million barrels belong to crude oil.
What is the intrahistory of this phenomenon? As noted above, Russian ships are forced to ship oil to distant ports in the east, as opposed to the short trips they took before sanctions. In 2021, Russian oil has been extracted from the country’s large fields, shipped by pipeline to Russia’s western ports, and from there by tankers to Rotterdam and other European enclaves. The average route for Russian ships used to be around 10 days and there was no need to exchange crude oil between ships.
At present, the situation is very different: “Exports to Asia from the ports of Western Russia (including the Arctic zone) were insignificant amounts before the war. Shipments from Western Russia to Europe took about 10 days or less , while current trips to India and China take more than 30 and 50 daysrespectively,” they explain from the International Energy Agency. India and China have become the top destination for Russian oil since Western sanctions were implemented.
This is ship to ship
“In addition, to improve the efficiency of long-distance transport, the number of ship-to-ship (STS) operations has increased significantly, which has triggered the number of days required for sea transport. About 180 operations were registered in January STS or ship-to-ship, approximately double the 2021 average level,” they warn from the IEA.
Unfortunately, in Spain, this practice of Russian ships is well known to transport oil from small ships to other large tankers, which are the ones that finally take the oil to Asia. Ceuta has become a key point for the operations of Russia’s ‘ghost fleet’: Ceuta’s waters are the stars of operations for these ships which transfer crude oil to other larger ships for transport to various ports around the world.
Until the invasion of Ukraine, Russia had barely used the waters near Ceuta as a stopover for its oil. Before the war, Moscow shipped oil directly to European refineries in small tankers. But the Kremlin began using “the coasts of Ceuta” as a base for ship-to-ship transfers, at first sporadically and now routinely.
The route is as follows: Russia loads oil in small tankers called Aframaxes into its Baltic Sea export terminals, such as Primorsk and Ust-Luga. The ships, reinforced to break Arctic ice during the winter, transport the crude oil to Ceuta.
Aframax and VLCC
Near this city, the Aframaxes, which transport around 700,000 barrels, await the arrival of the large oil tankers, known as the Very Large Crude Carrier (VLCC). Aframaxes approach VLCCs and transfer cargo from ship to ship. Typically, it takes up to three of these operations to load a VLCC, which can carry at least 2 million barrels. Subsequently, the VLCC begins its journey to Asia, bypassing Africa.
Since December, six VLCCs have done just that, pulling oil from more than 15 Aframax. Some of them are veterans of the oil black market, having in the past sent Iranian and Venezuelan oil, according to Vortexa, a consultancy that tracks oil tankers. And Russia and China seem to be organizing more exchange stops in Ceuta. Two VLCCs are currently waiting for the tankers to arrive. Meanwhile, the US is putting pressure on China not to facilitate the export of crude oil to Russia and reduce its purchases.
In all, “Crude oil currently accounts for most of the growth of all Russian fuels and derivatives on water. Russian crude oil on water has skyrocketed by about 70 million barrels, or what is the same, 180% year-on-year at the end of January 2023. The increase in Russian oil products was around 20 million barrels or 30%, but this is likely to increase as the impact of the European embargo on oil products takes shape.” de Energia.