Saturday May 25, 2024

Russian oil and products trapped on tankers hit by new Iran-related sanctions

By News Desk
April 14, 2024
Russian vessel Pure Point reaches Karachi port. — X/ @Roohan_Ahmed/File
Russian vessel Pure Point reaches Karachi port. — X/ @Roohan_Ahmed/File

MOSCOW/LONDON: Russian oil and products have become trapped at sea on four tankers after the United States hit the vessels with fresh Iran-related sanctions, LSEG data showed.

The development shows how Moscow and Tehran have boosted cooperation in the face of rising Western sanctions and how the West is trying to untangle a complex web of firms to reduce the loopholes and revenue to both countries.

On April 4 the United States imposed new Iran-related sanctions against a shipping firm Oceanlink Maritime DMCC and its vessels, citing its role in shipping commodities on behalf of the Iranian military.

The United States is using financial sanctions to isolate Iran and disrupt its ability to fund its proxy groups and support Russia's war in Ukraine, the Treasury Department said.

The list of vessels under sanctions includes three fuel tankers, which loaded oil products in February-March and a crude oil tanker that loaded Russian oil early in April.

A very large crude carrier (VLCC) Anthea loaded some 200,000 metric tons of Russian Urals crude off the Laconian Gulf near Greece through separate ship to ship transfers (STS) with two vessels late in March and is currently anchored in the Suez Canal with oil onboard, LSEG data showed.

The vessel has remained at anchor in the Suez Canal since early April, according to LSEG data.

Another vessel under sanctions - Elsa – took fuel oil on board in March via a ship-to-ship transfer near the Greek port of Kalamata, LSEG data shows. The fuel oil, some 100,000 metric tons, was supplied to Kalamata from Russia's St. Petersburg and Ust-Luga ports in March, according to the data.

Claire Jungman, chief of staff at U.S. advocacy group United Against Nuclear Iran, which tracks Iran-related tanker traffic via satellite data confirmed movements of both vessels, adding that since 2021 Elsa has transported over 9 million barrels of Iranian crude or fuel oil to the UAE, Singapore and China.

Elsa has been at anchor off Singapore since early April, according to LSEG data.

The other vessel, Hebe, was loaded with the 100,000 tons of fuel oil at the Russian Baltic ports St Petersburg and Ust-Luga. The tanker is heading towards the Suez Canal, but the final destination is unclear yet.

The vessel Baxter loaded with naphtha at the Black Sea port of Novorossiisk was destined for India, according to LSEG data. The tanker has been drifting in the Arabian Sea since April 5, shipping data shows.

"The recent actions against ships tied to Iran's military spotlight a serious shift: some of these ships, previously involved in dodging sanctions for Iran, have started dealings with Russia," Jungman said.

"These ships face major hurdles because of secondary sanctions. Ports worldwide are likely to deny them entry to avoid the repercussions of breaking these sanctions themselves ...", Jungman added.

Russian oil suppliers are unlikely to use these vessels or any provided by the shipping firm under sanctions now potentially tightening the already thin tonnage involved in Russian oil trades, a source in Russian oil market said. Reuters was not able to contact Oceanlink Maritime DMCC.

US sanctions on Moscow already dented Russian oil sales to India, the biggest buyer of Russian seaborne crude, and complicate efforts by Indian state refiners to secure annual supply deals.

Washington in February imposed sanctions to mark the second anniversary of Moscow's invasion of Ukraine and retaliate for the death of opposition leader Alexei Navalny.

The sanctions target Russia's leading tanker group, Sovcomflot, which Washington accused of being involved in violating the G7's price cap on Russian oil, as well as 14 crude oil tankers tied to Sovcomflot.

Indian refiners are concerned the latest sanctions will create challenges in getting vessels for Russian oil and could drive up freight rates. That may narrow the discount for the oil, which is bought from traders and Russian companies on a delivered basis.

In addition, Moscow may have to push even more volumes through traders to shield from further sanctions risk, adding to uncertainties, the industry sources said, declining to be named because of the sensitivity of the matter.

India rarely bought Russian oil before 2022 due to high freight costs, but refiners in the world's third-largest oil importing nation are now big buyers, benefitting from lower prices, after Europe banned Russian oil imports.

Russia emerged as India's top oil supplier in 2023. Through term deals and spot market purchases, the South Asian nation imported about 1.66 million barrels per day of Russian oil in 2023 compared to an average 652,000 bpd in 2022.

State refiners Indian Oil Corp, Bharat Petroleum Corp and Hindustan Petroleum Corp are in joint talks with Russian major Rosneft for an annual deal to secure a combined volume of up to 400,000 bpd of Russian oil, mainly Urals, for the fiscal year that starts on April 1.

Final volumes under the planned term deals depend on payment terms and discounts offered by Russia.

Rosneft has offered a discount of $3-$3.50 per barrel to Dubai prices, costlier than top refiner Indian Oil's current deal with Rosneft, which ends on March 31, at a discount of $8-$9 to Dubai quotes on a cost and freight basis.

Refiners consider the proposed discount to be thin, given the uncertainties brought by sanctions, sources said.

Indian state refiners are not seeking supplies of Sokol grade crude under the planned term deal due to payment issues.