The Definitive Guide to Where the US Has Squeezed Russia’s Oil Flows the Hardest
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The Definitive Guide to Where the US Has Squeezed Russia’s Oil Flows the Hardest
Julian Lee and Prejula Prem
6 min read
(Bloomberg) -- The latest US sanctions on oil tankers used to haul Russian petroleum look set to cause severe disruption across the nation’s export machine, with some of Moscow’s flows at risk of a near wipeout if history is any guide.
An analysis of the ships targeted by Washington suggests that nearly 1.5 million barrels a day of crude shipped from Pacific and Arctic ports could be heavily curtailed. More than one-third of those cargoes require specialized, purpose built tankers that will be hard to replace. Flows of the nation’s key Urals grade from ports in the Baltic and Black Sea look set to face less-severe — but still significant — constraints.
On Friday, the US Treasury Department’s Office of Foreign Assets Control imposed restrictions on 158 oil tankers involved in the Russia trade, with the State Department targeting another three vessels. The measures were part of the most-aggressive round of sanctions on Russia’s oil trade by any Western power since the war in Ukraine began almost three years ago.
The oil market is still trying to pick apart the impact of the sanctions, which could redraw traders’ expectations for a global supply surplus in 2025. Brent oil has rallied $5 a barrel since the measures were introduced, with some predicting further gains.
READ: Trump Team Readies Sanctions Plan for Russia Deal, Iran Squeeze
Ship tracking shows that previous rounds of US sanctions have been highly disruptive. It suggests Chinese and Indian oil buyers have been wary of falling foul of the Treasury. Since OFAC began sanctioning tankers involved in Russia’s oil trade in October 2023, only two of the 39 tankers targeted before last week moved more than single cargo. Thirty three were essentially idled completely.
Beyond the tanker sanctions, buyers are considering wider measures on Russia’s supply chain that are extensive, causing some to seek alternative supply.
Here is a run through of the sanctioned tankers and the trades they served before designation.
Hardest Hit
The crude streams that look like they could be hardest to maintain are ones where output from individual projects, or small clusters of fields, goes through dedicated transport systems.
Crude streams of about 550,000 barrels a day from the Arctic and Sakhalin island in Asia are at risk because the flows depend on specialized tankers built to meet their specific requirements, all of which have been sanctioned.
The Sakhalin 1 and Sakhalin 2 projects in Russia’s Pacific, with combined crude flows of about 250,000 barrels a day, have seen all dedicated fleets of shuttle tankers designated. The vessels need a bow-loading mechanism to take crude from the projects’ export buoys and it doesn’t appear there are other, unsanctioned, ships that can do the same job.
The tankers typically haul Sakhalin 1’s Sokol grade and Sakhalin Blend from the Sakhalin 2 project directly to ports in China.
In the Arctic, three terminals also use dedicated fleets of shuttle tankers to ship about 300,000 barrels a day of crude to Murmansk where cargoes are aggregated into 1 million barrel lots for export. All have been sanctioned, as have the storage vessels — the Umba and the Kola — where the shuttle tankers’ cargoes are collected.
Gazprom Neft’s Arctic Gates terminal handles crude from the company’s Novy Port field further south on the Yamal Peninsula. The company itself has been sanctioned, as has the entire fleet of seven specialized Arc7 ice-class tankers built specifically to meet the demanding conditions in the shallow waters of the Gulf of Ob.
Two ships that serve the company’s Prirazlomnoye offshore field were also sanctioned.
Lukoil’s Varandey crude is the third Arctic grade to be affected. Three dedicated tankers that shuttle between the Varandey terminal and Murmansk have all been sanctioned.
The move already seems to have had an impact on tankers moving Russia’s Arctic crude. Two unsanctioned vessels that were heading toward Murmansk made U-turns off the Norwegian town of Tromso in the days following the announcement.
One hope for Russia is that a relatively small portion of international tankers that collect cargoes from the two vessels were designated, so if buyers and shippers are willing to take oil that’s been handled by sanctioned vessels, then perhaps the barrels will continue to flow.
It’s possible that there will be an increase in ship-to-ship transfers, a practice that has been criticized by the International Maritime Organization. For that to happen, buyers of Russian oil would need to be confident that they can receive deliveries from ships that have themselves collected cargoes from sanctioned vessels.
East Siberian
About 900,000 barrels a day of the crude ESPO — named for the initials of a pipeline that takes the oil from east Siberia to the Pacific — could also be hit hard. It is the nation’s largest single-port export stream.
Almost all those ESPO exports go to China from the Pacific port of Kozmino, and almost three-quarters of the shipments made since the start of October were on tankers that are now sanctioned by the US.
While there isn’t quite a dedicated fleet of vessels serving Kozmino, there are many tankers that have made multiple trips between the terminal and Chinese ports in the past three and a half months.
A total of 41 different ships have loaded crude at Kozmino since the start of December and 32 of them, or 78%, have been sanctioned. Thirteen out of those 32 sanctioned ships have visited the port at least four times since the start of October.
Tankers serving Kozmino require no special equipment.
Urals Flows
In total volume terms, Urals is Russia’s key crude, at about 1.8 million barrels a day from three western ports.
One-quarter of Urals cargoes shipped since the start of October were carried on tankers that are now blacklisted by Washington, the smallest proportion of any grade or stream.
An additional 30, or 13%, were loaded onto vessels that have been sanctioned by some combination of the UK and the European Union, but not by Washington.
The grade is shipped through the ports of Primorsk and Ust-Luga on the Baltic and Novorossiysk on the Black Sea.
Three-quarters of Urals cargoes end up in India, which is going to reject OFAC-sanctioned ships, with Turkey accounting for another 20%. The trade from the Baltic and Black Sea to China is small, with just 11 of the 235 cargoes making the voyage.
