{"id":82707,"date":"2023-10-04T13:00:27","date_gmt":"2023-10-04T02:00:27","guid":{"rendered":"https:\/\/www.aspistrategist.ru\/?p=82707"},"modified":"2023-10-04T13:01:00","modified_gmt":"2023-10-04T02:01:00","slug":"russia-using-shadow-fleet-to-keep-oil-revenues-flowing","status":"publish","type":"post","link":"https:\/\/www.aspistrategist.ru\/russia-using-shadow-fleet-to-keep-oil-revenues-flowing\/","title":{"rendered":"Russia using \u2018shadow fleet\u2019 to keep oil revenues flowing"},"content":{"rendered":"
<\/figure>\n

Western efforts to choke Russia\u2019s oil profits are failing as production cuts agreed with Saudi Arabia push the market price towards US$100 a barrel and Russia\u2019s biggest customers\u2014China and India\u2014start paying close to full market price.<\/p>\n

Russia is successfully evading the Western effort to impose a price cap of US$60 a barrel on a large share of its oil sales.<\/p>\n

The price cap, devised by US Treasury Secretary Janet Yellen and in place since December 2022, demands that Western insurance companies only provide coverage of Russian oil shipments if they can be certified as being sold at no more than the upper limit.<\/p>\n

The aim was to curb Russia\u2019s profits while allowing its oil to keep flowing to world markets. An absolute ban on Russian oil sales, as the US imposed on Iran and Venezuela, would have sent the global price rocketing and was, in any case, seen to be impractical with such a large supplier as Russia.<\/p>\n

Since Western insurance companies covered around 90% of the world\u2019s shipping, it was expected to be successful. The agreement on the price cap binds all European Union and G7\u00a0members, except Japan. Australia is also party to the arrangement. Japan secured an exemption, which was recently extended to the middle of next year, because of its extensive involvement in Russia\u2019s Sakhalin-2 oil and liquefied natural gas project, in which Japanese trading companies have invested and which supplies 10% of Japan\u2019s LNG imports.<\/p>\n

Estimates by French trade data consultancy Kpler show<\/a> that, in August, only 24 million barrels of Russian oil were delivered by ships carrying insurance, while no insurance could be identified for tankers carrying 67 million barrels. The share with identifiable insurance has dropped from 47% to 26% since May.<\/p>\n

According to energy pricing company Argus Media, Russian oil was selling for US$87 a barrel on 22 September, only a few dollars short of the North Sea benchmark price of US$94, and far above the level set by the cap. Russia had been forced to accept discounts of as much as US$35 a barrel until April this year.<\/p>\n

Yellen<\/a>\u00a0acknowledged last weekend that the prices being fetched by Russian oil showed the price cap wasn\u2019t working as hoped. \u2018It does point to some reduction in the effectiveness of the price cap,\u2019 she said.<\/p>\n

\u2018Russia has spent a great deal of money and time and effort to provide services for the export of its oil. They have added to their shadow fleet, provided more insurance and that kind of trade is not prohibited by the price cap,\u2019 she said.<\/p>\n

The \u2018shadow fleet\u2019 Yellen referred to is understood to comprise almost 500 tankers, often with obscure ownership and insurance details that can change monthly. Shipments are sometimes made in small tankers and then transferred to larger vessels in the Mediterranean for the journey to Asia.<\/p>\n

Lloyds List analyst\u00a0Michelle Wiese Bockman says<\/a> prices for nearly all grades of Russian crude oil and refined products are now between 28% and 50% above the G7 price cap. She said a significant portion of Russia\u2019s oil shipments were still using Western insurance, implying they were complying with the cap.<\/p>\n

She suggested that false attestation documentation by the Russian sellers could explain how Russia was exceeding the limit. \u2018There\u2019s no suggestion sanctions are being breached by those ships, but I can\u2019t see how so many volumes could be compliant. These documents aren\u2019t publicly available, but would be available to regulators upon request. Perhaps enforcement needs to be stepped up to find out how these deals are being structured so they can remain below the cap.\u2019<\/p>\n

A\u00a0Financial Times<\/em> investigation<\/a>\u00a0found that on the Russia-to-India trade, oil was being loaded at Russia\u2019s Baltic ports at a price below the cap, but was arriving in India at prices US$18 a barrel higher, which is about double the freight cost.<\/p>\n

Russia\u2019s most potent counter to the Western price cap is the deal it struck with Saudi Arabia 12 months ago to cut oil production, with combined OPEC and Russian output falling by two million barrels a day. The cut was supposed to expire last month, but Saudi Arabia and Russia recently agreed to extend it to the end of the year.<\/p>\n

The\u00a0International Energy Agency, which represents oil-consuming nations, commented<\/a>, \u2018The Saudi\u2013Russian alliance is proving a formidable challenge for oil markets.\u2019 It predicts demand will rise by 1.5 million barrels a day over the remainder of the year, with most of the increase coming from China, and says supplies will run short.<\/p>\n

It\u2019s a seller\u2019s market for oil and this favours Russia getting the prices it wants. Shipping is too fragmented an industry\u2014with its flags of convenience, tax-haven ownerships and a multitude of shippers who can operate from a post office box\u2014to be corralled reliably by the G7 price cap, particularly when the biggest buyers of Russian oil\u2014China, India and Turkey\u2014are not parties to it.<\/p>\n

Yellen is a formidable economist. She chaired the US Federal Reserve and the Council of Economic Advisers under President Bill Clinton, and has held significant academic appointments. However, the price cap may have been too clever, overestimating the power of financial regulators to dictate the terms of trade to the oil market.<\/p>\n

There have been concerns that Russia may use the tight state of markets to generate a further global energy crisis over the coming northern winter, with suggestions that Russian President Vladimir Putin is keen to make life for US President Joe Biden as uncomfortable as possible in the lead-up to next year\u2019s US election. Russia recently banned the export of diesel and petrol, claiming it faced a domestic shortage, which added to global anxiety about energy supplies.<\/p>\n

While an energy crisis may suit Russia, it is not in the interest of Saudi Arabia. The alliance between the two is just one of convenience. The Saudis want to keep the oil price high, but not so elevated that it leads to either a global recession or a fresh surge of US shale oil production. It was only three years ago that a disagreement between Saudi\u00a0 Arabia and Russia over production cuts in the face of the pandemic descended into an all-out price war which at one point sent the global oil price negative.<\/p>\n","protected":false},"excerpt":{"rendered":"

Western efforts to choke Russia\u2019s oil profits are failing as production cuts agreed with Saudi Arabia push the market price towards US$100 a barrel and Russia\u2019s biggest customers\u2014China and India\u2014start paying close to full market …<\/p>\n","protected":false},"author":955,"featured_media":82708,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"footnotes":""},"categories":[1],"tags":[2110,222,1314,163],"class_list":["post-82707","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-general","tag-economic-policy","tag-energy-security","tag-oil-trade","tag-russia"],"acf":[],"yoast_head":"\nRussia using \u2018shadow fleet\u2019 to keep oil revenues flowing | The Strategist<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.aspistrategist.ru\/russia-using-shadow-fleet-to-keep-oil-revenues-flowing\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Russia using \u2018shadow fleet\u2019 to keep oil revenues flowing | The Strategist\" \/>\n<meta property=\"og:description\" content=\"Western efforts to choke Russia\u2019s oil profits are failing as production cuts agreed with Saudi Arabia push the market price towards US$100 a barrel and Russia\u2019s biggest customers\u2014China and India\u2014start paying close to full market ...\" \/>\n<meta property=\"og:url\" content=\"https:\/\/www.aspistrategist.ru\/russia-using-shadow-fleet-to-keep-oil-revenues-flowing\/\" \/>\n<meta property=\"og:site_name\" content=\"The Strategist\" \/>\n<meta property=\"article:publisher\" content=\"https:\/\/www.facebook.com\/ASPI.org\" \/>\n<meta property=\"article:published_time\" content=\"2023-10-04T02:00:27+00:00\" \/>\n<meta property=\"article:modified_time\" content=\"2023-10-04T02:01:00+00:00\" \/>\n<meta property=\"og:image\" content=\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2023\/10\/GettyImages-1247822844.jpg\" \/>\n\t<meta property=\"og:image:width\" content=\"1024\" \/>\n\t<meta property=\"og:image:height\" content=\"650\" \/>\n\t<meta property=\"og:image:type\" content=\"image\/jpeg\" \/>\n<meta name=\"author\" content=\"David Uren\" \/>\n<meta name=\"twitter:card\" content=\"summary_large_image\" \/>\n<meta name=\"twitter:creator\" content=\"@ASPI_org\" \/>\n<meta name=\"twitter:site\" content=\"@ASPI_org\" \/>\n<meta name=\"twitter:label1\" content=\"Written by\" \/>\n\t<meta name=\"twitter:data1\" content=\"David Uren\" \/>\n\t<meta name=\"twitter:label2\" content=\"Est. reading time\" \/>\n\t<meta name=\"twitter:data2\" content=\"5 minutes\" \/>\n<script type=\"application\/ld+json\" class=\"yoast-schema-graph\">{\"@context\":\"https:\/\/schema.org\",\"@graph\":[{\"@type\":\"WebSite\",\"@id\":\"https:\/\/www.aspistrategist.ru\/#website\",\"url\":\"https:\/\/www.aspistrategist.ru\/\",\"name\":\"The Strategist\",\"description\":\"ASPI's analysis and commentary site\",\"potentialAction\":[{\"@type\":\"SearchAction\",\"target\":{\"@type\":\"EntryPoint\",\"urlTemplate\":\"https:\/\/www.aspistrategist.ru\/?s={search_term_string}\"},\"query-input\":\"required name=search_term_string\"}],\"inLanguage\":\"en-AU\"},{\"@type\":\"ImageObject\",\"inLanguage\":\"en-AU\",\"@id\":\"https:\/\/www.aspistrategist.ru\/russia-using-shadow-fleet-to-keep-oil-revenues-flowing\/#primaryimage\",\"url\":\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2023\/10\/GettyImages-1247822844.jpg\",\"contentUrl\":\"https:\/\/www.aspistrategist.ru\/wp-content\/uploads\/2023\/10\/GettyImages-1247822844.jpg\",\"width\":1024,\"height\":650,\"caption\":\"*TO GO WITH AFP STORY BY ALEXANDER OSIPOVICH* Picture taken on February 16, 2009 shows a seagull flying near a liquefied natural gas (LNG) tanker near an LNG plant on Sakhalin island outside the town Korsakov . 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