Greek Tankers Stop Transporting Russian Oil As US Starts Enforcing Moscow Sanctions

With Putin successfully evading and flaunting all European attempts to halt Russian oil exports one year after western nations imposed a Russian oil embargo at the end of 2022 (which has proven even more porous than the US embargo on Iranian oil exports which recently hit a five-year high), Brussels' attempts to starve the Kremlin of its oil revenues may finally get some traction with the help of three major Greek shipping firms which, according to Reuters, have stopped transporting Russian oil in recent weeks in order to avoid U.S. sanctions being imposed on some shipping firms carrying Russian oil.

Greek shippers Minerva Marine, Thenamaris and TMS Tankers have stopped transporting Russia oil in recent weeks, the Reuters sources said. All three firms were active shippers of Russian oil and fuels up until September-October when they started scaling down their involvement.

The development could be a blow to Russia, which according to analysts has been in breach of the OPEC+ quota, pumping more oil than permitted, as it narrows the number of shipping firms that are ready to transport Russian oil to consumers in Asia, Turkey, the Middle East, Africa and South America - although traders said Moscow still had enough shipping firms for now.

In October, Washington imposed the first sanctions on owners of tankers in Turkey and the United Arab Emirates carrying Russian oil above the G7's price cap of $60 a barrel. Last week, it imposed sanctions on three more ships.

Whereas the G7 countries introduced a price cap on Russian oil in late 2022, but had not previously enforced it out of fears that an embargo that was too effective would send global oil prices soaring as a result of the millions of barrels taken out of the market. The price cap allows Western firms to provide shipping and insurance services for Russian crude as long as the oil is sold below $60 per barrel. The cap is designed to limit Russian export revenues.

Russia's main export grade, Urals, has been trading above the $60 per barrel cap since mid-July amid production cuts by the OPEC+ group of oil producing countries, prompting many market watchers to say the price cap wasn't working.

Russia's Pacific ESPO Blend crude oil grade has also traded above the cap, according to U.S. Treasury data.

The three Greek firms had been shipping Russian oil for decades and continued to do so when most other Western companies quit running the routes to avoid rising sanction risks and the imposition of the price cap.

Naturally, the routes have been lucrative, and even more so when many other shippers stopped serving Moscow. Indeed, Russian oil trade has brought record revenues over the past year to the shippers who took the risk and stayed in the business, just as Zoltan Pozsar predicted nearly two years ago.

Freight rates for Russian oil transportation jumped to as high as $15 million per tanker voyage from Baltic ports to India last winter as shippers charged high rates because of the risk. That was several times more expensive than shipments of non-sanctioned crude.

The three Greek companies operate more than 100 oil tankers capable of handling almost all the oil exports from Russia's European ports of Primorsk, Ust-Luga and Novorossiisk of roughly 10 million tonnes a month or 2.4 million barrels per day.

They also operate a fleet of smaller tankers that transport fuel.

"The dark fleet might not be enough to transport all of Russian oil," one of the traders involved in Russian oil shipping said, referring to the emergence of the so-called "dark fleet" of shippers that move oil from sanctions-hit Russia and Iran and are not covered by Western insurance.

He cited as the main reason the fact that the Russian oil was now travelling 8-10 weeks to reach customers in Asia as opposed to two weeks before sanctions, when oil was sold in Europe. That means more tankers are required for the trade. However, for now Russia appears to be coping as other shipping companies stepped in, traders said.

Russia is now relying on its shipping company Sovcomflot and many little-known shipping firms registered in the UAE, India, Hong Kong, Seychelles, Ghana and other locations, according to traders and shipping data.

Despite the Greek tanker firms' exiting the Russian oil transit market, so far all of Moscow's oil meant for export is reaching its targets, even if with a several week delay. However, should the US tighten the noose even more and impose further limits on how many tankers Russia can access, there will come a point where the oil market enters a structural deficit as available Russian oil can no longer reach buyers, at which point oil prices will surge making even less Russian oil eligible for exports and leading to the next commodity crisis.