Sanctions on tankers have had no effect on oil exports for Russia

Backlisting vessels by the OFAC and the European Union for breaching the Russian oil price cap has been successful in removing them from the fleet of ships exporting Russian crude oil, but it has had no impact on overall Russian crude oil exports, with more new ships filling the gap.

Sanctions on Russia’s oil exports and oil import bans from EU countries have reshaped oil flows over the last two years after the invasion of Ukraine and the enforcement of the price cap. The reduction in flows to Europe and increase to Asia, especially China and India, has increased shipping demand, resulting in the growth of the “shadow fleet”, a loose term for the group of vessels operated with the primary intention of facilitating Russian oil exports. In some cases, these ships have adopted covert tactics to disguise the origin of the cargo or loaded cargoes above the price cap, like ship-to-ship transfers. As a result, over 50 ships have been blacklisted in the last two years by US Treasury.

The fleet of vessels that have been sanctioned accounted for 8% of Russian oil export ton-miles and 13% of exports prior to sanctions. This has dropped to close to zero in recent months, indicating sanctions have impacted the ability of those ships to trade. However, Russian oil exports have been unaffected, with crude exports rising this year. Non-sanctioned vessels now carry even higher volumes, demonstrating a strategic shift to mitigate the sanctions' impact.

Despite increased logistical costs and potential revenue reductions due higher freight and discounts for crude and refined products, Russia, with the support of the shadow fleet, has been able to maintain exports consistently.

Comparing pre- and post-sanction activities, the sanctioned vessels have seen a significant reduction in their ability to trade. Vessel sanctions were implemented in batches over the last two years, with most taking place in the last year. Analysis of their trading behaviour in the three months before and after sanctions were imposed on each vessel show a stark decline in exports from Russia, as seen in the chart below. This shift, along with a rise in volumes transported by non-sanctioned vessels, highlights a compensatory mechanism within global oil trade networks.

Analysis of the sanctioned vessels' ton-miles over time reveals that they have not been able to replace imports of Russian crude, posting sharp declines post-sanctions, underscoring the immediate impact of the restrictions. Yet, the resilience of Russian oil trade is evident as non-sanctioned vessels have increased their activity, compensating for the sanctioned fleet's inactivity.

Sanctions on oil tankers related to Russian oil exports have had a limited impact on Russia’s ability to maintain exports, so for the Russian economy and Russian oil export revenues, as there remains a large and willing fleet of ships able to load from Russia even with the price cap policy.