Some 20 newcomers lift Russia crude exports as Sovcomflot cuts shipments

Russia turned to more than 20 newcomers for raising its seaborne crude exports in March, with state-owned Sovcomflot taking a step back after reportedly being rejected by refiners in India -- the top Russian crude buyer -- due to US sanctions.

Data from S&P Global Commodities at Sea and Maritime Intelligence Risk shows 22 tanker operators lifted Russian crude for the first time last month since G7 countries and their allies banned companies in their jurisdictions from servicing Russian crude exports, unless the oil was sold for no more than $60/b, in December 2022.

The new entrants loaded 20.3 million barrels, or 17.3% of the OPEC+ member's total exports. Seaborne crude exports from Russia reached a 10-month high of 3.8 million b/d in March as the country's refineries came under continued Ukrainian drone attacks.

Most of the companies are little known, single-ship operators registered in Turkey, Seychelles, the UAE, China and India, often using tankers not serviced by G7-linked firms and potentially trading outside of the price cap, according to the S&P Global data.

But one of them is an Emirati company operating 17 tankers with 1.8 million dwt set up last year, and one a Turkish group with 28 tankers totaling nearly the same capacity this year, suggesting a potential emergence of new 'gray' players with sizable fleets devoted to restricted trades.

The unusually high number of new entrants came as vessels operated by companies associated with Sovcomflot, traditionally the largest Russian crude transporter as a shipping group, lifted 11.1 million barrels in March versus 12.7 million barrels in the shorter February, the data shows.

On Feb. 23, the US Treasury put Sovcomflot on the sanctions list for its ties to the Russian government, following similar legal measures by Australia, Canada and the UK.

"Although the US...sanctions against Sovcomflot include a 45-day grace period, early observations from Commodities at Sea suggest the fleet will carry less Russian oil this month," CAS analysts wrote in a recent note.

In the wake of US-imposed sanctions, all Indian oil companies, comprising both state-owned and privately held entities, have decided to reject Russian oil delivered by Sovcomflot-owned vessels, according to media reports last month.

Just two tankers under the company's ownership lifted nearly 1.5 million barrels last month for Indian-bound shipments, versus eight tankers with 6.2 million barrels in February, according to the S&P Global data.

On the other hand, China, the No. 2 buyer of Russian crude that has officially opposed Western sanctions on Russia, has continued to received oil carried by such tankers.

The S&P Global data shows 13 Sovcomflot-owned ships lifted 9.5 million barrels of China-bound crude from Russia last month, compared with 16 ships with nearly 12 million barrels in February.

'Gray' fleet

While the relationship between newcomers and Sovcomflot cannot be directly immediately established, sanctions specialists have said in past cases Russian state interests would work with opaque companies to maintain the country's exports.

The operations could involve transfers of old ships to new firms with unknown ownership not sanctioned by Western authorities, then the ships could ship Russian oil in gray operations whose legality is questioned, analysts have said.

"Older units were in high demand to maintain and increase the 'gray' fleet from buyers mostly based in China, India, and [the] Middle East," shipbroker BRS said in a note.

"Many owners from the mainstream fleet opted to cash in by offloading their oldest units."

Less crude for Greeks

Meanwhile, 1.2 million b/d, or 32% of Russian exports last month were lifted by tankers flagged, owned or operated by companies based in the G7, the EU, Australia, Switzerland or Norway, or insured by Western protection and indemnity clubs in March, down from 33% in February.

While the price of Urals, Russia's flagship crude grade, was above $65/b throughout last month based on S&P Global Commodity Insight's Platts assessment, ships could still technically comply with the price cap if they carry barrels technically sold at deep discounts.

UAE and Turkish operators were using more ships covered by G7-based insurers to load Russian crude in March, with such Emirati tankers responsible for 5.1 million barrels versus 1.5 million barrels in February, and Turkish for 6.8 million barrels versus 1.8 million barrels, according to the S&P Global data.

However, shipments by tanker operators in Greece, Europe's top shipowning nation, fell to 12.8 million barrels from 16.6 million barrels in the shorter February. Last month's reading was slightly higher than 11.5 million barrels in January, the lowest for Greek firms since the price cap came into effect.

"Greek operators have slowly withdrawn from the Russian crude trade since...the first half of 2023," said CAS analysts, adding that Greek firms have largely exited Urals trade.