Sanctioned tanker carries Russian crude to China via Arctic route

An Aframax tanker is transporting Russian crude to China via Arctic waters in its first voyage since being blacklisted by the US last December, according to S&P Global Commodities at Sea data, as Russia seek ways to maintain its oil exports.

The Victor Bakaev, having loaded 732,000 barrels of Urals crude from Primorsk July 21, is sailing in the Barents Sea and due to arrive at the Chinese port of Zhoushan Aug. 19, CAS data indicated.

This was the 118,000-dwt ship's first loading record since last October. The US Office of Foreign Assets Control put it on the sanctions list last December for breaching the G7 price cap. Shipowner Sovcomflot is sanctioned by the US and EU.

The shipment comes as Russia's seaborne crude exports have averaged around 2.9 million b/d so far this month, down 21% on June and the lowest since December 2022 -- when G7 members and their allies banned maritime services firms subject to their jurisdictions from Russian crude exports unless the oil was sold for no more than $60/b to undermine Russia's war chest against Ukraine.

Aside from sanctions issues, analysts suggested the fall could also be attributed to Russian refineries coming back online following Ukrainian drone attacks and OPEC+ production cuts.

On an FOB Primorsk basis, data from Platts, part of S&P Global Commodity Insights, showed that Urals has been mostly trading above $60/b since July 2023, and the US, UK and EU have sanctioned dozens of ships for violating the cap in recent months.

Jeremy Domballe, an expert at S&P Global Market Intelligence, suggested sanctioning ships could have stronger effects in stopping their operations than sanctioning shipowners, who can transfer ownership of tankers to non-sanctioned firms.

Some 40 OFAC-sanctioned tankers transported just 400,000 mt of Russian oil in April-June, a sharp fall from 5.8 million mt in January-March, according to the nonprofit Centre for Research on Energy and Clean Air.

Arctic route

Vessels will have fewer requirements of non-Russian services when sailing via the Arctic's Northern Sea Route, a trade lane Russia has been keen to explore in warmer months as Moscow continued to pivot east to find buyers for oil shunned by Western refiners.

Flows from Russia's Arctic and Baltic ports to China reached 10.4 million barrels in the 2023 summer season, up from 484,000 barrels in 2022 and 2.2 million barrels in 2019, according to CAS.

On average, the voyage time for crude exports from Primorsk to Chinese ports was 40 days last year while the crude via the traditional southern Suez Canal route averaged 50 days. The NSR's shipping distance is about a third shorter.