Since Russia invaded Ukraine, many Western oil companies, as well as traders, shippers and bankers have stayed away from Russian oil. But a new report from CNN indicates that demand for Russian crude oil may be rising again — in relative secrecy.
Russian tankers carrying oil and petroleum products have disappeared from tracking systems. Dark activity, or when a ship’s transponders are turned off for at least a few hours, is 600% higher than before the war in Ukraine started, maritime risk management firm Windward told CNN.
“We are seeing a spike in Russian tankers deliberately shutting down the transmission to evade sanctions,” Windward CEO Ami Daniel said in an interview with CNN, citing sanctions on oil imports imposed by the US, UK and other countries. “The Russian fleet is beginning to hide its whereabouts and its exports,” he added.
The week of March 12 saw 33 cases of shady activity by Russian oil tankers, according to Windward AI intelligence — a 236% increase from the same week a year ago.
Shady activity is viewed by the US government as a deceptive shipping practice used to evade sanctions. International regulations require ships to keep their transponders switched on at all times, and the US Treasury Department said in a May 2020 sanctions advisory to the maritime, energy and metals sectors that any automatic identification system “may indicate tampering and disruption of potential illegal or criminal activity.” ”
“These ships want to disappear from the radar. From a compliance standpoint, it’s a red flag,” Daniel said.
Who buys the oil?
Energy research firm Rystad Energy estimated that 1.2 million to 1.5 million barrels of Russian crude oil exports per day have disappeared in the five weeks since the war against Ukraine began.
The destination of the remaining crude exports from Russia is “increasingly unknown,” Rystad Energy wrote in a report this week, estimating that a total of about 4.5 million barrels of oil mysteriously disappeared.
Analysts say refineries in China and India are buying up some of Russia’s oil products. According to CNBC, there is a “significant increase” in Russian oil deliveries to New Delhi, and China is also lured by the oil that is traded at a big discount.
And while the US and UK have both banned imports of Russian oil, the EU, which is much more dependent on Russian energy, has continued to buy – only planning to cut natural gas imports by two-thirds within the next year, to avoid an energy crisis.
The Russian Urals, the benchmark for Russian crude, is trading at an attractive discount of $30 a barrel against Brent, the European benchmark. But despite the cheap prices, many western traders have avoided buying Russian oil. “The Russian oil has effectively become toxic,” a banker previously told the FT.
According to S&P Global, traders said public perception caused many Western companies to stop buying Russian oil, even at a relatively cheap price. Many do not want to be seen as lenders for the invasion of Ukraine.
“The ships are going dark because they fear that if they take Russian business they will be blacklisted for a period of time and unable to get future cases,” said Andy Lipow, president of consulting firm Lipow Oil Associates. , to CNN.
But as millions of barrels of oil continue to go missing, analysts predict the spike in shady activity could be quelled by Western traders to avoid a PR crisis.