At least four Chinese-owned supertankers have been shipping to China Russia’s Urals crude, per tracking data and trading sources, as Moscow seeks ships for exports following a G7 oil price cap limiting Western cargo services and insurance.
China, the top oil importer of the world, has kept purchasing Russia’s oil despite ongoing Western sanctions after Vladimir Putin and Xi Jinping, the Chinese leader, introduced a no-limit partnership before Russia’s war in Ukraine.
The sources mentioned that a fifth supertanker, or a substantial crude carrier (VLCC), was shipping crude to India, which like China, has continued purchasing Russia’s oil sold at a discount as many Western purchasers turn to other oil suppliers.
Per sources and ship tracking data, five shipments were reportedly scheduled between Dec 22 and Jan 23.
The G7 price cap placed in December 2022 permits countries out of the EU to import seaborne oil from Russia, but it restricts shipping, re-insurance, and insurance firms from tackling Russian crude cargoes unless those are sold for below US$60.
As the US and its allies tried choking off Moscow’s energy revenues to limit its ability to fund the war in Ukraine, Russia diverted oil exports from Europe in 2022, primarily to Asia.
The long voyages, coupled with pretty heavy discounts and extremely high freight rates, ate into the profits, but the use of supertankers on Asian channels may now help cut down shipping costs. Indian Oil Minister Hardeep Singh Puri mentioned on Thursday that India would purchase oil from where it can secure the lowest price.
Industry sources mention that India’s refiners are now securing a discount of US$15-US$20 for a barrel of Russia’s oil compared to Brent on a delivered basis.
Russia Turns To Asia
Russia is sending troops from Western ports for transhipment to supertankers Lauren II, Natalina 7, Monica S, and Catalina 7; these are all Panama-flagged vessels bound for China while Sao Paulo is approaching India.
Based on data from public maritime sources, Lauren II is reportedly managed by China’s Greetee. China’s Maisie owns it. Hong Kong’s Canes Venatici owns Catalina 7 and Astrid Menks owns Natalina 7. China’s Runne manages these. Besides, China’s Gabrielle reportedly owns Monica S, but Director oversees it. Sao Paulo is operated and owned by Rotimi Holdings of Cyprus.
The executive with the Chinese firm involved in the shipments estimated that 18 supertankers from China and 16 additional Aframax-sized vessels could be used to transport Russia’s crude in 2023, enough to carry 15 million tons every year or nearly about 10% of the Urals exports.
A VLCC can be loaded with almost two million barrels; a Suezmax vessel can carry up to one million barrels, whereas Aframax with anearly0.6 million barrels.
As most of Russia’s crude is heading to China, Turkey, and India in Russian or non-western ships, G7 sanctions have reportedly resulted in a shortage of smaller ice-class tankers – belonging to Norwegian and Greek firms – required by Russia for transporting crude from major Baltic Sea ports during winter.
China and Russia lack a massive fleet of ice-class vessels. Using China’s VLCCs free them up to set sail from Baltic ports to carry out ship-to-ship transfers to relatively more enormous tankers, especially in international waters.
The practice was reflected in tracking data, including in the international Mediterranean waters, with operations highlighted near Ceuta, a Spanish city on the north coast of Africa, and Kalamata, a city located in the Peloponnese peninsula in Greece.
Another trader reportedly mentioned that the Ukraine war and sanctions had pushed up demands for smaller tankers and driven down rates for relatively larger vessels, helping lower the extra costs Russia encounters.
References: Japan Times, Business Insider