The export of crude oil from Russia’s primary Pacific terminal remains robust, as shipping companies and traders continue to navigate around recently expanded US sanctions. They are employing a new fleet of vessels to maintain the flow of oil to global markets.
Between January 30th and February 16th, none of the sixteen tankers loading ESPO crude at the Kozmino port were included on the US sanctions list, according to data from Bloomberg and Kpler. This follows the broadening of US sanctions early last month. Notably, half of these tankers are new to handling ESPO grade crude, highlighting the adaptability of the Russian oil trade.
Market participants are closely monitoring Russia’s capacity to sustain crude oil shipments amid ongoing geopolitical tensions. Direct discussions between the Trump administration and Moscow in Saudi Arabia regarding a potential resolution in Ukraine have raised speculation about the potential easing of sanctions. The resilience of oil flows from Iran, another target of US sanctions, further underscores the complexities of enforcing such restrictions.
Since late January, many vessels newly involved in the ESPO trade have been operating under flags of convenience, including Panama, the Cook Islands, Sierra Leone, and Djibouti. Nearly all ESPO cargoes were destined for China, with Dongying, Huizhou, and Dongjiakou among the frequent destinations. Ownership data from Equasis indicates that most of these ships are registered to companies in Shanghai, Hong Kong, and Seychelles.
Map showing oil trade routes
Freight rates for the Kozmino-to-Asia route experienced a sharp increase following the latest round of US sanctions, one of the final actions taken by the Biden administration. However, these rates have since subsided. Currently, the cost for the three- to five-day journey to China is approximately $5 million, according to shipbrokers and a Chinese private refiner. This represents an increase from $1.5 million prior to January 10th, but a significant decline from the peak. This suggests that while the sanctions initially disrupted the market, new strategies are being implemented to mitigate their impact on Russian oil exports. The continued flow of Russian crude, despite these sanctions, highlights the challenges in limiting global energy trade and the adaptability of market participants in circumventing restrictions. The long-term effects of these sanctions and their potential impact on global oil markets remain to be seen.
