How Russia Punched an $11 Billion Hole in the West’s Oil Sanctions
Discover how the sanctions have affected Russia’s oil exports by identifying trade routes and tracking petrodollars. An exploration of the energy dynamics’ intricacies.” The failure of Western sanctions on Russian oil exports is demonstrated by a short boat ride from the Greek coastal town of Gytheio, where two oil tankers with rusty hulls and a combined age of 57 years sit just meters apart. The owners and insurers of the ships are not readily identifiable. They fly the only flag in the world considered “very high risk” by the authorities. Furthermore, it is still being determined where the money made from trading their Russian fuel will end up.
The failure of Western sanctions on Russian oil exports is demonstrated by a short boat ride from the Greek coastal town of Gytheio, where two oil tankers with rusty hulls and a combined age of 57 years sit just meters apart. It is difficult to identify the shipowners and insurers. The only flag in the world that the authorities deem to be “very high risk” is flown by them. Furthermore, it’s unclear what will happen to the money that was made from trading their Russian fuel.
The sanctions agreement reached this week a year ago included a $60 per barrel price cap for seaborne Russian oil, which is $24 less than the average market price over the previous 12 months. The purpose of the deal was to limit funding for the Kremlin’s military assault on Ukraine. Rather, it has created a profitable industry for a large number of hard-to-find merchants and shipping firms. Trade data compiled by Bloomberg indicates that up to $11 billion worth of petrodollars are lost annually between the time the oil leaves Russia and when it is purchased.
The price cap was put in place to stop businesses from the Group of Seven countries from offering Russia services like insurance and shipping when the oil was selling for more than $60. Simultaneously, the European Union prohibited nearly all oil imports from Russia, which had been the bloc’s primary supplier until then. This forced Moscow to turn to its two most important clients, China and India.
The idea behind the sanctions plan was to limit Russia’s oil income without driving up energy prices worldwide. As a result, the financial structure of the oil and maritime trade has changed in a way that may be difficult to undo when the conflict ends or the current sanctions are eventually lifted, according to some experts. It has raised concerns about a potential environmental disaster and created a pathway for these hidden oil revenues to return to the Kremlin and fuel the conflict in Ukraine.
According to official Indian customs data, by the time Russian oil reached the Asian nation this year, it had cost an average of $72 per barrel. The KSE Institute, a member of the Kyiv School of Economics and an advocate of strict sanctions against Moscow, compiled the data and found that this is $12 more than the prices declared at the point of export in Russia.
The G-7 policy is based on data from Argus Media, which indicates a similar gap since March. Approximately $11 billion is being invested in what could be referred to as a delivery spread, considering that Russia has exported nearly 3.5 million barrels of oil per day this year. While the majority of that goes through unidentified shipping companies or anonymous traders, some of it will represent actual shipping costs.
Before Russia invaded Ukraine in February 2022, most of its oil was controlled by a small group of extremely powerful traders based in places like London and Geneva.
The three main players were Trafigura Group, Glencore Plc, and Vitol Group. In 2021, they jointly transported about 40% of the country’s crude oil from the Urals. Soon after the invasion and as the possibility of sanctions materialized, these three companies made their public withdrawal from the trading of Russian crude oil known. An army of smaller, harder-to-find organizations with ambiguous affiliations and headquarters spanning from Hong Kong to Dubai has replaced them.
- Published By Team Nation Press News
